All articles by PBI Editorial
PBI Editorial
Culture fit key as East meets West
Its about finding your niche and developing relationships, Alameddine said. You can have the best product in the world but it doesnt matter if you dont have the right relationship. However, Alameddine did imply that the region is prepared to meet bankers halfway, noting that the tendency for new wealth to increasingly materialise in the hands of business entrepreneurs is as evident in the Middle East nowadays as it is across Europe and the US.These are people who have been educated in the US and have worked in Western society so they understand how business works, the private banker commented.Alameddine added that wealth in the Middle East is no longer exclusively the preserve of those involved in the oil and gas businesses, highlighting other sectors such as IT, with Middle Eastern technology companies gaining prominence at home and further afield in Africa.The real estate boom seen in Dubai and other emerging Middle Eastern wealth centres means it is this kind of asset which clients in the region are most familiar with and hence most likely to invest in, with private equity also finding favour because of its role in supporting infrastructure and real estate products.Though no single private bank has built up a large market share in the region, areas being targeted include Bahrain, Qatar and Kuwait as well as Dubai and Abu Dhabi
Liechtenstein affair jeopardises future of EU offshore banking
Fresh doubts have been raised over the future of the offshore private banking industry as a much publicised tax investigation in central Europe balloons into a major tax havens controversy..The investigation of Liechtensteins LGT bank by BND, the German intelligence service, which paid a whistle-blower a reputed 4.2 million ($6.3 million) for a list of 1,400 names, has escalated into an EU-wide probe that has provided unwanted attention for a host of private banks and jurisdictions.Initial raids made in Germany last month culminated in a series of arrests, most notably that of Deutsche Post chief executive Klaus Zumwinkel Since then the enquiry has rapidly expanded across the EU and beyond; 15 other countries including the UK and the US are investigating the activities of their citizens in the principality.Liechtensteins banking industry is very different to those now seen elsewhere in the EU, with few concessions being made to transparency
Asia is where it’s at
Europe is being relatively eclipsed, although Citigroup strongly rejects rivals claims that it has placed this region on the backburner.Citigroups $1.8 trillion Global Wealth Management (GWM) operations are being increasingly driven by a hugely successful business across Asia.Of total international net revenues outside the US for the first nine months of 2007, more than 70 percent came from the Asia-Pacific region These revenues included new business in Japan, where the acquisition of brokerage Nikko Cordial is helping to create fresh growth after Citis private bank was closed in 2004 for regulatory infractions.The powerful performance across Asia now far outstrips the scale of Citigroup GWM across Europe, Middle East and Africa (EMEA).Asia, including Japan, produced net revenues of $2.25 billion in the nine months, or 70.6 percent of international business
Surge in number of Asian ultra-wealthy
Asias population of super-wealthy individuals with more than $30 million in assets is growing at a faster pace than in the rest of the world, propelled by economic growth, rampant stock markets and an accelerating trend towards foreign investment.The number of ultra high net worth individuals increased 12.2 percent in 2006 compared with 11.3 percent worldwide, a survey of Asia-Pacific wealth carried out annually by Merrill Lynch and consultancy Capgemini found The assets of the wealthy, from conventional millionaires through to the ultra-wealthy, will increase by an annual 8.5 percent to $12.7 trillion in the next four years, according to the study The actual number of wealthy in Asia grew to 2.6 million, up 8.6 percent during 2006.Overall, the wealth of Asias HNW individuals with more than $1 million in assets grew 10.5 percent to $8.4 trillion in 2006 from a year earlier, the survey showed
Full steam ahead
But are many advisers, relatively recent recruits into the industry, really up to the job if a downturn comes amid the subprime crisis and clients decide to head for the exits?Global high net worth assets will surpass $100 trillion this year and will go on to soar to nearly $129 trillion by 2011, according to new projections by the Boston Consulting Group (BCG)
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Foreign banks moving into Japan face an uphill climb
Resistance to the arrival of foreign institutions may mean progress is limited, with regulators and the Japanese people themselves unfamiliar with typical private banking procedures, warns an Asian wealth expert, Heinrich Wegmann, the former head of Credit Suisse Japan.The banker, in a briefing for Swiss wealth consultancy Arvetica, said that the overwhelming majority of the Japanese public is not interested (in having) any financial relationship with a foreign institution, implying that these banks would be forced to divide up a limited number of interested customers.Nonetheless, the Western private banking industry appears to believe that opportunities remain within Japan, which has the second largest population of high net worth individuals (HNWIs) in the world after the US.Japan takes the lions share of personal high net worth wealth in Asia, despite the rapid development of countries such as China and India
Staring into the unknown
Now, economic slowdown and the mauling of major banks by the subprime crisis make diversification of wealth through clever asset allocation an imperative.For the past four years, virtually all asset classes have climbed steadily, albeit by varying degrees, on the back of a benign macroeconomic and financial environment During 2007, however, the advent of an economic slowdown in North America, Japan and Western Europe, the emergence of a credit crunch and the popping of the US housing market bubble have caused the behaviour of asset prices to become much more volatile, with obvious implications for portfolio performance.Initial reports suggest that some portfolio managers had a particularly scorching time towards the latter part of 2007
Into reverse
Updating its original projections for 2008, BCG now thinks that this year will see the total fall back to around $100 trillion as valuations in a wide range of asset valuations have crashed.We dont expect to see (wealth) growing again this year, says Victor Aerni, a partner in BCGs Zurich office.The revision is even more dramatic given that the report had originally projected that global AuM would reach a record $113.2 trillion for 2008.In North America the epicentre of the turmoil wealth grew by 3.8 percent last year, down from 8.9 percent in 2006.It appears the worlds wealthy are particularly vulnerable to this global downturn: from 2002 to 2007, the share of wealth invested in equities grew from 32 percent to 40 percent, increasing the potential for volatility.That was at the expense of bonds and cash, which fell as a percentage of total AuM over the period by three and four percentage points respectively.But portfolios have been quickly unwound in the flight to safe haven investments
JPMorgan does it again
The bank took first place on the basis of $8.07 billion in 2007 trust revenues. In wealth management alone, Bank of America was ranked first with $2.1 billion of net income from its advisory activities. The annual study is intended to help describe and define the outlines of the burgeoning bank wealth management industry, according to its sponsors. In places, the report is a grim reminder of what has been lost in the tumult of the subprime mortgage meltdown and its economic contagion as well as just how vital wealth management is to US firms trying to iron the rough patches out of the rest of their balance sheets.The report hits the lowlights: Wachovia, hammered by the mortgage loan crisis, suffered a $350 million first-quarter loss and fired its CEO.
Clients prepare for choppier waters
Anumber of private banks are positioning for a return to a significantly more risk-adverse stance by their clients, amid an exit from higher risk investments such as hedge funds and private equity, in favour of a flight to quality towards cash and government obligations.While private bankers say it is premature to talk about the emergence of a ferocious bear market triggered by the US subprime mortgage lending crisis, they do indicate that the steep fall in world markets along with the de-leveraging of highly-geared sectors is starting to unnerve many clients.Michael Dobson, CEO of Schroders, says he does not believe we are in for a bear market but cautions we are probably in for a period of lower returns.Morgan Stanleys Global Wealth Management Group is recommending clients raise their cash position a couple of percentage points to 13 percent