Leading London-based private banker Ali Khalid talks to Blue Chip about his views on the banking industry and the global financial crisis
What drew you to a career in banking?
Ali Khalid: “Growing up in London during the 1980s, it was evident that the UK and the rest of the Western world was experiencing a period of economic metamorphosis. Moreover, the media was keen to promote the apparent ‘excess culture’ which resulted. Ambitious youngsters were ever aware of the ‘Yuppie culture’ and the success that could be achieved from working hard. Therefore, the desire to be successful in a professional capacity was very much in the forefront of my mind. There were three specific events during this period that set me on the road to becoming an investment banker. The first was the shift in the UK from a manufacturing economy to one of a service economy – this was evident from the coal mine closures in the UK, the Winter of Discontent in the late 70s, and the reforms implemented by Margaret Thatcher’s Conservative government. The second was the release of the movie ‘Wall Street’ in 1987 which glamourised the ruthlessness and fast moving pace of the banking world, but highlighted an increasingly meritocratic workplace where meteoric success could be achieved in a very short timeframe. The third factor was the regular interaction I would have with a close family friend who had become a Desk Head on the Fixed Income Trading Floor at the then Salomon Brothers. His stories about the nature of his work, the characters that worked with him and their antics would leave me in awe. These factors were crucial in convincing me that working in the banking world would be rewarding on many levels and as a result, I tuned myself into not wanting to do anything else.”
What are your views on the impact of the global financial crisis on banking in general and private banking in particular?
AK: “During my career, I have seen the Asian/ Russian crisis, the collapse of LTCM, and the tech bubble burst, but the current crisis is very unique. The GFC has changed the world landscape in several ways and for the first time we are seeing the balance of power shifting – both economically and politically – from West to East. On a daily basis we are observing the courting of the Eastern World not only by Western politicians, but many industries including banking that are focussing on growth from the Emerging Markets. Significant resources are being shifted to such markets to capture the expansion and recoup the dramatic losses that have been felt during the crisis.
The GFC knocked the financial markets and banking world ‘for six’; thousands became unemployed, entire banking departments closed down, and many well-established financial institutions collapsed or were obliged to resort to government bailouts. Bankers, who once talked of ‘millions’ and ‘billions’, all of a sudden began speaking about ‘trillions’ when referring to the fallout of the GFC. In short, the financial world had plunged into unchartered territory.
One cannot of course ignore the mismanagement and greed that had taken place, not only within the banking community, but also on a national level – all of which contributed to the economic meltdown. In summary, the impact has been enormous and will continue to be felt for a long time still.
As far as Private Banking is concerned, the key objective at a top tier bank is wealth preservation and investment management. Therefore, for the most part, clients that had been conservative remained relatively unaffected from the crisis, but any equity exposure led to losses within an investment portfolio, which unfortunately no one had been able to foresee. Private banking gained increased internal recognition, as banks grew dependent on their wealth management divisions to continue to produce consistent revenues. The old adage of ‘cash is king’ was evident throughout the financial crisis with private clients, however there was still the desire to chase yield, so the traditional asset class model fell apart as clients sought new ways of finding effective returns. This forced bankers to be innovative when considering potential investments, i.e anything from Central London real estate to stamps, art, cars and fine wine.
Given the recessionary nature of the economy internationally, how do see private banking evolving in the future?
Private banking will continue to grow given that well-advised clients have remained invested in cash, and are now looking to put those funds to good use. Also, private banking is expanding rapidly in the emerging markets to capture the increased growth within the BRIC countries and to capture the ‘natural resource’ generated wealth in countries like Africa which is dubbed ‘the final frontier’, and South America. We also continue to see a rapid expansion of private banking throughout the Middle East, given the wealth generated from the oil and gas industries, but primarily because private banking gives clients the opportunity to invest in far more sophisticated and quasi-investment banking products as opposed to settling for retail banking. The former will be the crux of the evolution as private banking becomes more innovative in its product offering, and private bankers will become increasingly more technical in due course. There will of course always be clients that use their bank for their ‘pension’ money, but more clients will move towards using every area of the bank to develop a sophisticated solution for their personal needs or the needs of their business. Certainly the GFC has taught us that, in some cases, clients would rather invest in their own companies than in financial products, so private banks will need to service those companies in order to retain their respective client bases.”
