This interview with Nordea, one of the top banks in Northern Europe, also touches on the work it does with wealthy clients in centres such as Singapore.

An earlier version of this article has appeared in WealthBriefing, sister news service to WealthBriefingAsia. Part of the business focus for the firm is Singapore, as well as other parts of the Asia-Pacific region, as described below. We hope WBA readers find this article useful. 

Nordea, one of the biggest banks in the Nordics is building
up steam as the firm continues to grow its wealth management division. While
many Scandinavian banks, particularly those headquartered in Denmark, have suffered since the
banking crisis of ’08, Nordea has managed to turn out profits - particularly in
recent years. 

What’s the key to this success? Cost-cutting and a strong
focus on revenue generating services, says the firm’s executive vice president
and head of wealth management, Gunn Waersted, who is a relative rarity in a
still male-dominated profession. In an exclusive recent interview with WealthBriefing,
Waersted reveals how the
bank cracked the revenue code post-crisis and what lies in store for the
growing
wealth management division. This was a relatively rare example of an
interview by such an English-language publication and such a
Scandinavian bank. 

Nordea’s wealth management division includes a package of
offerings classed under wealth management services, as well as private banking,
asset management and life and pensions. The unit has a record total of €228
billion ($311 billion) of assets under management, a growth of 11 per cent
year-on-year to the end of September this year.

Waersted has been in charge of this unit at Nordea
since 2007, having served in various group management positions. Under her
leadership, the number of customers has grown steadily - especially within
private banking. So far, the firm’s third quarter results revealed a
year-to-date growth of 8 per cent in assets under management, equalling a
strong 18 per cent on top line and 44 per cent on profit.

Now, Nordea Wealth Management will be expanding its employee
numbers, as the firm slowly looks at expanding Waersted’s profitable unit.

“Of course I can’t go into detail, but with the growth we’re
seeing and working hard to achieve in the future, we will have to expand our
employee base. You will not see a proportional increase in profits and employee
numbers, but we’ve been working with efficiency for so long that you will see
employee number increases going forward,” said Waersted.

According to Waersted, the strong results for this division are
driven by the firm’s focus on revenue-generating business.

“A key driver for Nordea’s focus on wealth management is
regulation. At the moment, there’s a lot of focus on capital build-up. So from
a bank perspective, it is of course very interesting to have an area that
provides growth and does not consume any capital. So it’s in the interest of
the group to focus more on wealth management,” said Waersted.

Focus on wealth

In this respect, competing Nordic firms have started to
pivot from retail to private banking in their efforts to increase profits. One
example is Danish banking giant Danske Bank, which has endured a client exodus
since launching its shift in strategy in the autumn of 2012. (That strategy,
however, appears to have paid off judging by its share price performance.) Similarly,
for Nordea, the equity bar is set high and as such, wealth management will have
to bring in the bucks, said Waersted.

“We have stated a clear target for a 15 per cent return on
equity for 2015, so of course, growth in the wealth management area is
important,” she explained.

Financial results aside, Waersted’s business area has also
seen an impressive growth in clients since 2011. This essentially comes down to
a well-functioning elevation model, which sends complicated clients from retail
to private banking - within the Nordea group.

“In this model, we see that the customers have higher
satisfaction, higher returns on their portfolios and from an earnings
perspective, the group also earns more. We also saw that the income increase
for the customers moved from retail to private banking was 160 per cent,” said
Waersted.

As opposed to boutique wealth managers, the group is able to
offer a full product range. This means that client issues such as changes in
taxation can be dealt with across the life and insurance business and then
later, the wealth management unit, if, for example, that works better for the
client and the group.

“I think we’ve been quite good at developing wrapped
products across the different units that meet customer demands,” said Waersted,
“the model wouldn’t work if we didn’t add value to the product. That’s what
we’ve been able to demonstrate, that there is value add in the combination of
the products we offer and the advice we provide”.

