Last month’s PBI Hong Kong Forum showed that
optimism among Asia-Pacific’s wealth managers has risen from the
depths of last year. Titien Ahmad highlights forum discussions
including the motivations of Chinese high net worth individuals and
the importance of customer-centric businesses.
Go deeper with GlobalData
Optimism among Asia’s private bankers has risen since last year
but they acknowledge that assets under management within banks have
shrunk. Clients fearing unpredictable market conditions have
reduced their risk appetite and increased demands for greater
transparency and liquidity, according to delegates at last month’s
PBI Hong Kong Forum.
Delegates showed a renewed vigour to identify
profitable niches in the market. More than half of those surveyed
at the forum expected an increase in net new assets, of 5-10%,
while 40% of the delegates were more optimistic and expected growth
of 10-15%.
In terms of technology, many delegates expect
to continue to invest in their systems, with more than half of
those surveyed looking to increase their technology spending in
2010.
Risk management and compliance were major
drivers in investment, especially with an expected tightening of
policies around Know-Your-Customer, investor protection and
cross-border businesses.
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By GlobalDataNew investments, exchange traded funds and
sustainable/ethical investments were rated as being very important
or important services to clients over the next two years by more
than half of delegates.
China’s UHNW changes
Alfred Shang, a principal with Bain
& Co, presented research findings at the forum from a
collaborative survey with China Merchants Bank which interviewed
more than 1,000 Chinese high net worth individuals (HNWI) residing
in China.
He noted that the HNWIs, “mostly consist of the
‘first generation rich people’ that are generally risk averse, with
low to moderate risk tolerance”.
The research found that 70% of HNWIs are
entrepreneurs and this segments makes up the greatest share of the
ultra HNWIs.
A sizeable number are still in the earlier
stages of wealth accumulation “and find fulfilment in the process.
[They are] proud of their investment abilities as well as their
contributions to national economics and employment,” Shang
said.
These HNWIs also seek financial security given
their memory of childhood poverty, but have a high degree of
confidence in their financial and economic judgment, according to
the survey.
Although the HNWIs in China remain open-minded
about the different types of banks, Shang highlighted that “foreign
banks are perceived as more professional, with more industry
expertise than local banks; but local bank sales staff are better
than foreign banks at establishing close and long-term
relationships with local clients.”
As expertise, service/customer relationships
and reputation are the top three selection criteria when choosing a
private bank, it is critical to provide outstanding
customer-centric service and well-trained staff, he said.
Shang argued that offshore investments of HNWIs
in China will be affected as these investments tended to be for
specific purposes – such as for emigration, overseas studies or to
bypass domestic regulation and seek safe havens. He expected
offshore asset management to “boom in 5 to 10 years with the
increase in second generation Chinese HNWIs.”
In his presentation on strategies in the
Chinese market, Andrew Cainey, managing partner of Booz & Co
pointed out that tight regulations in China mean that most players
offer similar products and tend to compete on mainly on price.
There needed to be a “more customer-centric business model among
wealth managers in the market”, he said.
Concentrate on the
customer
The need for an increased focus on the
customer was echoed throughout the day’s presentations and panel
discussions.
Ian Ewart, head of marketing and communications
at Barclays, said that financial services has gone through a shift
from being a relatively low-involvement and inertia-driven brand
category to one driven by emotions, as media reports from poor fund
due diligence, high portfolio churn, hidden charges, public
demonstrations and lawsuits have damaged the trust that clients had
in private bankers.
“Trust and confidence have risen in clients’
decision-making processes, so the role of the brand has seen a rise
in relative importance when choosing an investment adviser,
relative to product range, rates, fees and service issues,” he
said.
“Financial services is now comparable to
consumer electronics as a category when considering consumer
choice; this is a big shift,” he said.
Although the findings pointed to a need to go
back to the basics of building customer trust and confidence,
questions during the panel discussions revolved around business
strategies of finding the right talent.
Keeping up with churn among relationship
managers, compensation and dealing with increased regulatory
requirements were also discussion topics.
Even though it was widely acknowledged that
the markets are on the recovery trend, fundamental business
issues, including staff retention, that marked the boom of
2007-2008 still need to be addressed.
