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An entrepreneurial perspective geared to the long term

November 3, 2014

H.S.H. Prince Philipp von und zu Liechtenstein and H.S.H. Prince Max von und zu Liechtenstein talk about the special characteristics of a family-run bank in an interview for the LGT portrait.

H.S.H. Prince Philipp von und zu Liechtenstein and H.S.H. Prince Max von und zu Liechtenstein
H.S.H. Prince Philipp von und zu Liechtenstein and H.S.H. Prince Max von und zu Liechtenstein

LGT has belonged to the Princely Family of Liechtenstein for over 80 years. Family-owned private banks have become rare. What do you think is special about this constellation?

H.S.H. Prince Philipp: The primary question for us as a family is: what do we want to leave our children and grand-children as a legacy one day? Here I mean not just material values, but also ideals. Because we think in terms of generations, we automatically think and act for the long term. In contrast, a listed company must render an account of its activities to the financial markets every quarter, and continually report improvements in performance. A new CEO must prove to his investors as quickly as possible that he is providing the company with positive impulses. In such a situation there is a strong temptation to maximize short-term profits, while at the same time exposing the company to higher risks and consistently changing strategy. Experience shows that this pattern of behavior is frequently followed at the cost of sustainable development. A second important aspect is that many of our clients are themselves entrepreneurs. Accordingly, we can talk to them as entrepreneur to entrepreneur, and from family to family. That can be found only very rarely in modern private banking.

“Many of our clients are themselves entrepreneurs.” H.S.H. Prince Philipp von und zu Liechtenstein

LGT not only belongs to the family, it is also managed by members of the family. Is that an advantage?

H.S.H. Prince Max: Close, well-coordinated links between owners and management lead to efficient and stable corporate leadership. The current constellation works very well, it has a clear, long-term perspective, and therefore provides great strength and stability. For many companies, it is an enormous challenge to align and coordinate the interests of the various owners and the management. This frequently creates problems and inefficiencies. In this respect, LGT enjoys a major competitive advantage.

H.S.H. Prince Philipp: It is important that the most senior executives “fit” in with the company and the family, regardless of whether they are members of the family or not. In no event should the company become a colony of the family. This would make it more difficult to recruit qualified people from outside the company. Clear specifications are therefore needed to ensure that the best candidates are selected.

Does a family-run bank also attract a different kind of employee?

H.S.H. Prince Philipp: Efficiency and stability are valued by clients and employees. If ownership does not change hands, this typically also leads to greater management stability. This in turn attracts loyal employees seeking a longterm perspective and not interested in jumping from one job to the next. Stability is important in private banking. Clients tell me again and again that they are looking for stability with management, with their advisors and with their investments. In addition to good investment performance, it’s important to them that they do not sit opposite a new advisor at every meeting.

In your view, what distinguishes the corporate culture at LGT?

H.S.H. Prince Max: We have an entrepreneurial perspective geared to the long term. We are consistently striving to improve and we support new initiatives. In doing so, we are well aware that we are exposing ourselves to calculated risks. Another special characteristic is the way we do things within the company: I believe that we nurture a very professional, open, successoriented and good atmosphere within LGT, where we support each other and enjoy working with each other. Our clients also benefit from our strong corporate culture.

“Close, well-coordinated links between owners and management lead to efficient and stable corporate leadership.” H.S.H. Prince Max von und zu Liechtenstein

Your family is also a client of the bank and has a substantial part of its capital investments managed by LGT. What principles have to be applied to the management of your family assets?

H.S.H. Prince Philipp: As an investor, the family knows that one must expose oneself to risks in order to achieve reasonable returns. However, before we enter into risks we consider them carefully, and we strive to diversify them systematically. We are also convinced that one must take a very disciplined approach to investing. We use a part of the family wealth to try out new investment ideas and ventures. If these are successful, we also make them accessible to our clients. A good example of this is the Princely Portfolio. The basic principle is: we commit our own money first before we invest our clients‘ money. The resulting alignment of interests between clients and owners probably distinguishes us from other similar institutions.

LGT is committed to sustainability and philanthropy. Is this also part of your family’s philosophy?

H.S.H. Prince Max: Our family has a long tradition of commitment in various areas, and of thus striving to have a positive influence in the broader interest of society. When the family acquired its majority shareholding in LGT in 1930, the company was in crisis. Our family’s commitment at that time certainly wasn’t primarily driven by financial considerations, but rather also had a strong social motivation. In a certain sense it was also a philanthropic commitment. From the current perspective, we can certainly say that this commitment has had a very positive effect for all stakeholders. I hope that the next generation can also look back with pride on some of the initiatives and investment decisions of our organization, and that we are successful and effective in investing our intellectual and financial capacities in the broader interest of society.

The interview was published in the portrait of LGT Group: open PDF

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