André Bruck: 00:11 Technology is an enabler. We will always have, we have our AI. It helps to make things faster, more efficient. But as everybody has it, nobody has a competitive advantage. So it doesn't really help the product. We are stuck at the same place.
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Stefan Wagner: 00:47 I'm here with André Buck, former global head of sales at The Six. And André, you have spent so many years in structural products and everything surrounding it. And I have a little statistic actually for you. I don't know if you remember that, but in the last 10 years, you were always in the top three recognized as a key player in the structural products industry in Switzerland. You were always in the top three. and actually top five in the last 20 years, literally. So I think you have a lot of things to tell our listeners. Welcome.
André Bruck: 01:22 Thank you, Stefan. Thank you for having me. Yes, indeed, that was one of those things. When you're a bit more exposed to the market, then that comes as a side effect that in those yearly elections, you are recognized, and that's very much appreciated. I value that very much, yeah.
Stefan Wagner: 01:40 And it's well-deserved. Could you describe a little bit what the landscape looked like when you started in the structured products world and when you started, what factors drove the initial development and adoption of these instruments versus now basically?
André Bruck: 01:55 I think we have to go back into the 90s where I was at UPS, SPK in those days, just before the merger with Bankverein, another merger. And that's where I was active in the Japanese Asian market, issuing coal boot warrants, kind of structural products, but not yet known as we know it. And I remember then in 91 was Bankverein who issued the first real capital protection unit, CROI, what was called. Guaranteed return on investment. Also a very fancy innovation. We always like abbreviations.
And you have to think about what was in the 90s. If you go into the 80s, there was a big boom. Reagan was president. The US was driving the market. And that's the first time where money companies were listed on exchanges. And so investors could buy shares. ETFs didn't exist then, particularly not in Europe. And so you either buy a share or a straight bond, a fixed income thing. And obviously, investors had the usual 60-40 approach. And over time, people asked themselves, how can I not buy that in one trade? Because I have to buy a share, I have to buy a relation, it's two trades, it's too complicated. Why cannot I buy one trade? And so obviously, the departments of the various banks were thinking of how can you provide such a service to clients? and here we come with the Dendrogroi and then over years it grew slowly because it was a very bespoke area into more and that's how it was then.
And remember then it was in the late 90s that the French banks, particularly, they mastered the risk components of these products. They were the first ones coming out with reverse convertibles and barrier reverse convertibles. And they found their way into Switzerland. And I was then at the execution desk of then SPG and learned those products. and didn't understand them at first, of course, but that's how it all started, I would say, in the late 90s. And then in the nullar years, as we call it, it grew then and had a phenomenal growth, yeah.
Stefan Wagner: 04:23 I mean, business started small and grew suddenly. And obviously, did this have much, you know, the regulation suddenly probably woke up to it. How did that affect the market?
André Bruck: 04:34 Yeah, that's actually for that, we have to be glad we are in Switzerland, because obviously, the authorities, be it the regulator or the tax authorities, they looked at those instruments. And in 99, I had to look it up, of course, I couldn't remember. But in 99, they came out with the Kreisschreiben number four. and which then clearly explained how those products have to be taxed. And when you sell a product to the Swiss investors or to Swiss institutions, they need to know what is the tax situation, is there stamp duty, and how transparent this is. And so when they came out in 1999 with this Kreisschreiben, that was a big relief for the industry. And so open doors to more and more investors to invest in those products.
Stefan Wagner: 05:22 Clarify the situation.
André Bruck: 05:22 Absolutely. And we see that now. The authorities in Switzerland are very forthcoming in that sense. Also, as always, not the fastest, but nevertheless, They go steady their course, and we see that also nowadays in the crypto industry, the regulation there, the Swiss authorities, they had a clear view which way it was to go, be it on the tax side, be it on the regulation side, and that gives safety and guarantee to investors.
Stefan Wagner: 05:50 Stability, you know where you are. Stability, exactly. No, Switzerland has always been really good at that one. At the same time, obviously, technology moved along, you know, all what we have. How did that affect sort of the structure product business in your view?
André Bruck: 06:06 More and more complex product could be calculated in a shorter period of time. Because obviously when you need to have a barrier-less convertible, then a multi-barrier-less convertible, in each bank obviously you have a risk department. They need to have the tools to calculate the risk. Evaluate risk was in those days the key risk parameters to be convinced that it works.
