About Julius Baer

With origins dating back to 1890, Julius Baer is the leading Swiss wealth management group. We focus on providing personal advice to private clients around the world, powered by high-end services and expertise. We help our clients to achieve their financial aspirations through holistic solutions that take into account what truly matters to them – in their business and in their personal lives, today and for future generations. Our vision is to be the world's most personal and pioneering pure wealth manager. Our ambition for the next decade is to be the most admired global wealth manager. As entrepreneurs, we actively embrace change to be at the forefront of the private banking industry.

With headquarters in Zurich, Switzerland, Julius Baer employs 6,600 people globally with presence in over 20 countries and more than 50 locations. Asia is the bank's second home market, with both Hong Kong and Singapore being the key booking centers. At the end of 2020, the bank's assets under management in Swiss francs amounted to CHF 434 billion.

Backdrop: Wealth Management Industry and Julius Baer Before the Great Lockdown

Wealth management is one of the most attractive sectors within the financial services industry. During the last ten years, personal financial wealth has grown on average at about 6% per annum globally and more than 10% per annum in Asia. Relatively low capital requirements result in attractive returns on capital.

However, in recent years, the industry has been facing numerous challenges:

• Client needs are shifting structurally, from wealth creation to wealth preservation and from individual needs rooted in one geography to changing family settings with multinational requirements. Complexity is increasing and expectations are on the rise – factors that call for banks to provide even broader capabilities and deeper expertise in wealth management.
• Client needs are constantly changing. In particular, there is a demand for more enhanced digital channels and tools. Clients who are used to digital channels and services from their retail banking relationships are expecting wealth managers to also offer a seamless client experience across both digital and face-to-face channels.
• Generational dynamics are accelerating. In the next 20 years, huge numbers of assets will be handed from one generation to the next. This future generation is looking beyond the management of assets solely and is also interested in giving meaning and purpose to their wealth.
• New competitors are challenging the established players; for example, local banks are establishing their own private banking offering, and fintechs (financial technology organizations) are launching pure digital offerings for the mass affluent segment and also targeting higher-value segments.
• The economics of what was traditionally a high-margin business have changed. Commoditization combined with negative interest rates in many of the bank's key markets have resulted in strong margin pressure over recent years. Between 2011 and 2020, in line with the industry, the bank's return on assets (gross margin) dropped from 105 basis points to 88 basis points.
• More comprehensive regulations and changes in technology are driving up the structural costs of doing business and hence the critical mass. This has accelerated the trend of consolidation, as evidenced, for example, by the decrease in the number of banks in Switzerland from 320 in 2010 to 246 in 2019.

In response to this industry evolution, the Julius Baer CEO presented an updated and refined strategy at the start of 2020 with ambitious new medium-term targets and KPIs for 2022. The strategy in a nutshell:

• Shift leadership focus, from an asset-gathering strategy to sustainable profit growth.
• Sharpen value proposition, from historically grown individual client management to a distinctive segment value proposition.
• Accelerate investments in technology, from building the foundations to delivering a state-of-the-art client experience.

First Signs: When COVID-19 Hit the Wealth Management Industry and Julius Baer

The bank's Business Continuity Management (BCM) teams in Switzerland and Asia closely monitored the developments at the beginning of January 2020 and reviewed the bank's preparedness for a pandemic, including inventory checks for masks, hand sanitizers, and thermometers. The Singapore Crisis Management Team held its first meeting immediately after the Chinese New Year weekend and one week later, the Crisis Management Team (CMT) established a subteam – the Pandemic Management Team (PMT) – to manage the bank's response to the pandemic.

In a first phase, the PMT focused on swiftly providing basic protection to staff, clients, and the bank. Travel advisories were issued to staff initially traveling to China, later to selected other countries, and eventually it progressed to a global travel ban. During the Chinese New Year weekend, a call tree was triggered, and staff with travel history to China had to observe a self-quarantine away from the office for 14 days. This was initiated out of caution ahead of local health advisories. When the local authorities issued national advisories, the bank incorporated them quickly and ensured staff strictly followed those guidelines. At an early stage, the protocol to manage suspected and confirmed cases among staff was already established.

