Julius Baer International has reported a pre-tax profit of £9.15 million for the full year 2017, according to its latest set of annual reports and accounts. This compares with a loss of £13.21 million for the previous year.
The return to profit came on the back of both an increase in revenue and a decrease in expenses.
Revenues stood at £75.79 million, up from £64.56 million for the previous or a year on year increase of 17.4 percent. Of this, management fees accounted for £75.33 million, up from £64.36 million in 2016, with other ordinary income accounting for the remainder.
The UK continued to be the largest contributor to revenue. It contributed £71.25 million, up 17.8 percent year on year. The Republic of Ireland contributed £4.54 million, up 11.6 percent.
The Irish business will not fall under Julius Baer International’s remit and therefore will not be part of its annual account and reports next year. During 2018 it is being moved to another part of Julius Baer. David Durlacher, chief executive, told thewealthnet the bank was “not closing or scaling back” in Ireland and that it “continues to see growth and opportunities there.” He described the decision as an “operational re-alignment.”
Operating expenses totalled £66.64 million, down from the £77.78 million recorded for the previous year. Included in this decrease is a drop in staff costs from £47.17 million at the of 2016 to £44.90 million at the end of 2017.
Given that the firm has been expanding the UK regions it may seem counterintuitive that staff costs have fallen. However, Mr Durlacher said that this decrease was due to a period of investment in its systems and back office. This has meant individuals have had to be brought in for various projects but as these have completed they have left the business.
“We are looking to recruit for the long term for our core business,” he added. “That is to say, recruit to client facing roles.”
This is both within London and the South East and outside this area. The firm has already made a number of hires in the regions and Mr Durlacher said it will continue to do so in 2018.
“We see investing outside London and the South East as a long term benefit to the business,” he said. “We want to bring a strong wealth management offering from a global firm to the wealth that resides outside this area. We have always said we need to be close to the client and with around two thirds of the UK’s wealth in the regions it was a sensible time to invest.”
This has already led to the establishment of offices in Leeds, Manchester and Edinburgh, as well as a team in Belfast, he said.
Mr Durlacher said there are “strong manufacturing hubs” outside the South East of England. These, and supporting elements such as universities and innovation hubs, have been invested in. This in turn has led to entrepreneurialism and new types of manufacturing, leading to wealth creation.
Indeed, whilst noting that the business does not expect any long term material impact from the UK leaving the EU, the resulting decrease in the value of Sterling has benefited export focused manufacturers. “We want to bring our global mindset to this type of scenario,” he explained.
Mr Durlacher believes that the firm’s message of being a “pure wealth manager” with no investment product manufacturing capability is one that appeals to both clients and potential recruits.
While some firms might go down the acquisition route to bulk up, Mr Durlacher is cautious of pursuing this approach despite his growth aims. “It is not growth at any cost,” he said. He added that for an acquisition to work it needs to bring benefits to both sides and not just be based on scale, noting that he himself joined Julius Baer as result of its acquisition of Merrill Lynch’s international business.
To this end he is open to possibilities and keeps an eye on the market. However, he stressed that he is not currently reviewing any opportunities.
Mr Durlacher says he is definitely focused on “the two things that keep me awake at night.” Firstly, ensuring that the firm offers a high standard of client experience. “A chief executive of a wealth management business cannot think too much about this,” he said.
Secondly, ensuring that “this is a fun place to work at,” adding that a wealth management firm “treats it employees as commodities at its peril.” He also says that if staff are happy then this translate to good client service.
He also believes that these two elements, and therefore a business that will continue to grow, by having a consistent strategy.
“This may mean long term investment decisions but we do not lurch from one strategy to another hoping for short term gains,” he said. “This business has been around for 127 years and if after that time we cannot deliver a clear, simple business plan we shouldn’t be in this business.”