BNP Paribas Sees Regional Traits in Reactions to Covid-19 Turbulence
While European and Middle Eastern clients tend to invest with long-term horizons and are buying up stocks, Rémi Frank, global head of the key client group at BNP Paribas Wealth Management, reports that Asian investors, who have shorter timescales in mind, are reacting very differently
While the world’s wealthiest private banking clients are known for rational and sophisticated approaches to economic shocks, the early stages of the global coronavirus crisis also shows cultural and regional influences at play. Investors must also balance business issues with portfolio concerns.
“Regionally, we are seeing a lot of different behaviours,” says Rémi Frank, global head of the key client group at BNP Paribas Wealth Management, which has major investment and client servicing hubs in continental European locations including France, Belgium, Luxembourg, Italy, Spain and Germany. There are also significant wealth management operations in the US and Asia.
“In Europe, they are taking more of a long-term view, which means our clients are currently buyers rather than sellers,” reflects Mr Frank. “Some of their securities and assets may have lost value, but they have taken the opportunity to refinance, by buying more of their investments. That is the overall picture across Europe.”
Clients in the developing markets of Eastern Europe and the Middle East, who were actively selling many securities in the first half of March, when markets began to get spooked by the impact of the virus, have also began to restock their portfolios.
But Asian clients are not necessary following these patterns. “Asia is very different, as fewer clients take a long-term view,” suggests Mr Frank, with many clients following trends in futures markets of the previous day before making a short-term share trade.
“In Asia, all of our clients are entrepreneurs, they all own companies, so their long-term view is reflected by their company. The management of portfolios is to a much shorter time-horizon.”
For some entrepreneurs, these day-to-day operational challenges are however currently superseding any investment concerns. Many wealthy family clients of BNP Paribas are involved to some extent in the hospitality and tourism sectors and have huge practical issues about to how to manage properties and staff, leaving little time to devote to investment portfolios.
“They are even more busy today than during times of normal business,” says Mr Frank, who is responsible for somewhere close to 40 per cent of the wealth firm’s €393bn in client assets.
In many ways, the banking and wealth management sectors have been better prepared for this crisis than other parts of the economy. While firms such as BNP Paribas have made digitalisation a priority, drafting workers from different units into innovation clusters and bringing in clients to help develop apps, they have also received a helping hand from regulators.
The French bank, which has more than 200,000 employees globally, has long been required by regulators to have viable business continuity plans to back up operations in case of a disaster. “This means we are now better organised than some clients who cannot access their offices,” says Mr Frank. “They have had to build up contingency plans from scratch.”
This puts banks and wealth management firms into a unique position where they can help clients address business issues in addition to portfolio management, he says.
But the crisis may also become a time for reflection and reassessment for wealth managers. BNP Paribas will likely readdress some of the technological innovations which it has been so keen to champion over the last three years. While the Leaders Connection App was designed specifically to connect families in different jurisdictions – generally different continents – who wish to co-operate on investment projects, its original global ambitions are now being slightly scaled back to match changing client sentiment.
“It appears clients prefer to do club deals with families they already know well,” admits Mr Frank.
The crisis has also amplified a long-standing trend towards private markets. The bank’s clients who invested predominantly in listed equities suffered losses of up to 25 per cent when PWM spoke to Mr Frank in late March. But most private equity valuation dates were still three months away. “It gives you more time to digest what has happened,” he says.
Meeting client demands for digitalisation, private market exposure and introductions to other wealthy families gained importance for leading private banks in the decade following the global financial crisis. How seriously they addressed some of these challenges could now define the role they will play during the current public health crisis and beyond.