Strategic orientation of VP Bank
Diversified business model
VP Bank’s business model is based on two strategic pillars: the intermediaries business and private banking. The Liechtenstein home market also includes the retail and commercial banking activities. In addition to these core competencies, VP Bank Group has its own international fund competency centre. Thanks to the valuable synergies between the respective business segments, VP Bank can offer its clients attractive value added across a broad range of services.
VP Bank Group has offices in seven international financial centres: Vaduz, Zurich, Luxembourg, Singapore, Hong Kong, Moscow and Road Town (BVI). From these locations, VP Bank actively cultivates its defined target markets and client segments, differentiating between the intermediaries business and private banking activities.
VP Bank’s primary strategic goal is to pursue profitable and qualitative growth through its activities in the target markets and thereby ensure its independence. To that end VP Bank Group offers a comprehensive line of services that correspond to its business model.
VP Bank distinguishes between three market categories. The target markets are relevant for the entire Group and are actively developed across all segments. Opportunity markets are those offering concrete growth potential and where market penetration is pursued through site-specific initiatives at reasonable cost. Clients in other markets – mainly in the intermediaries area – are offered cross-border services on a passive basis.
The target markets for Europe include Liechtenstein, Switzerland, Germany, Luxembourg, Russia and Ukraine. In Asia, they include Singapore, Hong Kong, Indonesia, Malaysia and Thailand. Each site is responsible for the market penetration efforts, which are coordinated at Group level.
In 2015, the Board of Directors and Group Executive Management developed the “Strategy 2020” business plan. Based on this plan, the Board of Directors defined the medium-term goals through end-2020 as follows:
VP Bank’s medium-term goals
CHF 50 billion in client assets under management
CHF 80 million in consolidated net income
Cost/income ratio of less than 70 per cent
The 2020 strategy consists of three pillars with a long-term approach: growth, focus and culture.
In order to achieve its defined growth targets, VP Bank is pursuing a dual growth strategy.
Through organic growth, VP Bank aims to win new clients in its target markets and expand the current client base in order to further advance the qualitative growth of client assets under management. This objective will be achieved by actively strengthening the bank’s positioning in the all-important financial intermediaries business, expanding the private banking business and further enlarging the fund business.
Growth will also increasingly be achieved through the addition of new client advisors. With that in mind, the “Relationship Manager Hiring” project was initiated in late 2016. This project seeks to hire a total of 75 client advisors by end-2019, with roughly one half hired at the bank’s Asian sites and the other half in Switzerland/Liechtenstein/Luxembourg. The project is off to a good start. In 2017, a total of 24 new client advisors joined VP Bank along with satisfactory new cash inflows. Various working projects were launched and implemented in order to optimise back-office processes with an eye toward increased growth.
Along with organic growth, VP Bank wants to use its very strong equity position to invest in growth through mergers and acquisitions.
VP Bank also aims to pursue growth by continuing its international diversification. The earnings contribution from foreign target markets will be increased to 50% of the total over the medium term.
At VP Bank, the term “focus” is understood to mean efficiency enhancement and reduced complexities and costs for internal processes. The resulting productivity gains are reinvested in the growth and digitalisation strategy. VP Bank has established cross-functional teams to ensure implementation.
The identification of potential cost savings within the Group was successfully implemented in recent years. VP Bank has largely completed the necessary measures related to the various projects. The knowledge gained in this process has been applied to an on-going cost management approach and resulted in focused product and service lines.
The third pillar of Strategy 2020 relates to VP Bank’s culture. In this regard, VP Bank has identified two key areas: a sales and performance culture as well as the overall corporate culture.
The measures aimed at strengthening the sales and performance culture include the goal of further raising the advisory quality offered by employees. They receive support through advisory tools as well as training programmes. In 2017, comprehensive continuing education and training measures were implemented, which are described in the section “The employees of VP Bank – employee development” (page 56).
Last year as in 2016, broad-based management culture leadership seminars with training sessions and workshops were held for managers in all business segments and at all office locations. The leadership programme is divided into four modules, and in 2017 the “Competent to lead” module was offered along with the “Lead to perform” workshop. These measures help to secure VP Bank’s cultural values, foster commitment, support managers’ continuing development and promote the active sharing of experiences.
In the corporate culture area, the focus is on promoting team spirit. Based on the findings of employee surveys conducted in 2015 and 2017 (see below), numerous measures were implemented at all levels, internal exchange programmes were stepped up and communications opportunities with senior management were expanded.
Motivated and service-oriented employees are the key to success. VP Bank again undertook numerous initiatives in 2017 in order to encourage its employees and create a positive work environment.