Temperature screening for all visitors, including clients and business partners, was set up at all of the bank's offices in Asia as of the end of January. Additional temperature screenings by landlords were soon implemented as a further measure. For the first time, the bank canceled its investment conferences for clients to prevent social interaction or community spread; these conferences are the bank's flagship events, held periodically to share with clients the bank's market outlook and investment insights.

After the declaration of DORSCON¹ Orange in Singapore, the bank invoked a split operations setup in Singapore and Hong Kong. Split operations enabled the bank to immediately increase the resilience substantially by physically segregating the relevant teams in two different locations. This ensured business continuity, should any infections be detected among staff. Preparing and executing split operations on short notice, without meaningful space reserves, proved to be a daunting and challenging task for the organization. However, the setup yielded a positive effect because it provided staff an opportunity to meet and interact with colleagues from other offices, instead of interacting only via emails or phone calls.

When the number of infections increased drastically, not only in Asia, but also in Europe, Julius Baer began to facilitate staff to work from home (WFH) to minimize their exposure to the potential infections during their commute and to reduce density in the office. At the same time, the bank was also getting ready for a potential lockdown by authorities.

However, the bank's WFH capabilities were not sufficient at the start of the pandemic. Similar to other private banks, Julius Baer traditionally limited remote access to its systems and client data, in order to protect and safeguard our clients' confidentiality. The default workspace for most staff was a desktop in the office with remote access to email and a few selected applications via mobile devices. Only a few employees, mostly senior management and project staff, were using bank-issued laptops plus secure tokens. During the demonstrations in Hong Kong in 2019, a full remote access solution via VPN was implemented for users of company laptops. When the bank considered rolling out this solution to a significant number of additional users, it became evident that it was not possible to procure the required equipment, whether laptops or secure tokens, within a reasonable time frame, and that this solution would also very heavily consume bandwidth capacity. Alternative ideas centered around a BYOD (bring your own device) solution while meeting the bank's information security requirements.

The global COO gave the IT infrastructure team the following challenge: “If you can enable me to work from home in a stable and secure manner in one week's time, I invite the whole team for dinner!” Within days, the team developed a Citrix-based² solution, named the “Temporary Pandemic Workplace,” which was rolled out successfully to all staff in Switzerland in the middle of March and one week later across Asia. All this took place just before the local authorities implemented the lockdowns.

One final challenge was slightly unexpected, though: a significant number of staff shared that they did not have a laptop or had to pass their personal laptop to their children for home schooling; therefore, 150 consumer laptops were procured from retail stores to support WFH.

During the Great Lockdown

The lockdowns imposed in most countries triggered the first “manmade recession” in history and a larger decline in GDP than during the global financial crisis (GFC) in 2008. This led to a sharp correction in equity markets from their all-time highs at the beginning of February, in fact the fastest decline in the US equity market in history from an all-time high. However, unlike during the Global Financial Crisis banks were not part of the problem; they were part of the solution, facilitating government schemes to provide liquidity to temporarily closed businesses. For Julius Baer as a wealth manager, the focus was on advising clients how to navigate this unprecedented storm in financial markets. The key recommendation for clients by our bank's Chief Investment Officer was not to panic and to stick to their strategic asset allocations while taking advantage of opportunities identified by our investment experts in the volatile markets.

Traditionally, stock market corrections have a strong negative impact on Julius Baer's profitability and share price, since a significant part of revenues is fee-based income linked to assets under management. Indeed, the bank's share price declined from CHF (Swiss franc) 51 in January to CHF 25 in March 2020, in line with the global market correction.

Globally, stock exchanges experienced a massive drop in March, followed by very volatile further developments. Although private banks, such as Julius Baer, do not finance business or consumer loans and are less exposed to deteriorating economic environments, they do issue secured loans that are exposed to fast and deep drops of the collateral values. Julius Baer's relationship and risk managers responded swiftly to the financial turmoil by following up with clients on their risk and credit exposures, as well as managing certain capital ratios due to heavy inflows of deposits. Jointly, solutions were developed and credit shortfalls were solved, while regulatory minimum requirements were adhered to at all times. In fact, liquidity and funding ratios as well as the classical regulatory capital ratios even strengthened during the crisis.

Furthermore, due to the highly volatile markets during this time, clients' transactions increased substantially, reaching record volumes and leading to record-high net profit for the first half of 2020 for the bank.

