Q&A: Jean Riachi

Quite a bit of rain with intermittent periods of shine has been the experience of financial companies in Lebanon for several years. To be an independent player in this market is no mean feat. EXECUTIVE talked to Jean Riachi, chairman of Financial Funds Ad

E: What is the core requirement for a financial company to be successful in Beirut?

In general, for a financial company to be successful, it has to be focused on its lines of business and on its friends. When you are in Beirut, you need to compete with local competition but also with foreign competition. You have to stress your advantages and the most obvious advantage that you can have is that we are closer to our clients, so it’s easier for them to reach us. But this does not mean that you don’t have to be competitive with other aspects – competitive in terms of prices. You need to have good execution and a team of professionals with a good knowledge of financial markets and high ethical standards. It is also very important to have up-to-date technology.

E: By your own scale, how successful are you at this point, and how much more successful do you think you can be?

We have worked hard on technology. We have people who know their business and are fair to their clients. So, we believe this is how we can achieve being a successful company as measured by the number of new clients that we get almost every day and the increase in the money we manage and we deal with. This is it. We don’t pretend to compete in fields where there is nothing for us to compete in. We will never be an international money manager; we will never be the place where people put very large amounts of their wealth, but we might very well be a competitive broker for people who would like to deal on stocks or futures or currencies, online or offline. I believe we compare very well with the foreign competition as well as the local competition.

E: Does this perspective hint to growth limits on the financial industry?

We have been and are still in difficult markets where for example equity trading has almost disappeared. Something that used to represent 90% of our revenue is today almost non-existent, because people don’t trade actively on stocks anymore. That doesn’t mean that you don’t have people who buy and sell stocks but they are not very active. We are also in a very difficult environment because we still don’t have a local market. We have a very good market share but in a market, which is very small. In a local market, our business would flourish very much because we would be one of the big players and a natural flow of business would come to us. The two problems we face are first that equity trading goes towards zero and second that there is no local market. We have to struggle in other areas where things are more difficult.

E: In which areas are your best competencies and success stories today?

We offer online trading and our online systems compare well to any system in the world; I mean they are the best in the world. This is something that we are going to market more aggressively. We have a client base in the areas of commodities trading and currencies trading. We also try to attract new customers by offering them interesting investment products that fit well into their investment needs. Here we are not talking active traders who take risks; we are talking conservative people who would like to improve their yields. We have been successful in offering new products to these kinds of investors. Finally, we have set up a team in the real estate area. We have done one project, Foch 94, with other projects in the pipeline. So we are trying to diversify.

E: How do you see the financial culture in Beirut today?

Generally speaking, there is no financial culture, although you find educated people who understand what investing is. We still need a broader understanding within for example the state administration, because they don’t understand what a financial company is, what financial markets are. Something needs to be done on this level, because it is very difficult for us to work something that is new, modern, in an environment that does not understand it. It leads to a lot of problems. There is a whole education to do.

E: How long have you been active as finance professional in Beirut?

Ten years, and I spent ten years before that working in Europe.

E: Can you in any way compare the financial market place here to Europe?

No, it is nothing comparable. But this was what I expected. When I started ten years ago, this was fine, because it was new. Something has failed and because of those political changes in the country, we have not modernized our system in terms of legislation, in terms of arbitration courts etc, to fit with the needs of capital markets. The best proof for that is that we have no capital markets. I would have expected that something would have happened with new rules and new ways of doing business, and nothing has happened.

E: If you were to compare the last ten years to preceding periods in Lebanon, which period would be best or worst for doing financial business here?

Before you had the war and before the war, financial markets all over the world were not so important. What happened during the 80s was a switch from commercial banking to financial markets, meaning that investment banking became much more important than commercial banking to finance the economy in mature markets. At that time, we had the war in Lebanon, so we had the excuse. Now, we don’t have an excuse. We are ten years and more after the beginning of the new era and nothing has happened. Okay, the banking system is fine and up-to-date, legislation is up-to-date, use and habits are up-to-date. But in terms of financial markets, you don’t have people who understand the importance of reengineering the whole system in Lebanon. We need something to be done and nobody takes care. Law proposals are sitting in some drawers in some ministries but nothing has come out yet.

E: What is the contribution that a financial firm such as yours can make to the national economy and life in Lebanon?

We are a company that has paid hundreds of thousands of dollars in income taxes and other kinds of taxes. We are a company that is the source of living for 30 families plus all the people who work around us, accountants, lawyers, etc. Out of our 30 employees, 25 have university degrees, which means that we contribute to keep people with university degrees in Lebanon. Believe me, that’s important. This is one side. The other side is that we contribute to attract capital to Lebanon. A big part of our clients are foreigners and we even have Lebanese expatriates who live abroad and who have accounts with us while they could have accounts with foreign firms in the countries they live in. In a way, we contribute to repatriate some of this activity to Lebanon.

E: With this, you appear to postulate a mandate for the need of financial firms?

We don’t pretend to be the savior of the Lebanese economy, but if financial institutions in general had a higher rate of growth and were bigger, you would have two advantages. First they would help develop financial markets, which are a good way to finance the economy; second they would contribute to the economy because they would generate added value. It’s important to have financial institutions.

E: Some depict a financial trader as the type of person who drives a flashy sports car, a Maserati or Ferrari. How important are such symbols of success to you?

We are not this kind of company. People here are all low-profile. They are well paid but they are not making millions and they do their job anyway despite that.

E: So is there no suitable stereotype to describe the financial trader here?

It is a stereotype that does not apply to Lebanon anyway, because in Lebanon, you don’t have the kind of income for those financial advisors and consultants that you have outside. Here, they cannot drive luxury cars.

E: What is the dream that motivates someone for a career in financial markets

It might be very simple. He might love the financial markets. A lot of people who work here as financial consultants like what they are doing. It is not specially that they want to make lots of money. Maybe they are making high average incomes but it is not a fortune that they are making.

E: What gave you personally the idea of thinking, ‘I want to be in financial markets?’

My dream was never to be a millionaire. It is only a way for me to do something I know and to live happily in my country. There is nothing else I am looking for.

E: What is your outlook for 2005 and 2006, in terms of your sector, your company, and the country?

I am not very optimistic about 2005. I’ll only be optimistic about my company. People like us do exist in Lebanon and they can exist somewhere else and we all compete all together. We can stay like we are for years but we won’t see a real boom in our business until we do have local markets. But the competition in local markets cannot come from abroad. We need local markets. Here, we have a competitive edge and we are the first in the waiting line and we know how to grab and take profit out of new IPOs, volumes, new ideas. If we don’t have local markets, we are going to be struggling to have decent revenues and profits. However, things cannot be worse than they have been in the last three years. They can only be better but I don’t see a boom before we have a real financial market in Lebanon. And I see nothing in 2005, because politically, it is a period of confusion.

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