Every two years, VP Bank conducts a Group-wide employee survey; the most recent one was completed in September 2017. The excellent 91 per cent return rate shows the level of interest that employees have in their company. Compared to the survey conducted in 2015, VP Bank recorded strong gains in the key assessment criteria, i.e. commitment, spirit and attractive employer. The measures taken as a result of the 2015 survey had the desired effect. The most recent findings will also be used as the basis for further improvements. To achieve these goals, the respective business segments hold workshops in which employees and managers jointly define specific measures and complete them.
VP Bank’s ideas and innovation management programme “myContribution” was totally reconfigured in 2015. Employees are encouraged to contribute to VP Bank’s success by submitting ideas on how to improve processes and procedures. Submissions are assessed by a panel of experts, and successful ideas are rewarded. A total of 46 ideas were put forth in 2017, a 30 per cent increase relative to the previous year. Of that total, five have already been implemented, another 10 are still being reviewed or being implemented by panel of experts. With “myContribution”, VP Bank taps the potential of its employees and thereby improves its competitiveness.
To promote open dialogue between Group Executive Management and employees, in 2017 VP Bank introduced the “VP Bank Journeys”. By observing other companies, employees gain new insights and a fresh perspective, address VP Bank’s own challenges and catch a glimpse of the other companies’ innovation culture through company visits. In 2017 two groups of 30 employees from throughout the company travelled to Munich and Dublin, respectively.
Skilled advisors and teams
Engaged and skilled client advisors are a key factor behind VP Bank’s success. In an environment marked by increasingly complex regulations, clients have a greater need for advice and competency. VP Bank must therefore support its client advisors as they expand their knowledge.
SAQ certification for client advisors begun the previous year was successfully continued in 2017. SAQ is an internationally recognised certification based on ISO standard 17024 that contains various financial and advisory components and was created with Switzerland’s AKAD University of Applied Science (Höhere Fachschule Banking und Finance). It ensures that clients benefit from a high quality standard and transparency in advisory services. The training covers not only technical matters and bank-specific content but also their application in advisory discussions.
The projects implemented in previous years to improve advisory quality again bore fruit last year. In November 2017, VP Bank was recognised as the “Top Supplier in the Overall Rankings” in the highly regarded Fuchsbriefe tests in Berlin. In the German-speaking countries, VP Bank is rated as one of the top five banks, and in Liechtenstein it was ranked number 1. The Fuchsbriefe assessment shows that VP Bank satisfies the highest advisory standards in an international comparison.
New organisational structure
In 2017, VP Bank Group made adjustments to its organisational and management structure and focused the tasks within Group Executive Management. This on-going development was based on the Strategy 2020 and its medium-term goals.
Further information can be found in the section “The organisational structure of VP Bank Group”, page 16 ff.
Group Executive Management is supported by a broad base of 19 second-tier managers.
VP Bank’s intermediaries strategy
Since its founding in 1956, VP Bank prides itself in being a reliable, leading-edge partner for financial intermediaries clients. To successfully service this demanding segment requires an understanding of the different and ever-changing needs of clients in Europe and Asia, a constant eye on regulatory requirements and at the same time 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 an ordinary universal bank. With its differentiated, personalised line of services, VP Bank stands out amongst its competitors.
The goal is to offer clients efficient and reliable banking services and information in a digital environment. Client segmentation helps VP Bank tailor its services accordingly. New solutions for each client segment enable VP Bank to provide these services according to need and growth potential.
In this regard, external asset managers receive specialised, proactive support from VP Bank’s Active Advisory Team and benefit from specific investment recommendations, portfolio consulting and switch recommendations.
With the ProLink information platform, intermediaries clients have a simple and speedy way to access the most important information and services they need for their daily work. These include extensive coverage of financial market events, regular publications on business and economic issues, 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.
As an internationally active private bank, the core competencies consist in asset management, investment advisory, financing and wealth planning for demanding private clients.
In asset management, VP Bank offers delegated investment decisions as well as continuous portfolio monitoring. In the investment advisory area, clients can rely on targeted support with market and product information. Wealth planning offers comprehensive advisory and individual solutions for complex needs.
In the investment business, the proven foundation of open architecture ensures independent advisory. Together with VP Bank’s Active Advisory Team and a network of worldwide partners, advisors recommend the best investment instruments or develop innovative solutions for their clients.
The fund business
The fund business plays a central role at VP Bank. It complements the private banking and intermediaries businesses and represents an especially attractive growth segment.
