Strategic orientation of VP Bank
Proven business model
The business model of VP Bank is based on two strategic pillars: private banking and the intermediaries business. The home market activities in Liechtenstein are supplemented by retail banking and the commercial business. Aside from these core capabilities, VP Bank Group maintains an international fund competency centre.
The primary strategic goal of VP Bank is to grow both in terms of profitability and quality through its activities as a group enterprise in the defined target markets and thereby preserve its independence over the long term. VP Bank fulfils all regulatory and crossborder requirements while offering a comprehensive range of services in keeping with VP Bank Group’s business model.
From the various locations of VP Bank Group – namely Vaduz, Zurich, Luxembourg, Singapore, Hong Kong, Moscow and Tortola – clearly defined target markets and client segments are actively cultivated. The local offices bear responsibility Strategic orientation of VP Bank for developing their own markets and receive coordinative assistance from the Group. The target markets for Europe comprise Liechtenstein, Switzerland, Germany, Luxembourg, Russia and Ukraine; in Asia, the Group’s focus is on Singapore, Hong Kong, Indonesia, Malaysia and Thailand.
Taking into account the rapidly changing circumstances in the financial services market, in 2015 the Board of Directors and Group Executive Management mapped out the route VP Bank will be taking in the coming years: “Strategy 2020”. On the basis of this strategy, the Board determined the following medium-term targets for the end of 2020:
- CHF 50 billion in client assets under management;
- CHF 80 million in consolidated net income; and
- a cost/income ratio of less than 70 per cent.
Strategy 2020 is built upon three pillars, and each of them is of a lasting nature: growth, focus and culture.
In effort to reach its defined growth goals, VP Bank is taking a two-pronged approach.
First: organic growth
For VP Bank, organic growth means winning new clients in its target markets, expanding its existing client base, and thereby driving the qualitative growth of its client assets under management. To this end, the markets, client segments, as well as products and services are being developed further and continuously subjected to close analysis at all of the Bank’s locations. Nonetheless, it would be difficult to achieve the Bank’s ambitious medium-term goals through organic growth alone.
Growth can and should also be generated with the help of newly hired client advisors or entire teams of professionals. With this in mind, the “Relationship Manager Hiring” project was initiated in 2016. Here, the objective is to attract a total of some 75 additional client advisors over the next three years. Roughly half of those people will be hired at the Bank’s locations in Asia, and the other half for the Swiss/Liechtenstein/Luxembourg markets. An international, interdivisional project team was formed to accomplish this task. The team provides assistance to those regional offices in their recruiting efforts and works together with established local executive search firms.
Second: growth through mergers and acquisitions
VP Bank actively and continuously examines acquisition possibilities at its Liechtenstein, Swiss, Luxembourg and Asian locations. The success of M&A (mergers & acquisitions) activities is not plannable – it depends entirely on the opportunities that arise in the market. And VP Bank will not simply pay any price for a takeover: the acquisitions must make sense and fit with the strategy and culture of VP Bank Group. The shares purchased in conjunction with the Bank’s 2015 and 2016 open-market buyback programmes are earmarked primarily for that purpose.
VP Bank sees the promise of additional growth impulses coming from its internationalisation push. Medium term, income from the Bank’s foreign target markets should rise to 50 per cent of the total Group revenues. Aiding that effort will be measures aimed at reinforcing the Bank’s position in the especially important business with financial intermediaries, as well as a further expansion of the funds business and continued development of the advisory concept.
At VP Bank, the term “focus” is understood to mean efficiency enhancement and a reduction of the complexities and costs of internal processes.
For years, the financial industry has been faced with the problem of higher cost structures and narrower margins. The increasing regulatory requirements bring about added costs. For those reasons, keen cost consciousness prevails at VP Bank.
Localising the potential for cost savings has been a major, and successful, activity in the past several years. Measures derived from various projects have been largely implemented and the findings incorporated into a disciplined, ongoing cost management process, which includes the identification and exploitation of savings potential within the Group as well as the optimisation of the Bank’s range of products and services.
