Despite the much-touted appeal of wealth management
boutiques, they still need to prove to clients they are safe homes
for assets, according to Justin Ong, head of
PricewaterhouseCooper’s Singapore wealth management practice. He is
also putting together the firm’s Asia-Pacific wealth report, to be
released in September.
Titien Ahmad (TA), Private Banker International: There is
still a huge potential for wealth management in Asia considering
that the market is still under-served. How have the rules of
private banking in Asia changed since the crisis?
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Justin Ong (JO): From the Asia perspective, private banks need to
go back to basics. The last one and a half years has been a big
wake-up call for private banks. The days of easy money are gone and
banks will need to go back to being a trusted adviser.
This has been the most difficult year for private banking, and
wealth managers will need to look at different ways to deliver
trusted advice. Bankers have woken up to the fact that the product
suite that they had is no longer an easy sell.
So how do you, as a private banker, generate revenue? Bankers will
have to look at costs even more stringently than they did and be
more innovative in what they deliver to the customers to move away
from a predominantly transaction-driven service.
This is also a good time to revisit the service offering and look
at offerings that are less market driven such as trust and estate
planning.
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By GlobalDataThis will generate revenues that are more fee-based and will need a
big shift in mindset for many relationship managers.
Training will also be even more important. The crisis has shown
that a lot of relationship managers were ill-prepared to deal with
clients who were losing as much as 40 percent to 50 percent of
their money in a space of three months.
So training is needed not just in product knowledge but also in the
softer skills such as client management, building trust and helping
clients understand the economic situation.
TA: How badly do you see revenues of private banks being
affected with the flight to plain vanilla deposits and equity
products?
JO: We see that most of the banks in the region are still expecting
to see positive growth in assets under management and revenue. Asia
Pacific by far has the fastest growth rates and the outlook is
still positive for Asia to remain a growth story.
The region will be the first to recover and there is already a huge
pool of savings and deposits which will flow into other products at
some point.
However, the positive responses that we’ve been getting are from
the big-tier banks. The mid-tier players and boutiques that have
size, scalability and capital issues will be struggling.
TA: How can banks rebuild customer trust and relationship
with the current lawsuits flying around?
JO: By building a client-centric model and putting the client at
the core and not the relationship managers or product
revenue.
Client segmentation will need to be a lot stronger as banks no
longer segment in terms of assets but look at aspects such as
lifestyle needs and generational needs to address service
requirements at that level.
We are also seeing more firms having a lower client to relationship
manager ratio as spending quality time with the clients for a
bigger share of wallet and getting referrals are more sustainable
way of building the business.
It will not be an overnight change but clients are demanding it.
The clients will put pressure on banks to change. This is a wake-up
call and wealth managers that do not make the change now will not
be able to survive in the longer term.
TA: Will boutique/asset managers be the new client
champion?
JO: The client management model is quite different in Asia than
compared to the US or Europe. In the West, the bulk of assets tends
to be parked in one single bank; so when clients lose their money
or when branding is affected, trust and confidence are more easily
eroded.
In Asia, most of the high net worth have three to four different
banking relationships – they may use the boutiques for products and
the larger banks for service. The boutiques will still need to
convince their clients of their stability and growth in Asia.
TA: We are still seeing top-level movement among the
private bankers, how much will compensation and remuneration of
private bankers be affected when they sign on?
JO: Wealth managers are still recruiting quality staff and senior
management. This will not change too much although they will be
more selective in the middle- to entry-level staff.
Compensation will be a challenge as it is under scrutiny by
regulators in European and US private banking operations and
especially now with this idea of “the government in the tent”*, the
government is a stakeholder in a number of these banks.
Their decisions will filter down to Asia as subsidiaries here will
be affected by what goes on in the headquarters.
A lot of banks are looking at rejigging the compensation model not
just because of regulatory pressure but also to build a more
sustainable business model.
With margins coming down, banks will need to find a more viable
remuneration model. Good times are rewarded but when things go
belly up, there should be room for claw-back on bonuses.
When you look at how bankers are being remunerated now it is not
about client service or sustainability of returns to clients; it is
still based on assets under management. A client-centric approach
needs to have a matching compensation model.
* From the PricewaterhouseCoopers point of view paper, The Day
After Tomorrow