The fund business encompasses the activity with third-party funds and proprietary funds and is managed under the VP Fund Solutions umbrella. With VP Fund Solutions, VP Bank Group has an innovative and dynamic international fund competency centre and a one-stop shop for all services related to the fund business. The competency centre is comprised of VP Fund Solutions (Liechtenstein) AG and VP Fund Solutions (Luxembourg) SA, with the Group-wide management of this strategically important business based in Luxembourg.
With 20 years of experience, VP Fund Solutions offers close, cross-border teamwork with locally and internationally renowned asset managers. 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’ investment decisions.
Through its participation in several fund trade fairs and industry conferences in 2017, VP Fund Solutions continued to present its services to a receptive audience of industry professionals. It also stepped up its participation in various interest groups – notably in the private equity, real estate and infrastructure fund areas – and working groups.
In 2017, the rating agency Citywire gave an outstanding A rating to four VP Bank investment funds. After three “VP Bank Best Manager” equity funds received outstanding sustainability ratings in Liechtenstein in 2016, other VP Bank funds received favourable sustainability ratings in 2017. They are listed on the “yourSRI.com” sustainability platform. The Morningstar rating agency also gave an excellent four-star rating to four “VP Bank Best Manager” funds.
The lending business
The lending business is a constant and dependable pillar of VP Bank, and especially in the current interest rate environment it makes key earnings contributions. The lending business provide significant support to the Group’s organic growth, both through an expanded range of financing services as well as through more close-knit and long-term client relations.
The orientation of the lending business is aligned with the strategic intermediaries and private banking business segments. In the Liechtenstein home market, retail and corporate lending are also offered.
The lending business is part of VP Bank’s core business. It provides the bank with a major differentiation factor relative to other traditional private banks and contributes to the achievement of its medium-term goals. In order to continue the growth of the lending business, several measures are planned. They include the build-up of a product line and pricing tailored to the market, training sessions, an overhaul of the lending process through further quality improvements and the introduction of digital lending processes.
Excellent client care is a top priority at VP Bank and is one of the most decisive differentiating factors. The advisory process is of utmost importance in order to offer clients tangible value-added.
To ensure that all clients receive consistently high-quality advice, new quality standards were established in such key areas as advisory concept, standards, digital and other tools, quality requirements, the definition of responsibilities and teamwork with internal and external partners. The success of these measures was demonstrated by, amongst other means, the aforementioned top ratings in the “Fuchsbriefe” TOPs 2018.
Clients benefit from the newly introduced advisory concept in multiple ways. A new software application provides clients with even more precise portfolio analyses and investment recommendations that also take into account the regulatory requirements of the respective domiciles. Comprehensive and continuous portfolio monitoring rounds out the client care services.
At the start of 2017 VP Bank launched a comprehensive new Advisory package. As part of the advisory concept, it covers the entire spectrum of professional investment advisory and offers attractive, transparent pricing.
In 2016 VP Bank installed “Finfox”, a new advisory software programme, which enables a systematic and high-quality investment advice based on scientifically based financial planning and wealth optimisation. The expanded range of services includes the definition of processes for investment advisory and the optimal integration of these processes in the advisory approach. With the “Finfox Touch” tablet version, clients participate interactively in the advisory process; through an intuitive interface, clients see the investment decision implemented directly and vividly on the tablet screen.
The implementation of the digital investment advisory approach using tablets is a further milestone in VP Bank’s digitalisation strategy, whereby the investment advisory software provides the client advisor with background support and makes it possible to advise clients remotely.
The digitalisation strategy
Today’s client is mobile and connected. Technology and increased mobility have changed people’s behaviour in a lasting way, as evidenced by changing communication patterns and consumer behaviour.
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 approach, 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 that combines tried and true 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.
VP Bank is applying a trust-enhancing combination of people and technology based on client needs. The goal of all these measures is to convince new and existing clients that they are in good hands with VP Bank.
As part of this trend to digitise processes, data and communications channels, numerous measures have been introduced. Since 2016 the so-called Next project has been consistently implemented by a cross-functional project team. The main focus of all these measures is on solutions that can be implemented on a Group-wide basis and standardised.
VP Bank has identified concrete action fields to be implemented as part of 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 specific functional improvements for all VP Bank client segments. In that regard, the use of online services will be made simpler and usability and convenience will thereby be enhanced. In 2017, VP Bank’s client portal was reconfigured as part of the website redesign and the technical foundation of VP Bank’s new e-banking was modernised.
In a second phase, VP Bank will make targeted investments in its internal systems and data. The goal is to provide client advisors with even more time to give their clients the best possible care and jointly arrive at the best possible investment decisions. The online service offering will also be further expanded.
