Exclusive outtakes from industry leaders
Restructuring: You shouldn’t be afraid to do it, even more than once if you have to, and even if your own family doesn’t understand it. Just ask John Riccitiello, chief executive of videogame publisher Electronic Arts. Here’s what he said at the Reuters Global Media Summit on Tuesday:
A company that doesn’t restructure in the face of that dramatic transformation, I don’t know what they’re doing. GM had a great decade in the ’70s building large cars… They didn’t restructure in the face of what was obvious. The music industry kept telling us they wanted to buy albums, and then they tried to sue us. It didn’t serve them well. … We look at the future and we are aggressively embracing it… .
That means taking the big net loss at times, even though as Riccitiello stressed, that was on a “GAAP” basis. That means the bottom line. Still, media businesses tend to look at profit before various charges (often expressed as operating profit or other terms that are comparable to Wall Street analysts’ expectations and are said to offer a true picture of a media business’s health), and executives sometimes get irritated when you insist on reporting their bottom line performance. Why? Because a massive loss from a writedown or a restructuring shows up in the bottom line, but it is not always a sign of the business’s fundamental health.
Yet, people often take it that way if they don’t know better — including people close to home. “My mom took it that way,” Riccitiello said. “I straightened her out over Thanksgiving.”
A year after the implosion of Lehman Brothers, private banking leaders will gather in Geneva, Boston, Tokyo and Singapore on October 5
– 7 to share their views about the future of wealth management across the globe.The industry is at a crossroad. After the Madoff scandal and the collapse of bank secrecy in Switzerland and other major offshore banking centres many players have to rethink their banking model and work hard to regain their clients’ trust.
Even the rich aren’t as well-off as they were a year ago but that’s not stopping the wealth management industry from focusing on what the future of private banking will look like after the economic downturn has passed. Click below to view my latest story:
Private bankers are guiding their rich clients into safer investments as financial market turmoil spreads, but when it comes to their own money they often take a different tack.
“I don’t have a very well diversified portfolio,” admits Timothy Vaill, chairman and chief executive officer of Boston Private Financial Holdings , which owns 15 independently operated financial services firms.
“The majority of my investments are in my own company,” he told this week’s Reuters Wealth Management Summit.
“And I invested additionally this quarter in my own company again because I really believe what we are doing is the right thing to do and it is a very strong company. And I’m there all day, every day, watching it like a hawk.”
David Lamere, chief executive of The Bank of New York Mellon’s wealth management unit, said his money is managed by his own company.
“I’m a big shareholder in BNY Mellon, and the rest of my assets is managed by our organization,” Lamere told the Reuters Summit. But his investments were “very diversified”, he added.
How much do they own?
According to Thomson Reuters data, Vaill owned 201,794 shares of Boston Private as of mid-August valued at about $1.8 million. As of Thursday afternoon, his stake would have retained its value at $1.8 million.
Vaill also said he does not borrow against his stock and does not invest in hedge funds.
Lamere owned 255,820 shares of Bank of New York Mellon as of May 9, valued then at about $11 million. As of Thursday afternoon, that was notionally valued at about $7.5 million.
Lamere said he was at a lunch on Sept. 18 when Bank of New York Mellon stock briefly fell 35 percent along with a slump in shares of other trust banks and asset managers.
“It all happened within about an hour in the middle of the day and I was in a lunch. I got called six times,” Lamere added.
Women have long bumped up against glass ceilings as they try to advance to upper level executive jobs.
According to research from the Harrison Group, a market research and strategy firm in Waterbury, Connecticut, when it comes to housework wealth men are dealing with barriers too, although it’s unclear where those barriers come from.
“Women handle the household’s employment, treasury and other functions” and are making real money for the family, said Jim Taylor, the group’s vice chairman who regularly researches how rich people behave.
Men work long hours at their jobs and at home they are now allowed only to care for lawns, shrubbery and maybe the swimming pool. That gives rise to the new term “the grass ceiling,” Taylor said at the Reuters Wealth Summit.
Forty-six percent of the wealthiest U.S. families believe they can lose everything, said Jim Taylor, vice chairman of the Harrison Group, a market research and strategy firm in Waterbury, Conn.
While the man or woman on the street cuts back on non-essential spending as the value of their home falls and they worry more about whether or not they will keep their job, so too multi-millionaires are feeling the pinch.
Javier Arus Castillo, general manager of Santander Private Banking International, explains.
As global markets rallied over the past five years, talent in the private banking industry had become a heavily fought over commodity. Rain makers, top bankers and entire teams were poached constantly by rival organizations who offered top dollar for the move.
However the unprecedented financial crisis has dramatically changed the talent landscape, with rookie bankers facing a harder time to move up the ladder, said a Merrill Lynch executive.
So when someone talks about the industry being in “meltdown”, it is good to see they are backing up their dramatic views with some dramatic actions.
But according to Sebastian Dovey, managing partner of wealth management consultancy Scorpio Partnership, they need to spend less time moaning about it and more time working with regulators to communicate the benefits of the industry.
“It’s not good enough to sit back and say this is going to cost us,” he says. “We’re here now, we’re in this mess. We’ve got to try and manage our way out of it.