In a move to heighten operative excellence, new key performance indicators (KPIs) were defined for the area of Group Operations. Interdivisional teams were deployed to implement the related measures. In 2016, they managed to successfully reduce internal complexity, automate previously paper- based processes, further optimise segments and specific products, realign the target markets, and further advance digitalisation within the Group as indicated below. In terms of external relations, the number of counterparties was reduced and many of the terms and conditions for collaboration with third parties were renegotiated.
The cost and efficiency benefits from these measures will be reinvested in the Group’s growth and digitalisation strategy.
Other projects in 2016 centred on fine-tuning the balance sheet through a reduction of the Bank’s risk-weighted assets, as well as on the initiation of an in-depth analysis of outstanding credits. Details on the latter are provided below.
The third thrust of Strategy 2020 relates to the culture at VP Bank. In this regard, two aspects are of special importance: the encouragement of a sales and performance culture, as well as the corporate culture in general at VP Bank Group.
The measures aimed at reinforcing a sales and performance mentality have the goal of further increasing the quality of client advisors’ advice. They get support in this regard not just from computerised tools, but also through further training. In 2016, a wide array of skill enhancement and continuing education courses were offered, as described in the “Employees of VP Bank” section under “Employee development”. Exemplary in this regard are the client advisors who successfully became certified in accordance with the SAQ standard. Moreover, in pressing ahead with our market development efforts, the necessary financial resources were made available in the Bank’s growth markets.
In terms of corporate culture, the emphasis is on promoting a team-oriented mentality. Based on the employee survey conducted in 2015, wide-ranging measures were introduced at all levels, internal job-exchange programmes were intensified, and the possibilities for reaching out directly to top management were broadened.
The series of Leadership seminars initiated already in the fall of 2015 was continued this past year, with training sessions and workshops being conducted for managers from all operating units and locations of VP Bank Group. The training sessions focused on the role perception and role model function of a manager. This Leadership programme is divided into four modules, the next of which will be addressed in 2017.
Other major focal points in 2016 were the topics of Change Management, a “can-do” culture, visions, as well as talent recognition and advancement. Further measures were team and cooperation workshops, and expanded Key Management Meetings that included third- and fourth-level managers. All of these endeavours have the goal of strengthening the entrepreneurial culture at VP Bank Group, fostering commitment, as well as encouraging decisiveness and self-responsibility.
New organisational structure
In 2016, VP Bank Group adapted its organisational and management structure and refocused the tasks of Group Executive Management. This evolutionary step was taken in reflection of the Bank’s strategy and its medium-term goals for 2020.
Effective as of 1 January 2016, the “Chief Operating Officer” organisational unit came into being as a supplement to the already existing “Chief Executive Officer”, “Client Business” and “Chief Financial Officer” organisational units.
As a member of what since the start of 2016 has been VP Bank’s four-man Group Executive Management team, the Chief Operating Officer oversees the Group Information Technology, Group Credit, Group Operations and Group Treasury & Execution operating units. This focus is consistent with a strengthening of the relevant support functions, greater implementation competency and stringent process optimisations. It also reflects the dramatically accelerating trend towards digitalisation as well as the significance of IT-based processes and solutions – both in the intermediaries business and in private banking.
In conjunction with the realisation of Strategy 2020, the start of 2017 also witnessed a further adjustment of the organisationally and management structure. On one hand, the function of General Counsel is now combined with that of Chief Risk Officer and, on the other, VP Bank Group’s investment competence has been purposely fortified through the creation of the “Investment Solutions” organisational unit.
Group Executive Management is supported by a broad base of second-level managers, 19 persons in all.
Private banking at VP Bank
“We generate enthusiasm by offering our clients unique experiences” – the roughly 800 employees of VP Bank Group live by that claim. As an international active private bank, VP Bank offers its clients highly professional advice and convincing financial solutions – all with a personalised touch.
Our core competencies lie in portfolio management, investment advisory and wealth planning services for sophisticated private clients.
Portfolio management at VP Bank can involve the delegation of investment decisions as well as continuous portfolio monitoring. If clients prefer to receive investment advice only and make their own decisions, they can count on receiving personalised support, the latest market information, and details on the most suitable products. Wealth planning involves comprehensive counselling and investment solutions that are individually structured to satisfy complex needs.
With its proven philosophy of “open architecture”, VP Bank ensures the unbiased quality of the advice it provides in all of these disciplines. Together with VP Bank’s Active Advisory Team and a global network of partners, our client advisors recommend the best investment instruments or develop innovative solutions on behalf of their clients.