You are a frequent visitor to Pakistan, what are your impressions of the banking landscape there?
AK :”The retail banking landscape has grown rapidly, and perhaps too quickly. There are a multitude of banks, many new to the market and the frequent sell-off, which makes one think one side of the banking community is there to profit on the churning of these selloffs. This naturally leads to a concern with regards to issues of on good corporate governance, client protection and customer service.
That said, within the well established banking institutions, it is clear that there is a high quality of staff with sophisticated financial and market knowledge. Moreover, given the entrepreneurial spirit that is inherent within the Pakistani business community, one gets to witness landmark, innovative transactions as bankers push the boundaries to find new structures and new ways of doing good business.
In recent visits, I have met some highly professional bankers, some of which have been featured in this publication. I would say whole-heartedly that they are up there with the best in the world.”
Do you believe Pakistan is a viable investment destination?
AK :”I believe that Pakistan has the potential to be a great nation and a beacon within the Muslim world, especially given its depth of talent in numerous industries, its geography and its potential to nurture an increasingly skilled labour force. However, the geo-political issues that have been all too present over the past 60 years or so, and the apparent failure to maintain a stable economic and political environment, will continue to cause many difficulties and concerns for large scale foreign investors. The focus must shift from a short –term, self serving attitude in many facets of life, business and politics to one of sustainable growth, spreading prosperity and education. Once that is established, it is likely that Pakistan will see an increased and sustained foreign investment, as well as stronger economic ties with other nations.
Foreign entities do continue to invest in Pakistan even in the current environment, but the objective should be to dramatically increase such investment activity, and more so to result in the benefits being reaped locally as opposed to transferred back abroad.”
You visited Pakistan just after the catastrophic floods, what impact did you witness on the economy?
AK :”One would often hear about the amount of devastation caused to homes, families and the livelihoods, and most certainly on the agricultural harvest. I feel however that it is too soon to fully gauge the longer term economic impact. I think it’s fair to say that – in terms of economic impact – the floods were yet another tragedy which has so unfortunately devastated the lives of people who were already suffering from economic hardship. The financial assistance that is now required from the IMF will I hope serve to help Pakistan to reform its economic landscape, and move the country towards a more stable economy.”
As a leading private banker, what factors do you feel have contributed to your success?
AK :”I started my career as an Investment Banker moving to the debt capital markets division of BNP Paribas, primarily focussed on sovereign bond origination. Working on an investment banking trading floor had been my ‘baptism by fire’, an environment which represented and promoted the principle of “time is money”, but at the same time gave me all the financial tools I would need to succeed in the banking sector. Having joined UBS Wealth Management in 2007 (and later Standard Chartered Private Bank), I was initially struck by the relaxed work ethic and the “basic” banking methods which were being used – this represented a complete antithesis to the world I had come from. Therefore, I set my own pace – combining the trading floor mindset with the more personal approach required to deal effectively with private clients and their wealth. In addition, I feel it is always important to establish a personal, convincing and well-informed view of the financial markets, rather than just providing your client with a regurgitation of the Financial Times or research reports.
I would undoubtedly ascribe my success firstly to the opportunities made possible by my parents and especially my late father, Riaz Khalid, who gave me the education and taught me the need for courage in the face of adversity and the importance of having a resilient moral code. The moral code is especially relevant in private banking as it leads to establishing a fuller empathy and trust with your client, so that you become their confidant, as well as their financial adviser. The relationship is more refined and more delicate – you are after all managing somebody’s private wealth, whether that be inherited or hard-earned. An empathy of personal circumstances and life experiences are always of relevance, especially when there are family concerns and sensitivities associated with the succession of wealth. It is of course crucial to understand the objectives of a client and to build a solution tailored to those objectives, rather than forcing a generic investment solution upon them. You cannot be afraid of going off-piste to find the answer or to educate yourself further to arrive at the ideal solution. Moreover, the long term benefit to the client is of paramount importance, as the aim is to build a relationship that can last for generations.
I am also thankful to have the support of an understanding and intelligent partner. My wife, Farah, is a well-established financial services lawyer and has an inspirational approach to achieving success. It also helps when your spouse can share a solid understanding of your work, especially on the stressful days!”
