Lombard Odier relies on LexiFi Apropos to develop and diversify its structured products activities
Lombard Odier implemented the LexiFi Apropos software to automate the management of its structured products activities and to further improve pre- and after-sale service. LexiFi Apropos has become a key asset underpinning the Bank’s strategy of pursuing client satisfaction by offering customised investment solutions: the system covers all core processes related to the design, pricing, delivery and management of internal and external structured products offered by Lombard Odier.
Founded in Geneva in 1796, Lombard Odier Darier Hentsch & Cie is the city’s oldest firm of private bankers and one of the largest in Switzerland and Europe. With a network of 25 offices in 18 countries, the Bank offers a wide range of advisory services in wealth management, financial products and specialised areas to private and institutional clients. Lombard Odier holds the special status of “private banker”, a term that distinguishes banks in Switzerland who provide private asset management services under the ownership of one or more partners with unlimited liability for the bank's commitments.
Lombard Odier manages discretionary mandates and advises experienced investors who wish to manage their own allocations. The Bank has developed strong capabilities in structured products to help in-house wealth managers and independent investors to expand their investment universe and build diversified portfolios.
The challenge of profitably offering customised investment solutions
Lombard Odier’s strategy of pursuing client satisfaction by offering customised investment solutions calls for a complete understanding of client needs, agility in designing and sourcing suitable investments and an advisory capacity that spans the life of each product. A strict control of costs and risks, achieved through process automation, is a fundamental success factor in such a service-intensive activity. A related challenge is to correctly demarcate the tasks that the Bank should perform in-house: Lombard Odier’s decision to issue certain structured products, instead of relying on external providers, is a source of top-line growth but mandates the deployment of new pricing and risk management procedures and tools.
Addressing these challenges with LexiFi
In the spring of 2010, Lombard Odier and LexiFi teamed up to automate the management of the Bank’s structured products activities and to further improve pre- and after-sale service. The relationship grew to progressively encompass all core processes related to the design, pricing, delivery and management of internal and external structured products offered by the Bank.
Product design and sourcing
LexiFi Apropos’ structuring tools help Lombard Odier’s primary market team to promote an active dialogue with clients seeking tailored investment solutions. Users enter product terms and conditions in predefined graphical trade entry screens and use analytical tools such as pricing pages, contract variations, solvers, historical simulation and forward-looking simulation to provide a balanced picture of a candidate transaction’s risks and rewards. LexiFi Apropos increases the productivity, situational fluency and comfort levels of client-facing personnel and reduces the risk of misrepresentation by encouraging the provision of fact-based advice. Once the client and the Bank agree on the main terms of an investment, the system’s advanced pricing capabilities help the Bank to control the sourcing of the product and to potentially challenge counterparty prices. Lombard Odier’s virtuous and controlled process improves the quality of interactions with clients, creates intimacy and fosters the development of mutual trust.
Secondary market control
Lombard Odier’s secondary market team monitors the Bank’s structured products portfolio using LexiFi Apropos’ interactive displays. Users track the performance of products and underlying assets, control that issuer prices match internally calculated prices and receive alerts when selected metrics, such as the daily change in a product’s value or the distance to a barrier, diverge from a user-defined threshold. Users navigate easily from summary displays to detailed product pages. Another responsibility of the secondary market team is to manage contract events as they occur: LexiFi Apropos processes payments, fixings, option expiries, barrier crossings and equity corporate actions and adapts product definitions accordingly.
Lombard Odier uses LexiFi Apropos to automate the periodic production and distribution of performance reports, previously a time-consuming process. Users generate product-specific reports that summarise terms and conditions, including a text that describes precisely the economics of the contract, display the performance of the product and that of underlying assets in both tabular and graphical form, chart the realised volatility of underlying assets through time, monitor metrics such as the distance to a barrier or a strike level and keep track of life cycle events such as coupon payments, barrier crossings and corporate actions. Lombard Odier distributes generated reports to stakeholders through a secure web site. The Bank chose to control the process from end to end: LexiFi trained Lombard Odier’s users on LexiFi Apropos’ document creation and production tools. In a matter of days, users were able to independently design and generate high quality, content-rich performance reports.
Issuance of structured products
Following the success of LexiFi Apropos’ deployment for sourcing and distributing external structured products, Lombard Odier ordered the development of a new module to support the issuance of the Bank’s own structured products. The initiative covers all product and portfolio management aspects, from inception to maturity, for foreign exchange, index and bond trackers. Lombard Odier and LexiFi collaborated to design and validate new features, system interfaces and workflows. The new LexiFi Apropos module meets the needs of the trading and risk management functions, with the following capabilities: recording of initial terms and conditions; primary and secondary market pricing; publication of end-of-day prices; support for actively managed trackers; management of corporate actions and other contract events; retrieval of positions from an in-house system where primary and secondary market orders are stored; ongoing hedge calculations taking into account already executed hedges; integration with an in-house order management system to channel hedge transactions to execution desks; and real-time monitoring of risks and risk limits.
The experience of working with LexiFi
With LexiFi Apropos providing a single source of data and services for structured products, Lombard Odier streamlined operations and improved its pre- and after-sale advisory capacity. As the system demonstrated its ability to manage an increasingly diverse product offering, complex workflows and growing volumes, the Bank partnered with LexiFi to develop a new module to support the issuance of structured products. Ultimately, Lombard Odier was able to develop and diversify its structured products activities thanks to LexiFi Apropos’ combined analytical and processing capabilities, powerful extension and integration tools, and access to experienced consultants.
According to Eric Mangin, Trader at Lombard Odier, "LexiFi Apropos brings together all data and services needed to support Lombard Odier's structured products business: the system has coped well with the growth and diversification of our activities, a testimony to its sound design. LexiFi Apropos has become a key asset for the Bank in light of the quality and process improvements that it enabled in the structured products department. LexiFi's service team contributed their experience and project management skills, keeping an impressive tempo through all phases, with no compromise on quality."
"LexiFi Apropos brings together all data and services needed to support Lombard Odier's structured products business: the system has coped well with the growth and diversification of our activities, a testimony to its sound design. LexiFi Apropos has become a key asset for the Bank in light of the quality and process improvements that it enabled in the structured products department. LexiFi's service team contributed their experience and project management skills, keeping an impressive tempo through all phases, with no compromise on quality."
Solution for the distribution of structured products