VP Bank’s strategy in the intermediaries business
Since its founding more than 60 years ago, VP Bank prides itself in being a reliable, leading-edge partner for financial intermediaries. Servicing this demanding segment successfully requires cognisance of the different and ever-changing needs of clients in Europe and Asia, a constant eye on the regulatory requirements, and simultaneously the ability to leverage the advantages of a digitised world.
VP Bank Group’s “boutique” approach to private banking also applies to its intermediaries business. In other words, it is neither a pure online bank nor a garden-variety universal bank. With its differentiated, personalised air and flair, VP Bank stands out amongst its competitors.
The goal is to offer clients efficient, reliable, cost-effective and intuitively conceived banking services and data in a digital environment. Client segmentation helps VP Bank to tailor its services accordingly. In this regard, external asset managers receive targeted, proactive support from the Active Advisory Team of VP Bank and benefit from specific investment recommendations, switch ideas and portfolio consulting.
In October 2016, a new information platform for VP Bank’s intermediary clients was implemented. It affords them a simple and speedy way to access the most important information and services they need for their daily work: from extensive coverage of financial market happenings, to regular publications on business and economic issues, to the latest news on tax and regulatory developments plus the relevant forms.
With its five international booking centres, VP Bank is one of the few banks of its size to have this unusually broad global presence.
The fund business of VP Bank
The investment fund business is of central importance to VP Bank. It is a key supplement to the Bank’s private banking and intermediaries businesses and represents an especially attractive growth segment for VP Bank Group.
All of the Bank’s fund-related activities – whether they pertain to third-party funds or the proprietary funds of VP Bank itself – are centrally conducted by VP Fund Solutions, an international fund competence centre and one-stop shop for the entire spectrum of services required for the formation, administration and distribution of investment funds. The unit is comprised of VP Fund Solutions (Liechtenstein) AG and VP Fund Solutions (Luxembourg) SA, and the Group-wide management of this strategically crucial business is carried out in Luxembourg.
The Luxembourg and Liechtenstein entities work closely with each other in a cross-border collaboration. This enables their specialised know-how and technological infrastructure to be bundled, deployed more efficiently, and in a way that ideally fulfils international clients’ needs as well as the regulatory requirements.
Having amassed close to 20 years of experience and expertise in the fund business, VP Fund Solutions is the trusted partner of renowned domestic and international advisory firms and fund management companies. Through its cooperation with VP Bank, which acts as custodian bank and paying agent, VP Fund Solutions has access to VP Bank Group’s international reach and cost-optimised network of depositories for the clearing and settlement of fund managers’ transactions.
By having had a presence at several fund trade fairs in Europe, VP Fund Solutions was able again in 2016 to offer its services to a sophisticated audience as well as intensify its involvement in various trade associations and workgroups. Of particular note: the “VP Bank Best Manager European Equities”, “VP Bank Best Manager Swiss Equities” and “VP Bank Best Manager World Equities” were included in a 2016 Liechtenstein ranking of funds with the best sustainability profile. And like the year before, VP Fund Solutions (Liechtenstein) AG was in London during the financial year to receive World Finance magazine’s “Investment Management Award” for the best investment management company in Liechtenstein.
VP Bank’s lending business
In 2016, the Chief Operating Officer organisational unit initiated an in-depth credit analysis in order to assess the quality of VP Bank’s loan portfolio – a key source of revenue for the entire VP Bank Group – and enhance the transparency of its lending practices. The credit business is of great importance to VP Bank and has recorded significant growth rates in certain areas. It centres especially on the Liechtenstein and Swiss mortgage business, a dynamic lombard loan business, as well as a small number of special credits.
The “Credit Review” project aims to define clear, more streamlined lending procedures and bolster VP Bank’s credit risk management. The implementation of this project represents an important focal point for 2017. In conjunction with this effort, the newly created “Group Credit” unit under the Chief Operating Officer represents a realignment of the internal organisation. Based on a new credit policy, directives have been issued and their provisions will be implemented during the course of 2017.