Some of the previous year’s planned and announced measures were already successfully implemented in 2017. VP Bank Group’s contract management was reconfigured, with all contracts now contained in a contract management application. A new approval portal enables vendor invoice management for electronic invoice processing. The Employee Self Service offers electronic absence management. Other measures involved “WebEx”, a virtual meeting room for teleconferencing and joint document editing and the installation of electronic pinboards for employees.
VP Bank’s new interactive website lays the foundation for easier use of online services while paving the way for integrating third-party services and enabling more efficient communications between clients and advisors.
In November 2017, VP Bank held the “Next VP Bank Fintech Day” in Zurich. Senior management and the Board of Directors had an opportunity to discuss the latest topics involving digitalisation and thereby create the basis for further strategic decisions in the Next programme.
For years, VP Bank has operated an e-banking platform that meets the highest standards and enables environmentally friendly sending and receiving of e-Post communications. In 2013 a new version of “e-banking mobile” was introduced that turns a smartphone into a mobile banking device.
Using their smartphones, clients can check their VP Bank accounts and portfolios as well as enter securities orders and make payments based on the latest market prices. 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.
The introduction of the so-called mobile token in 2016 created an alternative login process for e-banking through a special mobile app. When logging in from a personal computer, a push message is sent to the smartphone to confirm the login.
E-banking usage has been growing steadily for years. After rising by 56 per cent in 2014, it posted gains of nearly 30 per cent in the recent years through end-2017. Today, more than 72 per cent of VP Bank’s payment instructions are submitted online.
In August 2017, the design of the VP Bank mobile app was updated as part of VP Bank’s new corporate identity. In December of that year, an updated version of the e-banking app was installed that enabled the implementation of MiFID II regulations for those securities markets subject to the regulations.
In 2017, VP Bank worked assiduously on the planning and development of the new e-banking platform with extensive features and enhanced user-friendliness, which will be made available to VP Bank clients beginning in the second quarter of 2018. The new e-banking platform operates on all mobile devices, including smart phones, tablets and PCs. The content and presentation of market data with professional graphics was noticeably improved and other functional extensions were introduced.
Further innovative opportunities that enable interaction between advisors and clients are being created using modern communications solutions such as chat and video-supported solutions. The new e-banking platform with its totally new user interface also makes it possible to satisfy client needs faster and provide online services.
With the introduction of Electronic Banking Internet Communication Standards (EBICS), VP Bank will offer a professional solution for direct connections to clients’ financial software platforms as from 2018. EBICS represents a new, multi-bank standard for the transfer of payment information over the Internet. The EBICS approach enables companies to have their global payments processed by their banks using the highest security standards.
In 2019 the replacement solution for the current payment slip, the invoice form with QR code, will be launched and implemented over a longer parallel phase.
Growth remains a central concern for VP Bank in 2018. The “Relationship Manager Hiring” programme continues the steady expansion of the advisor teams in the intermediaries and private banking segments. Along with organic growth, the very strong equity position will also be used to invest in growth through acquisitions. The move to new and larger offices in Zurich, Luxembourg and Singapore provides the infrastructure for personal growth.
Another key project is the on-going implementation of the digitalisation strategy. In 2018 these measures will focus mainly on the client side. VP Bank will devote considerable resources to this issue in the years ahead.
As regards regulatory matters, the data protection directive, the implementation of the EU Fourth Anti-Money Laundering directive and “Basel IV” will be front and centre. Other projects include the finalisation of MiFID II and PRIIPs (Packaged Retail Investment and Insurance-Based Products) as well as the implementation of the Automatic Exchange of Information. VP Bank has created designated working groups for these matters and is providing comprehensive in-house training, thereby leaving it well prepared for these upcoming challenges.
The investments and activities in the newly equipped intermediaries business are making themselves felt. In 2017, services for intermediaries clients were further expanded; more than 60 client events were also held. These very active market development activities create growth opportunities and the bank will continue to invest in them in the coming year.
In June 2018, VP Bank (Singapore) Ltd will be converted from a subsidiary to a branch and its license will be expanded from merchant bank to wholesale bank.
VP Bank Group’s outstanding results demonstrate the relevance of its strategic orientation. VP Bank will thereby continue its pursuit of broad-based growth.
VP Bank Group is very well equipped for future challenges, both strategic as well as personal and financial. That was also confirmed by the Standard & Poor’s rating agency, which in March 2017 confirmed its A- rating and raised its outlook from “stable” to “positive”. Following the annual meeting in August 2017, this rating was reconfirmed. The rating and improved outlook take into account VP Bank’s operating gains, prudent risk management and robust capitalisation.