And obviously, the faster chips you had to calculate that, you could calculate them, provide the risk, and then you could add five stocks, 50 stocks, you can do then more and more such complex products. And that's how the market developed. And that was obviously then a challenge for the desks, for the sales teams. Obviously, new complex products, you have to understand them, and then you have to sell them to the clients. But also identify which clients need this and that kind of products because not all products made sense.
Stefan Wagner: 07:05 I think that was one of the things I remember in the beginning that there was a lot of innovation in the payout and new features were added to it. But if I look back now, sort of certain payouts have really established themselves. The innovation structure product side is not so much more in the payout, it's more in the underlying or the wrap-up. What do you think?
André Bruck: 07:26 When I look back actually, I would say that in the zero years, it was really new product types came out almost on a monthly basis or even faster. And after a while, there were all kinds of products were out there, and then the investors didn't demand for additional ones and the industry exhausted itself. And then it focused on services, on tools to make life easy for investors to have quicker access to find the right product for them.
So it shifted from product innovation to service innovation. Later on, the issue platform came along. and then multi-issue platform, and that's where we are in this area where development is still seen. But not in the product innovation. There are small nuances, maybe sometimes innovated, but the big innovations have been really done in the zero use.
Stefan Wagner: 08:26 Now, if you think back about all the years that you spent in that industry, is there sort of a pivotal moment that you can share, a memorable story in the early days or during a crisis or anything else? I've got obviously many stories to tell. Some you can't tell?
André Bruck: 08:45 I'm now in a different situation. But maybe there's one story which is also 25 years old or more than 20 years old. It was interesting in various aspects, obviously, because it changed a few things how we then did business. It was during the TMT crisis, obviously, the younger folks among us, that's the technology, media and telecom crisis, 1999 to 2002. Maybe everyone knows about the year 2000, people thought the world would come to a standstill.
And so there was huge investments into technology and this and that. And lots of things hyped up. But then obviously in 2000, 2001, it came crashing down. And there was also a recession to my understanding and so on. And so lots of things changed. And also with the stocks and companies. And we had then a large French company that was then working with Zekebi. And a large big company came along and said, I want to have a call spread on Nestle. And he asked for a 5 million notional, which was a decent size. And so I went to my trader and said, oh, look at this maturity and so on.
And he looked at it and volatility and this and that. Yeah, that's the price to it. And so we did the trade. I said, okay, happy, everybody happy and he was happy and so on. So three days later, the same guy, same Frenchman came and said, I can have another 5 million. Okay, same price more or less and done again. And at the end, we sold about 25 million. And then I told my trader, are you sure that's the right price? Because this counterparty normally doesn't trade with us if something is wrong. And so we looked then deeper into it. And obviously as a trader, he looked at the price, he looks at volatility, this and that. But what he didn't check was the dividend. And the dividend had moved.
André Bruck: 10:41 And maybe you remember in those days there was a few companies who moved their dividend. They stopped paying dividend in 2001 and that had a major impact on the valuation of calls, puts and everything. And so we were then short this call spread and we lost quite a bit of money and the trader was really confused.
Stefan Wagner: 11:03 I had exactly the same experience when I was a trader on single stocks in Germany. There was always one counterpart who always called in after a while because when the dividend date was moved, we hadn't updated in the models, they're trying to arbitrage us. Yeah.
André Bruck: 11:18 And what happened then is, of course, we hired a guy, a junior trader, whose job was, among other things, to call the Swiss companies on a regular basis, particularly closer to dividend dates, called them, is that the dividend date? And what is the dividend as far as they could tell? and so to make sure we have the correct data in the system. And that helped us quite a bit not losing money.
Obviously, nowadays, I think it's more automated, but still, for me, as a trader, I mean, Switzerland is easy, you have one dividend, but if you go US stocks, four dividends and other countries which have one or two or three and depends and so on, that's something you really have to watch out very much. and make sure you have the right date in your system.
Stefan Wagner: 12:09 Yeah, I mean, that was when I was trading. I always remember that when I started to selling, when I started to winning too many trades, I knew I was selling something I wasn't aware of because it's usually one-sided business for the bank. You're only selling or you're buying it. Always the same. If you have too many trades in one thing, then you think, I missed something. I should not win that many trails if I'm with four people in competition. Was there ever sort of an instance where the Structure Products market nearly faced a major setback?