VP Bank’s digitalisation strategy
Digitising the product and service range represents a core element of VP Bank’s internationalisation strategy. The relentless trend towards digitalisation and the increasing significance of IT-based processes and solutions – both in the intermediaries business and in private banking – call for a strategic plan of attack, one which VP Bank is systematically executing within the framework of its digitalisation strategy. This involves an across-the-board modernisation of the communication channels with clients and employees as well as a broadening of the Bank’s online offerings.
For example, VP Bank has started to apply a hybrid advisory model, one which combines tried and trusted personal financial consulting with modern technologies and digital services. Here, the future focus will be on tools that support the client advisors and various client segments.
Those who really place the client at the centre of the advisory process apply a trust-building mix of mind and machine to determine the needs of the client. The goal of all these measures is to convince current and future clients that they are in the best of hands with VP Bank.
As part of this move to digitise processes, data and communication paths, initial measures were conceived and successively introduced during 2016 by an interdivisional project team under the leadership of the Chief Operating Officer. For all these measures, the priority is to come up with solutions that are standardised and can be deployed on a Group-wide scale.
VP Bank’s digitalisation strategy for the next three years centres on the following major objectives:
- a comprehensive modernisation of the communication channels to clients;
- an expansion of the online range of offerings;
- the Group-wide harmonisation of business processes;
- the harmonisation of IT-related services and data; and
- a reduction of complexities in the process, products and system environment.
Today’s technological possibilities and increased mobility have changed human behaviour permanently and the results are already visible in the way people communicate and do their shopping. In anticipation of this evolutionary change amongst clients of today and tomorrow, VP Bank has identified concrete action fields which are to be addressed over the next three years in conjunction with a Group-wide programme. This will be accomplished in two phases:
The first phase centres on technical modernisation of the existing online services and will bring about noticeable improvements to specific functions for use in all client segments of VP Bank. Here, the focus will be on simplicity, and hence “usability” and client convenience. VP Bank’s website is to be redesigned and the e-banking routine thoroughly modernised by early 2018 (see below).
In the second phase, VP Bank will be making targeted investments in its internal systems and data. The aim is to afford client advisors even more time to give their clients the best possible care and, together with them, arrive at the most suitable investment decisions. The online service offering will also be expanded.
Despite all of these digital innovations, technology will never be able to replace the human dimension of private banking. However, VP Bank’s client advisors are armed already today with the latest technological tools that help them to provide optimal service. In the end, it will always be our clients who decide what they want to do, where they need help and whether they are prepared to pay for it. And they also have the choice between taking advantage of round-the-clock online services, or discussing their banking matters in person with their own client advisor. Or actually doing both.
Many of the previously announced efficiency measures have already been successfully implemented in 2016. One notable example is the automation of paper-based processes. As a result of measures like this, VP Bank has achieved savings in the millions – not even counting those attributable to the insourcing of services from Group subsidiaries. So the digitalisation strategy is not just ensuring maximal client satisfaction; it is also enhancing the profitability of VP Bank.
Competent advisors and specialist teams
The financial industry is still in a state of flux. On one hand, clients are better informed, more mobile and more demanding than ever before. On the other hand, banks are constantly faced with increasingly strict regulations and the strident call for transparency.
For excellent, comprehensive client care, a heightened degree of competence is required. Asset management expertise must be combined with insight into crossborder tax law and international finance. In order to advise clients even more competently, VP Bank for years now has been increasing its efforts in the area of professional training for its employees.
The process for certifying client advisors, which started already in 2015, was successfully pursued in 2016. As one of the first banks in Liechtenstein able to make such a claim, VP Bank today has SAQ (Swiss Association for Quality) certified client advisors under its employ. Selected advisors at the Bank’s locations in Liechtenstein and Switzerland attended a series of comprehensive training courses for international SAQ certification in the first half of 2016 and graduated in July with a professional degree.
The entire training course is comprised of various finance- and advisory-related modules and was conducted in collaboration with the AKAD School of Banking and Finance. SAQ certification is in keeping with the international ISO/IEC 17024 standard and is federally recognised by the Swiss Accreditation Service. Exams are held under the auspices of the “Swiss Association for Quality SAQ”.
With these client advisor certifications, VP Bank will not only fulfil the regulatory requirements of the Liechtenstein and Swiss banking centres, but also keep pace with the highest advisory standards on an international scale.