It is against this backdrop in financial markets that the bank sent 90% of staff to work from home in full compliance with regulatory requirements at the start of April.

Management's immediate focus was to maintain the usual service levels in a remote office setup and at the same time to systematically increase the bank's resilience. Measures implemented were grouped into five categories: (1) process workarounds and optimizations, (2) new ways to interact with clients, (3) project work, (4) employee communication and management, and (5) training.

Ensuring continuity in transaction processes and availability of the underlying IT systems was the first priority of the Pandemic Management Team (PMT) given the spike in transaction volumes, which reached 300% of the usual levels due to the market volatility experienced then. Therefore, the daily system morning checks were further enhanced. Despite a high degree of straight-through processing in the bank's operations department, a few processes were still paper-based before the pandemic. The various teams defined tactical workarounds to replace paper-based workflows with soft copies, which were then stored in shared network drives. In parallel to such tactical quick fixes, more robust solutions were implemented, such as the processing of incoming “Swift” messages for corporate actions such as dividend payments, which were automatically routed to the Operations Team's mailbox. One key change was the (temporary) acceptance of scanned or digital signatures instead of wet ink for client documents, as well as scanned copies instead of original documents.

Trust is the key element in client relationships when it comes to wealth management. Since relationship managers could not meet their clients in person, the bank enabled video conferencing via Cisco Webex, supplemented by guidelines and recommendations for relationship managers to conduct virtual meetings with their clients. Together with the use of scanned signatures and soft copies, we were able to continually open new accounts while observing safe distancing measures. In addition, investment seminars are now held “live” and “virtual” via webcasts.

It became evident that the pandemic would last longer than initially expected. Therefore, tasks that typically required a lot of physical collaboration among the employees, such as project work, had to move forward in high speed and quality. Thus, the PMT enabled staff to effectively use collaboration tools such as Webex Conference, Webex Training, and SharePoint to ensure engagement and communication. For example, in Asia, the investment management team migrated to a new portfolio management system during the lockdown. During the cut-over weekend, a project team of more than 50 employees collaborated virtually across three time zones to complete a runbook with approximately 200 activities.

To stay in touch with staff and to keep everyone abreast of any changes, a dedicated intranet hub with all related information was set up. Staff got access to useful information about the pandemic, home office guidelines, and essential help lines. The site also included recommendations for managers on how they could continue to engage staff effectively in a remote environment. One of the recommendations was for managers to hold regular check-ins with their team members. This initiative eventually improved employee engagement and communication, as some employees commented that they had more interactions with their superiors during the lockdown than before. Some managers sent weekly emails with key updates to their staff so every team member was aligned. Others contributed to intranet blogs to share their personal work from home experience with practical tips and personal pictures about maintaining a healthy work-life balance. The regional and global town halls, for the first time, were conducted fully virtually. Many questions were fielded during the virtual conferences, and there was even more active interaction between the speakers and the participants than in the traditional physical format.

JB Academy, the bank's learning and development unit, developed a comprehensive list of remote training workshops. Some of the workshops ranged from health and resilience, and mental wellness to team building. Additional training and sharing sessions were rolled out to support staff in managing substantial changes brought about by the pandemic and to build life skills on adapting to a new normal. One of the most popular workshops was on conducting effective virtual client meetings and how to improve engagement in virtual team meetings. Leadership training was carried out virtually too. During the pandemic, the average learning hour per employee increased by 37% compared to the previous year.

Future Outlook

Having established measures and guidelines to protect the health of the staff and the interests of the bank, management took the crisis as an opportunity to accelerate the implementation of its change strategy, especially the digital transformation of the bank's value proposition.

COVID-19 will continue to change the way we interact and work with clients, partners, and colleagues, thereby accelerating existing structural trends rather than creating new ones. The strategic outlook is based on a few key assumptions regarding social interaction, client needs, and work patterns. The current behavioral patterns like social distancing and remote interaction will likely remain to a certain extent. This affects not only how we collaborate internally, but also how we serve our clients. Clients are rapidly increasing their adoption of digital technologies from video conferencing with the relationship manager to online banking and the use of digital advisory tools. Workwise, staff are expecting greater flexibility and autonomy with work from home becoming more common. A well-rounded and well-functioning work-from-home solution will be more important than ever to attract top talent. These increased work-from-home patterns will not only blur the boundaries between private and work life, but also impact the way we measure productivity. The cultivation of trust, new styles of leadership, enhanced processes, and governance will become even more important for the bank.