André Bruck: 12:42 No, not such. Also, I think BV had a court case. Which even I think now really makes me angry, because it was a basket on participation product on European telecom companies, I think 20 stocks in it. And in the term sheet, at the end of the day, the comma was not at the right place. And so it was about whether the dividend is included or not in the pricing. And even the counterparty was a professional, knew exactly and we were right. But obviously looking at the term sheet, it was not clearly defined and he had a good lawyer. I can say now maybe we had a bad lawyer because we, Zecobee, lost the case.
And it took two years, I think two and a half years, all these court cases and so on. And it was always, it was another pleasant situation. So there I thought, shall we stop that kind of business? But again, what we then did or had to be done, obviously, each term sheet has to go through a legal, they have to give the approval. So again, the process was adjusted to take such risk into consideration. And the legal has to give the stamp of approval that the term sheet is correct. And as far as he can say from the legal point of view.
Stefan Wagner: 14:17 The legal risk is always asymmetric for the issuer. You only get the call when it's in the favor of the investor. Personal milestones looking back, is there a particular moment or project that you feel defined a little bit in your career or you're particularly proud of?
André Bruck: 14:34 Well, I mean, obviously, not a particular one, because there were so many remarkable situations and things happened over the course of the year. I always try to be true to myself and listen to the needs of the clients and deliver the best possible outcome for them. But maybe one thing, obviously, Credit Ligne, I was one and a half years or less than one and a half years with Credit Ligne in Zurich. And that was, I learned a lot, but it was tough. I was the only German-Swiss speaking person among 10 Frenchies. And there I really learned to cold call. And that was really, I loved it at the end, but it was tough.
But I learned a lot. I called a whole bunch of clients, a dry hander. And the best experience was in the first call, he did a trade with me, 500,000 of a battery-versus-convertible, which was unbelievable. So that was great. Obviously, I had other calls, but you learn that as a salesperson, you get lots of rejection, but that's your daily bread, basically. You can't take it personal. Exactly, yes. But you live on the ones you are successful, and that gives you actually the energy to carry on and carry on and so on. And those are the positive experiences. No, I had many, but yeah.
Stefan Wagner: 15:59 You probably met a lot of interesting characters during that time as well.
SPEAKER_00: 16:02 Oh yes, absolutely, yeah.
Stefan Wagner: 16:05 Forward looking a little bit, where do you think, with your experience particularly, where do you see structured products heading in the next decade?
André Bruck: 16:14 Yeah, exactly. Fintech, market dynamics are changing.
Stefan Wagner: 16:18 Yeah.
André Bruck: 16:19 I think, I mean, if you now look back in the past, what happened, particularly with the structure product industry in Switzerland, then you can not always see that it is a bit disappointing in respect of how many percentage are in the portfolio of the Swiss banks. According to the S&P statistic, this has been always around 3%. At the moment, I looked it up in January 25, it's 261 billion Swiss francs invested in the structure, which is a big number. But it is 3.1%. And this number has always been the same. And if you look at ETF, of course, different product, different point of sales.
But they have gone through the roof, you know. Also look at private debt or private equity. I mean, there's not a bank who doesn't have nowadays a desk which invests into these assets and the growth has been phenomenal. So my question is, what can be done that this number 3% can go up? And I don't think it has to do with technology, because we have all the technology here. We have multisource platforms. We have Wester, who helps you on the participation products. We have so many things. It's more, I think, maybe on the communication, on the approach, on how you sell or present these products.
Stefan Wagner: 17:47 I think a challenge is sometimes also the naming. I mean, if you see some of these names, it's like listening to a doctor, they have their own language. Yeah, we understand each other, but I think the rest of the population… Absolutely.
André Bruck: 18:00 Also, the association, they stepped in many years ago and presented a naming for products, but obviously some specific names still exist. But of course, it is a bit challenging because products expire after three months, six months. So you have to constantly engage with the client. If you have an ETF, you buy it and you can hold it till the end of the days. And also private debt equity, you hold it five years plus.
So it's obviously a different sales approach you need to have. You need to have a different setup to constantly engage with the client and sell him the products which have expired that he keeps going and investing into it. And that's certainly a challenge. But I think the communication has to be thought through, what do you want to say and how are you going to sell it, that this 3% goes one day up to 5% as a next step. Because we have everything, but somehow the industry is stuck in this 3%, meaning the guys who know it, they love it, they buy it, they invest it, but they are not new ones.