This continuing education initiative is an integral part of the Group-wide Strategy 2020. Its goal: ensuring the Bank’s continuing ability to convince its clients with top-notch solutions. SAQ certification is an important building block in VP Bank’s ongoing effort to enhance the professionalism of the advice given to its clients and meet the requirements of the future. In addition to its continuous individualised, in-house as well as external development programmes, VP Bank plans to broaden the range of international certification courses available to its employees.
The projects conducted in recent years with the intent of heightening the advisory quality of advice at VP Bank paid off yet again in the past financial year. In November 2016, Germany’s Elite Report, together with the Handelsblatt in Munich, presented awards for the best portfolio managers in the German-speaking region. VP Bank is one of them and was recognised with “cum laude” citation.
In the financial industry, motivated and service-oriented employees are the key to success. Again in 2016, VP Bank launched numerous initiatives aimed at furthering its employees and fostering a positive work environment.
“myContribution” is the completely revamped idea and innovation management tool that was introduced at VP Bank in 2015. Employees are encouraged to contribute to VP Bank’s success by submitting suggestions on how processes and procedures can be improved. The ideas are evaluated by a panel of experts, and the successfully implemented ones are rewarded. In 2016, a total of 35 suggestions were submitted. Several of them have already been implemented and 13 are currently either under examination or in the process of being implemented by the specialist units. With myContribution, VP Bank is leveraging the brainpower of its employees and in this way boosting the Bank’s competitiveness.
After a longer pause, VP Bank conducted another employee survey at the end of 2015. The participation rate of 88 per cent demonstrated the great interest our employees have in their company. Once the findings of the survey were presented in the spring of 2016, all department and location heads were instructed to sit with their employees and devise suitable measures for addressing areas in need of improvement in their field of activity. The main weak points were “Inclusion of employees”, “Collaboration within the company”, “Structures and processes”, and “Knowledge transfer”. Accompanying “flash polls” taken during the course of the year provided a snapshot of the progress being made in implementing the fixes. Those efforts will continue apace in 2017 with the goal of “improving together”.
A comprehensive overview of all employee-related measures can be found in the section entitled “Employees of VP Bank”.
New advisory concept
The constantly changing environment in the banking industry calls for a flexible, innovative, and perpetually optimised service offering. Excellent client care is a top priority at VP Bank and is one of its most important differentiating traits. The overhaul of VP Bank’s advisory process is a significant factor in the quest to offer clients noticeable, tangible added value.
To ensure that all clients receive consistently high-quality advice, the advisory process was optimised in 2016. New quality standards were defined for core elements such as the advisory philosophy, the relevant norms, digital and other aids, quality specifications, the precise allocation of responsibilities, as well as the collaboration between internal and external partners.
The clients of VP Bank benefit in a number of ways from this newly introduced advisory concept. Through the structured optimisation of client care, the related systematics and a clearly stated performance claim with regard to investment advice, they enjoy genuine added value. And with VP Bank’s new software solution, they receive even more precise account analyses and investment recommendations that also take into consideration the regulatory requirements in their given domicile. Comprehensive, ongoing portfolio monitoring rounds out this convincing approach to client care.
During the past financial year, training in the major aspects of this advisory concept took place and these new skills were put into actual practice. Already today, the redefined advisory standards are being successfully applied in client discussions.
With this systematic approach and the ongoing further development of VP Bank’s services, the foundation has been laid for “investment advice of the future”.
Further details can be found in the section “VP Bank’s clients”.
Further enhancements in advice
Excellent client care and attention is one thing; but the quality of the advice given is also of central importance. To that end, VP Bank has revamped its range of services and installed a new advisory software application called “Finfox”. Based on a scientific approach, it methodically facilitates top-quality financial planning and asset optimisation. The next steps will be to integrate this software and introduce new advisory packages.
The online services for existing clients are being successively broadened through the addition of modern means of communication. For years, VP Bank has made available its e-banking platform, a system that fulfils the highest standards for security and ease of use. 2013 witnessed the introduction of a new version of “e-banking mobile” that turns a smartphone into a mobile bank counter and enables the environmentally friendly dispatch and receipt of e-post.