Meeting all clients
at a low cost

To this end, the benefits of being a large banking group
versus an independent manager, seem to be endless. However, the business model
does provide challenges too. As a major financial services provider, Nordea
services all types of clients - even in a heavily regulated environment. With
recent new rules such as the UK Retail Distribution Review making it more
costly to service lower-end clients, this publication asked Waersted how Nordea
was managing to uphold a profit.

“The benefit, but also the challenge of being a major
banking group is that we have to cover all types of clients. The way we work
with this is to have one investment process to cover all segments. So the
products might be wrapped differently, priced differently and advised
differently, but underneath you have this one investment process. This is of
course key, because this also furthers efficiency - which is pretty much the
name of the game nowadays,” Waersted said.

In this respect, Waersted considers the base process key in
order to provide customers with different products, while maintaining an
underlying profit. More importantly, one single process saves money.
Cost-cutting has been a big topic in the industry but more importantly for
Nordea, it has been essential to cut expenses while the Nordic economies
recovered and as regulators imposed higher demands on firm equity.

“We have had flat costs for 12 consecutive quarters in the
group and we have stated that we also want flat costs for 2014. Obviously that
is a big challenge, which we have tackled by looking at efficiency and
particularly, applying value-chain thinking. It’s about the production, advice,
concept-building, customer-facing - the whole value chain. We have increased
investments in IT in order to increase efficiency, as well as outsourcing work
to India
rather than Nordic consultancies. The main challenge is cost cutting on
processes, because we also have to make investments as our private banking
grows,” said Waersted.

This move has helped foster the aforementioned growth in
Waersted’s business unit - despite a challenging market. Yet, Waersted insists
that some areas of the business are untouchable when it comes to slashing
costs.

“We will not cut down on expenditures when it comes to our
customers - customers need personal advice and they want personal advice.
That’s where online comes in - we can meet customer demands via the internet, as
long we do not cut out the personal advice. That is key.”

Beyond the Nordics

And when it comes to customers, Nordea is of course sticking
to its loyal followers in the Nordics, as it sets the goal to become the
leading Nordic wealth manager not only in the overall market, but in all the
individual Nordic countries too, Waersted said.

“From a customer angle, the demographics in the Nordics are
still working with us - people are living longer and they are saving longer.
Its still an accumulation model rather than a de-accumulation model, as there
is a growing awareness amongst people that if you want to maintain a certain
lifestyle, then you really need to save up,” added Waersted.

Aside from the home-court advantage in the Nordics, Nordea’s
wealth management arm has logged significant international growth. Some 20 per
cent of its assets under management arise outside the Nordics, partly from its
Luxembourg-based international private banking unit, but also through global
fund distribution. More importantly, Nordea recently opened a new regional
office in Singapore
- and according to Waersted, Nordea may expand its wealth management business
further.

“Singapore
will be a key focus, but we will not rule out that we will open offices in
other markets,” she said.

“We see a general globalisation in the Nordics, so when we
picked Singapore for a new
office it’s because we’re seeing a lot of Nordic companies and a big Nordic
community in Singapore and Asia. This doesn’t mean that we’re there to expand into
Asia, but we’re there to focus on the Nordic population in Asia.
Of course, we have also seen the major growth in wealth in Asia,
so that also makes it interesting for us to be in that market.”

Growth & the
search for talent

Waersted said Nordea’s wealth management unit has a three-pronged
approach, including development of next-generation value products, increasing efficiency
in order to maintain profit growth, and most importantly, to continue to grow
from its current business momentum.

Achieving this won’t be easy, said Waersted, who pointed to
two key enablers: the ability to attract the right people and competencies and having
a strong and credible brand in five years' time.

“We generally benefit from being the biggest and strongest
brand in the Nordics, but there is a fight for the right people. The labour
market is not tough at the moment, but getting the right competencies is. Of
course, we are not the only ones seeing wealth management as a good area for
growth, so it’s something we need to constantly focus on,” she explained.