How do you approach new clients and institutional ones? consistently consider these products as an alternative where needed, where required. And that will be the challenge. For me, it's not technology. Technology is an enabler. We will always have. We have our AI. It helps to make things faster, more efficient. But as everybody has it, nobody has a competitive advantage. So it doesn't really help the product. We are stuck at the same place.
Stefan Wagner: 19:47 You know, part of your role also when you worked at The Six was also then Spain. You looked also after Spain. I mean, Switzerland is known as a strong structural product and alternative investment market. How does Spain sort of in comparison?
André Bruck: 20:02 Yeah, interesting. On the exchange side, BME, they have a segment for leveraged products. And there are two issuers, BNP and Sosgen, issuing about 4,000 or 5,000 products. And that's about it. And they have a monthly turnover of 20, 30 million Swiss francs, or euro, of course. So it's very small. And there are structured products that are listed there, but not traded, but not in a big number. So the market there is underdeveloped. It has also to do with the taxation of those products. That's also the reason why there are only six ETFs.
So ETFs do not flourish there because of the tax hurdle they have. The potential, I'm really confident, the potential is there. It's not that there are no banks there. The big banks are there. They are active outside Spain, but they could also use that know-how in Spain. But obviously, as an exchange, as an infrastructure provider, you can do a little bit. You can make it easier, a bit cheaper, more efficient. But then you need the banks, the investors who then take that up. And that needs education. And that will take some time.
Stefan Wagner: 21:23 Now, you have so much experience, what would be your advice for somebody who wants to start in the structured product arena? Go to work for a bank, for an investment manager, what would be your advice?
André Bruck: 21:41 It's difficult to give advice. I mean, I don't like giving advice just like that because there's too much generalization. Everybody is individual who has his preferences, which way he wants to go. So what I try to encourage also with my kids is basically stay true to yourself, focus on what you like the most and Stay curious all your life, learn, and that is for me learning, stay curious, ask questions, and also always question, particularly corporate houses, always question the current status.
And with those two things in your mind, I think you can move things. I mean, there are people who don't like people and persons, but the ones who are a bit open-minded, stay interested in persons and people, because then you get also a lot back from them.
Stefan Wagner: 22:43 A question I always like to ask somebody, all my people I interview and say, what is sort of your definition of success?
André Bruck: 22:52 Yeah, what is that? That's a good question. Is it the Porsche in the garage? Is it the Rolex on your wrist? But I think it has to be in the satisfaction that you have done a good job. Obviously, with family, it's kind of easy. If the kids are happy, wife is happy, wife is happy, you are happy. And it's similar in the business. You know, when you do business and your client is happy, then you know you've done a good job and then you are happy and then also even your boss is happy.
And that should give you the satisfaction and also the confirmation that you've done a good job. And then you can call that a success. And that is then in the daily business that doesn't need to be at the end of year a big whatever. And I rather live from a focus from small little points to the next one, then expect a big, a big success story.
Stefan Wagner: 23:53 And the other question I also like to ask is, what's currently on your playlist? If you come home or when you travel, what kind of music do you like to listen to?
André Bruck: 24:02 Yeah, because I was so intense in the job, I always had a very old playlist, which is a mixture of ABBA and The Cure and many other songs. And I haven't updated the current one. But I get an input next week, I will go to Zermatt Unplugged. and listen to lots of music and hopefully or I'm sure I will learn lots of new music and trends and with that update my playlist.
Stefan Wagner: 24:34 Last question to everybody. If they like what they heard and they would like to get in contact with you, how can they reach you these days?
André Bruck: 24:41 Yeah, at the moment through LinkedIn, yeah.
Stefan Wagner: 24:43 Okay, LinkedIn, and I book and they will find.
André Bruck: 24:45 Yeah, and leave six in the past was a great time. And but now we're looking forward to new adventures and new challenges, whatever they may be.
Stefan Wagner: 24:55 No, I'm sure there will be some interesting ones coming your way. Thank you very much, André.
André Bruck: 25:00 Thank you for having me. It was a pleasure on my side. Thank you, Stefan.
Outro: 25:05 Nalu FM finance podcast. insights into the financial markets.