With their smartphones, clients have the possibility to query the status of their VP Bank accounts as well as to enter securities orders and money transfer instructions based on current market prices. Also, CH/FL payment slips can be scanned with the device’s on-board camera, and notifications of incoming credits to the client’s account can be received via a secure mobile “push” channel.
Two significant innovations were added to VP Bank e-banking in 2016. The Mobile Token is an alternative login process for accessing e-banking. With it, the smartphone and e-banking mobile app are used to confirm the authenticity of the login. When doing so via a PC, a push notification is sent to the smartphone to confirm the login. VP Bank’s proprietary Mobile Token is a leading-edge, user-friendly means of system login and is based on the latest technical standards. As a result, VP Bank is the first bank in Switzerland and Liechtenstein to offer a login process that features push notification.
The new ISO 20022 international standard for payment transactions (also referred to as UNIFI – Universal Financial Industry message scheme) regulates the exchange of interbank financial notices as well as those between banks and their clients. By having implemented the related functionality, VP Bank is in harmony with the new Swiss procedure for conducting payment transactions in which the previous TXT format of transmitted DTA files has been superseded by the uniform ISO 20022 standard. VP Bank is the first bank in Liechtenstein and the fifth in Switzerland to offer a functionality for ISO 20022.
These modern technologies have met with great favour amongst clients: after having risen by 56 percent in 2014, the usage of e-banking increased by a further 12 per cent in 2015 and rose again slightly this past financial year. Today, considerably more than 70 per cent of all payment instructions are entered online.
VP Bank’s e-banking services are constantly evolving and a new platform is under development. The new e-banking is accessible via all mobile devices, be it smartphones, tablets, or PCs. The informational content and display of market data with high-quality graphics are being improved noticeably and further functional features will be introduced. The means of communicating with clients will also change: modern “chat” and video-based solutions will open up innovative possibilities for interaction between advisor and client. The new e-banking platform, with its completely redesigned user interface, will enable clients’ needs to be addressed even faster than before and also feature special online offers. This platform should become available to VP Bank clients in the first quarter of 2018. Further releases with even more enhancements will follow.
Our efforts in recent years to heighten efficiency and optimise resources at VP Bank Group are starting to pay off. In that knowledge, VP Bank will continue to press ahead with the aforementioned projects. In parallel, sizeable investments in new products and services are planned.
In 2017, special emphasis will be placed on the full implementation of the new advisory process and the marketing of the related product packages. The “Finfox” tool, which is one of the underpinnings of this new approach, will be constantly improved and expanded through new releases and functionalities.
VP Bank’s deployment of the “Active Advisory” is an example of how the Bank’s financial consulting competence is being furthered. This team bears responsibility for the investment product offering as well as for consulting on complex investment issues.
The fund expertise of VP Bank will gain even more significance in the years ahead and be successively broadened. In 2017, the target markets in Asia will be cultivated through increased activities.
With further investments in the areas of continuing education, e-banking and CRM (customer relationship management) tools, VP Bank will reinforce its already strong position and expand the range of services offered to intermediary clients. The Bank foresees additional chances for growth from the realignment of its intermediaries business.
VP Bank’s digitalisation strategy is a forward-looking endeavour aimed at paving the way for modern, innovative services; one in which evolution rather than revolution takes centre stage. This topic will occupy VP Bank heavily over the next three years.
The revamp of the credit business which got under way in 2016 will be resolutely pursued also in the year ahead at the Bank’s headquarters in Vaduz as well as at all of its subsidiary companies.
VP Bank Group is well equipped to meet the challenges of the future. This opinion is also shared by Standard & Poor’s, which in July 2016 reaffirmed its excellent “A–“ rating for VP Bank and raised its outlook from “Negative” to “Stable”. As of 2 March 2017, Standard & Poor’s again confirmed VP Bank’s «A–» rating and improved the outlook from «Stable» to «Positive». As highlighted by Standard & Poor’s, the strong capital adequacy of VP Bank showed that the Group would have the capacity to absorb the impact of any potential risk to a great extent. The reconfirmed rating and improved outlook also took account of the operational progress made by VP Bank, its low levels of credit risk and very strong capitalisation.
VP Bank therefore continues to hold a rating of «A–/A-2». The outstanding rating and positive outlook are testament to VP Bank Group’s robust and successful business model.