Edmond de Rothschild Asset Management (Luxembourg): taking stock of a positive and formative business model change

In the media - 7/20/2017

The process of outsourcing the asset servicing activities of Edmond de Rothschild Asset Management (Luxembourg) was completed nearly one year ago. Despite the criticism expressed at the start of the process, this project has surpassed our expectations. Article published in Agefi Luxembourg.

One year on from the migration’s completion, it is time to make a first assessment of the Novus project, time to put this extensive project into perspective and to explain the reasons and consequences of this important strategic decision for our management company and most importantly for our clients.

In the summer of 2013, the Edmond de Rothschild Group informed its clients that it would initiate a selection process to appoint a single service provider for its account management activities and operational and administrative services related to the central administration of traditional investment funds.

Access to a network and techniques

30 years of experience in investment fund services pushed us to review our business model. Edmond de Rothschild had long been considered a niche player in the fund industry; attracting small and medium-sized institutional clients such as private banks and wealth managers is central to our group’s business. As we intend to continue to serve our clients and develop our activities, we made the decision to establish a partnership with a service provider whose core business would help us to bear the ever-increasing weight of regulatory constraints, giving us access to a network and techniques that would have been extremely costly to develop internally.

The group selected the service provider based on a set of clear criteria, which were the guiding principle behind this large-scale project. Securing employment in the long term was the primary concern. The transfer of roughly 100 staff members, under certain non-negotiable conditions, ruled out a good number of potential contenders from the outset. Other prerequisites included having a recognised and established presence in Luxembourg as well as an operational culture akin to our own and that of the local market. Financial aspects were not given top priority.

Working partnership

There was a period of technical preparation from when Caceis was selected until the actual start of the migration process; during this year we identified gaps, developed tools and processes, created research groups, communicated with social partners and supported staff. A genuine working partnership was formed between the various teams at Caceis and Edmond de Rothschild. This time was crucial to ensuring we continued to offer a high-quality service, which has always come first at Edmond de Rothschild Asset Management (Luxembourg).

Over the course of 18 months, we encountered all the problems associated with a migration between two service providers, but the greatest challenge was combining “tailor-made” and “large-scale” service – two very different worlds that require two different ways of working and two approaches to tackling and solving problems. Over time, our partner succeeded in adapting to our tailored approach targeting institutional clients who expect an Edmond de Rothschild standard of service. It must be acknowledged that there were some initial reservations in response to the news, as some of our clients feared we would not be up to such a vast undertaking. There were concerns that clients would fade into the background and no longer receive the individual attention they deserve, or lose their valued relationship of trust. We had estimated that we would lose 10% of clients between the start of the migration process and completion. In the end, this figure was not reached. We lost very few clients, and most of those left before the project got under way. Some of those who left us are now actually considering returning. Meanwhile, the clients who stayed with us have launched other funds and sub-funds with us. Finally, the business model with Caceis as our partner has enabled us to attract new prospects.

A lot of progress

Almost four years after this change was decided, we are now satisfied. A lot of progress has been made thanks to this collaboration between Caceis and Edmond de Rothschild Asset Management (Luxembourg). Of course, we are still making improvements. The project still revolves around our aim of making daily developments based on clients’ needs, and striving to ensure they benefit as much as possible from the advantage offered by having a technical platform combined with the “Made in Rothschild” service culture. For example, the reporting solutions provided are now of a much better quality thanks, in particular, to having an online platform and a mobile solution. These digital solutions also allow more efficient monitoring.

It is important to note that Edmond de Rothschild remains the custodian, administrative agent, paying agent and transfer agent; clients deal only with Edmond de Rothschild Asset Management (Luxembourg), their single point of contact on a day-to-day basis; and the counterparty risk is still only linked to our bank’s balance sheet.

From a commercial perspective, we are also reaping the fruits of our labour. The pooling enabled by our model means that we can offer competitive pricing for substantial asset amounts. We are also improving the efficiency of our plain vanilla products. Our existing clients are referring us for other projects and we can now dedicate our analytical resources to innovative projects and new markets, such as virtual currencies and even Chile and India.

If we had to do it all over again, we would! Above all, this experience has been an incredible human adventure, which has allowed us to address every last detail of the migration. Of course, our clients had concerns and some of our staff did not believe it would happen. But, with support, involvement and commitment, everyone now agrees it was the right thing to do. And the results speak for themselves!

Emmanuelle Claude, Senior Business Developer, Edmond de Rothschild Asset Management (Luxembourg) and Franck Sarrazin, CEO Edmond de Rothschild Asset Management (Luxembourg)