Based on this outlook, the bank's executive board launched several strategic initiatives as early as April 2020, which were structured according to three key themes: client needs, employee needs, and organizational needs.

The first set of initiatives invested in accelerating the digital transformation of the bank's value proposition. The foundations were already in place before the pandemic struck in the form of globally harmonized mobile and e-banking platforms. In Switzerland, a secure chat feature was rolled out in September 2020 that allowed clients to interact with their relationship managers conveniently via their WhatsApp account. Clients in Asia started benefiting from this solution in May 2021. In order to support digital document flows and to facilitate administrative tasks, an electronic/digital signature solution was also rolled out during the pandemic. The digital onboarding of new clients and video identification for prospects were launched in Switzerland in October 2020. The bank has already started using advanced data analytics tools to generate personalized investment recommendations, which were distributed via digital channels.

Remote working is expected to continue in the new normal. In a recent employee engagement survey, 78% of our employees globally expressed the wish to work more than 20% of their time remotely post-pandemic. The survey yielded similar results in Asia, with 85% for Singapore and 72% for Hong Kong. Julius Baer employees will have greater flexibility in choosing their preferred work setup. This new way of working will be supported by the COO's values of Ambition, Courage, Collaboration, and Trust, values that already served us well during the pandemic.

The new flexible working arrangements will provide an opportunity for the bank to redesign our office space to enhance collaboration and engagement. Since some employees will work partially from home, “hot-desk” seating arrangements will be introduced for certain functions. This frees up space to embrace creative thinking, foster innovation, and support the “agile” transformation. An additional benefit is an expected reduction in infrastructure costs in the future.

Learnings from the Great Lockdown

While the pandemic was not expected, the bank was generally well prepared for the situation. Having been exposed to various crises before, the business continuity plans were already in place with an adequately equipped and ready team. Nevertheless, the need for staff to work from home was clearly underestimated and so the team needed to provide out-of-the box ideas. The solutions and changes that were implemented in response to COVID-19 will remain and allow the bank to operate fully remotely in the future, if required. Today, the bank has increased its resilience considerably, notably since all locations worldwide were affected simultaneously and learned “on the go.” The pandemic moved business continuity management – traditionally regarded by many as a paper exercise to be ticked off once a year – to the forefront, and adding resilience in general has become a company priority.

The global crisis certainly fostered the bond between the bank and its employees. We received very positive feedback from our staff on the handling of the pandemic situation and how the bank took care of its staff. Since we lived up to our values, the staff went the extra mile to find solutions to challenges. This translated into improved collaboration, agile and faster product and project deliveries, as well as being highly adaptable while delivering continuously high-quality service. The extraordinarily high volumes of client interactions and transactions were handled promptly without errors or operational incidents. The bank will certainly emerge stronger from this crisis and apply the same sense of urgency, alignment, and commitment demonstrated during the pandemic to carry out the bank's strategy.

Bringing people back to work at the office has turned out to be more challenging than sending them to work from home. Interaction and information flow within teams was easier when everyone was working from home, compared to a scenario where half of the staff population are in the office and the rest are working from home. Some staff also got used to working from home and saved time commuting to and from the office.

It will certainly be a challenge to find the right balance going forward between work from home and work at the office, physical and virtual interaction with clients and staff, and providing flexibility to employees while ensuring high service levels.

By responding with swift and effective measures to counter the challenges brought about by the pandemic, our bank has actually emerged stronger. This experience will have a lasting impact on our organization and will motivate staff to further foster entrepreneurship, agility, and client centricity.

About the Contributors

Toni Scheiwiller (Global Head of Corporate Services) and Andreas Zingg (COO, Asia Pacific) Toni Scheiwiller is the bank's Global Head of Corporate Services based in Zurich, and Andreas Zingg is the COO Asia Pacific, based in Singapore. They led the bank's response to the COVID-19 pandemic globally and in Asia, respectively, and were instrumental in leading the bank's changes in adherence to regulatory requirements while ensuring business continuity and sustainable growth.