Lars Seier Christensen is betting that a $1.5 million Swedish supercar will help lure wealthy clients to revive his firm’s fortunes after profit slumped to a nine-year low.
Offering customers test-drives of Koenigsegg’s latest model before its Geneva Motor Show debut next month or bobsled lessons in St. Moritz with former world champion Gregor Baumann are “relatively low cost, but very special,” said Christensen, co-founder of Copenhagen-based Saxo Bank A/S.
Christensen and co-founder Kim Fournais switched their global focus early last year to individuals with assets of as much as $100 million from the retail investors who previously generated most of the firm’s revenue by trading currencies, commodities and equities on Saxo Bank’s online platform. That change means ditching advertisements on Google in favor of wine-tastings and Formula 1 grand prix, said Christensen.
“To get bigger clients, and to get referrals, you have to meet them regularly and have some fun,” Christensen said in an interview from Dubai on Feb. 5. “We used to be entirely focused on our electronic channels. Now we’re putting part of that focus on relationships.”
After meeting executives at Saxo Bank’s Copenhagen offices today, a group of clients will fly by helicopter tomorrow to Koenigsegg’s factory in Angelholm to test drive the automaker’s latest model. The One:1 will be capable of speeds of more than 450 kilometers (280 miles) per hour, according to computer simulations, and just six will be made.
Christensen and Fournais initiated the strategy in early 2013 after they resumed responsibility for the company’s operations from Eric Rylberg and Karsten Poulsen, who had been named to oversee daily tasks in 2008. That followed an 86 percent slump in 2012 profit to 81 million Danish kroner ($15 million), the lowest since Saxo Bank reported earnings of 45 million kroner in 2003.
The initiative also comes as banks from UBS AG to Deutsche Bank AG invest in wealth management as tougher capital rules and regulations make parts of their investment-banking businesses less profitable.
Unlike traditional private banks, which base some of their charges on assets under management, Saxo Bank earns fees by getting individuals to trade directly on its platform. Clients need a minimum of $5,000 to open an account and fees depend on whether they are trading currencies, currency options, equities, bonds, derivatives or exchange traded funds. Foreign exchange trading comprised two-thirds of the bank’s revenue in 2012.
While the company manages about $3 billion of assets for Nordic clients, the firm refers most wealthy individuals to asset managers, hedge funds and other advisers, which trade using Saxo Bank’s infrastructure. The bank, founded in 1992, declined to name the companies it makes referrals to.
Saxo Bank plans to focus on customers with $1 million to $100 million of assets, said Christensen, 51, who still controls the company with Fournais. Both men own 29.95 percent stakes in the company, while Fort Worth, Texas-based private-equity firm TPG Capital holds 30 percent. Saxo Bank is also targeting family offices and institutional investors, said Christensen, who oversees international operations.
“It is now way more pronounced how much more income bigger clients are providing us compared to lower end retail investors,” said Christensen, who started his career selling derivatives at brokerages in London.
The bank will consider an initial public offering in the future, Christensen said, though there aren’t any specific plans. “Obviously at some point TPG Capital will want to exit and an IPO will be considered as an option,” he said.
Saxo Bank, which competes with retail brokerages such as FXCM Inc., reported a sixfold increase in income to 267 million kroner in the first half of 2013. Income from wealthy individuals and professional traders will exceed that of retail investors for the first time this year, said Christensen, adding that the former already contribute a 60 percent share in the Middle East.
“There are massive amounts of people catering for the low-end and that market is getting very overcrowded,” he said. Increasing competition and rising compliance costs “makes it difficult to acquire low-end customers at reasonable cost,” he said.
The quest for wealthy clients means that Saxo Bank’s traditional web-based approach is changing and the company will retrain some of its 1,500 employees for new roles, said Christensen.
“Some things a computer does well, and in some things a human still outperforms a computer,” said Christensen. “That is in the relationship side of business.”