For today’s blogpost we had the pleasure to interview Mr Karl-Matthäus Schmidt, CEO of the innovative start-up bank quirin bank in Germany. This is Mr Schmidt’s second venture in the financial sector after having launched the online broker Consors in 1994 and sold it to BNP Paribas in 2002.

1. Herr Schmidt, what does “Private Banking” mean to you?

Private Banking means to me to really put the client first and serve his interests in the best possible way. This means to treat the clients assets as if they were your own assets: transparent, fair, honest and professionell. At quirin bank you are welcome with an investment of just 50.000 Euros and you will be treated like normal private banks only treat millionaires. The personal trustful relationship between financial advisor and client is most important. This is a completely different approach as if you would do online banking.

2. What has led you to launch a new bank after having built and sold the online broker Consors ?

It seems as if I could not really do without banking. I am a banker in the 6th generation- so it is really in my genes. After having sold Consors and at the same time getting older and more experienced my needs and the needs of my friends and acquaintances changed over the years. The issues that are important to us now are: who do I trust to really care for my money? Who will make it grow and help me do my financial planning for the future? Will my kids and my family have enough financial resources if something happens to me? Will I have enough money when I retire? Many of my friends started asking me: “Karl which bank can I trust, who will really care for my investment?” I could not answer any of this questions properly.

Do you know why? The answer is: because all banks in Germany are running their businesses through commissions. Commissions are a great temptation for every banker. Why? Because the banker always is “a servant of two masters”. He is supposed to serve the customer `s interest but instead of doing so, he will always tend to sell those products to the customer which get him and his bank the biggest commission. But these products are often not the products that serve the customer`s interests best. Most clients feel that there is something wrong in the relationship between them and their banks. This is why, according to Forrester Research, 60 percent of the clients do not intend to buy future financial products from their bank.

It is this conflict of interest between customer´s needs and banker`s needs that I perceived to be the core of the problem of the established banking system. This is the reason why I have founded a new bank; a bank that solves the conflict of interest between client and bank and that really puts the client first

3. Can you explain us quirin bank’s business model a little?

The business model of quirin bank can be described in one sentence: we are the first bank in Germany that can honestly and truly call itself a “Customers Advocate Bank”. What does this exactly mean?

• First: we are completely transparent. The costs of our services are clearly communicated to our clients: they pay a flat-fee of only 75 Euros a month plus profit sharing. We do not take any hidden commissions like the usual banks do. And also there are no unprofitable transactions on clients bank accounts, which get us money but not the client! We strongly believe that with this approach we create much better value for money for our clients than is usually the case.
• Second: we are completely independent: we are not dependent on any commissions this is why we are not obliged to sell our own house-products. On the contrary: we advise our clients objectively and independently and advise them on the most intelligent and economically efficient products - we do financial consulting and not product-selling
• Third: we are a “Customers Advocate bank” serving our clients interests 100 percent. Only if we earn money for our clients we will earn money as a bank. This business model creates a real win-win situation for both: clients and bank
• Fourth: Making clients assets grow is our first and foremost target. We are the first bank in Germany which writes back all commissions to its clients. Furthermore we allow interests on clients deposits that are often the best you can get in the market –
  these are interests, which banks grant to each other and which are normally higher than the interests that banks grant to their customers.

4. Are you a threat to traditional private banks, like Berenberg Bank, even though you are not competing for the same client segments?

We are very carefully examined by the German banking scene: they are really watching what we are doing and how we are doing it. As a small bank we are able to move quickly between the big established financial institutions. I do see this as a clear advantage. The number of people who are interested to work with us and rising numbers of clients are very encouraging. We will consequently follow the way we have started in December 2006 with our new private banking model. Hopefully we will be able to win 10.000 new clients till 2010.

We want to be a respected and well known bank in Germany that is a synonym for a new fair and transparent private banking model. At the moment we are present all over Germany with ten different affiliates and 150 employees and we are proud to have won 1.300 clients into our new private banking.

5. Do you think there could be a “Skype of Private Banking”?

If I understand your question correctly what you want to know is whether the revolution caused by free or cheap voice-over-IP internet telephony in the telecom market could be copied in the Private Banking Market. My answer to this is: the future will show and the customer will decide whether this becomes true! But we still have a long way to go. We do have first signals in the market that a transformation has begun: up to now every banker was convincingly telling the public that bank customers want to be cheated and are not willing to pay banks for their services. We do not believe that this is true.

Customers are ready for a change, they want to be treated fairly and honestly. How fast and quick this change takes place and whether it can really be compared to Skype remains to be seen. But I personally believe that with quirin bank, as the first fee-only bank in Germany, the foundation for this transformation is laid.

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