The 24th Private Banker International Wealth Summit 2014, held in Singapore, brought together global industry leaders to discuss pivotal issues such as the integral use of technology, tackling impending regulatory pressures and strategies to differentiate services among unique customer segments. Sruti Rao reports key insights from the day
|Arnaud Tellier, Chief Executive Officer, Wealth Management Singapore, BNP Paribas Wealth ManagementBassam Salem, Chief Executive, Asia Pacific, Citi Private BankTan Su Shan, Group Head, Consumer Banking and Wealth Management, DBS BankLiew Nam Soon, Partner, Financial Services Advisory Leader ASEAN, EYPeter Kok, ASEAN Head of Private Banking Clients, Standard Chartered Private Bank|
|Moderators:Andrew Au, Chief Executive Officer, AG DeltaJohn Evans, Editor-at-Large, Private Banker International|
Setting the tone of the conference, the opening panel discussed the myriad opportunities prevalent in Asia’s private banking industry. Acknowledging the growing wealth in the region, keynote speaker Arnaud Tellier, BNP Paribas WM, highlighted that challenges lie ahead, alongside significant compliance pressures that can only be handled through appropriate use of technology.
Tellier: "We have a lot of processes that are becoming extremely heavy, like client on-boarding, which need to be well monitored. If we don’t automatise these processes, we will all face serious issues going forward."
Andrew Au of AG Delta, who co-moderated the panel with PBI’s John Evans, highlighted the importance of technology in the contemporary private banking model, and the CEOs on the panel put forth their diverse perspectives.
Tan Su Shan, DBS, strongly advocated the benefits of leveraging technology to allow private banks to be compliant more effectively, enable straight-through-processing in trades, and most importantly, understand clients better through predictive analytics.
Su Shan: "We are beta testing an artificial intelligence platform to tell our RMs how to rebalance client portfolios based on what your clients are looking at.
"Our RMs cover quite a lot of clients, so it’s not possible for them to remember everything. To have information in front of your RMs at the right time is crucial. You have got to give them speed, safety and security."
Agreed Peter Kok, Standard Chartered, recognising that the increasingly tech savvy, international client will compel wealth managers to re-evaluate their revenue models and keep up with changing demands.
Kok: "Clients get more tech-savvy, get more access to information, and they also get more impatient. Execution-wise, by getting more access to data, and getting them from multiple banks, clients will put pressure on getting cheap execution.
"The transaction revenue model will be under pressure. We will have to move to a more fee-based, advisory model, and that will be the outcome of all this technology."
Bassam Salem, Citi Private Bank, spoke of technology’s importance in assisting relationship managers to serve clients better. However, face to face interaction is required for sophisticated advice, he said.
Salem: "If you look at private banking segmentation, at the top end of the market are the UHNWs, where Citi operates, and they will always be looking for a private banker. Technology will never replace the personal interaction."
As Nam Soon, EY, reiterated on the panel, the need for private banks to focus on their specific strengths and segments is imperative for the success of institutions in volatile and competitive markets. Soon: "Post 2008, depending on brand and product offering, each bank has taken a different approach to dealing with the different customer segments, with a varying degree of success.
"It’s clear that the cost-to-income ratio is a problem, so that’s why we see a number of exits. The ones that have been successful are the ones that have focussed on the segments they want to go after, and realigning and putting in place the right platforms to have the right processes."
|Ang Eng Hieang, Executive Director for Client Relationship, Bordier & CieSalman Haider, Managing Director & Head of Southeast Asia, J.P. Morgan Private Wealth Management (keynote)Ray Soudah, Founding Partner & Chairman, MilleniumAssociatesNizam Ismail, Partner, Corporate, Banking & Finance, RHTLaw Taylor Wessing LLP|
Speaking about the pivotal issue of regulation, Salman Haider of JP Morgan introduced the session with a keynote presentation on the shifting controls from a risk perspective, and how the industry should address scalable challenges as a collective unit.
Haider: "When we look at this paradigm, we have to ask ourselves questions. Are we really managing risk and control in an efficient way? What is the right level?
"There is a regulatory expectation, a business expectation and a client expectation. The average UHNW client will have anywhere between three and five banking relationships. There is form-filling fatigue, with more and more information being sought out, and limited opportunities onshore in key markets."
Ang Eng Hieang from Bordier and Cie however said that despite issues around KYC processes, clients may not be open to sharing personal data across institutions and a collective venture may not be a feasible idea.
Former regulator and legal practitioner in the wealth management space, Nizam Ismail of RHT Law Taylor Wessing, made it apparent that regulators should take shared responsibility for the cost implications their jurisdictions are imposing on private bankers, with local and international regulations that need to be tackled.
Ismail: "Regulators should be reminded to be more sensitive to the cost impact of their regulations. They should articulate a cost-benefit analysis of every rule change in their consultation."
Ray Soudah brought up the idea of transferring high cost of compliance to the end customer.
Soudah: "Pressure on profit growth is immense and has not gone away, and these factors in turn have depleted the value of the banks. Since the whole industry is facing this situation, I suggest weincrease the pricing on the client significantly by 25-50% to have an effect. Cost of the service is not being recovered by the client."
This suggestion was reflected on by other panel members with Haider highlighting the commoditised offerings of private banks and the need to direct more of the business into consultative sales in order for clients to consider the service a value-add to their needs.
Ang echoed this view on the dwindling significance of the brokerage business for private banks, and the approach Bordier and Cie takes to charging a relationship and transaction fee to execute sophisticated advice.
|Ian Ewart, Head of Products, Services and Marketing, CouttsMark Smallwood, Managing Director, Head of Franchise Development and Strategic Initiatives, Asia Pacific, Deutsche Asset & Wealth ManagementMichelle Lau, Senior Director and Head of Wealth Planning South Asia, Private Wealth Solutions, HSBC Private BankGary Tiernan, Global Head of Investment Advisory and Client Segment Management, Standard Chartered Private Bank|
Turning the focus to a more exclusive client segment, the Summit highlighted the diverse strategies in play to deal with the issue of wealth transition to the next generations. As industry veteran Ian Ewart from Coutts mentioned in his keynote presentation, this next generation of clients should be perceived as a ‘rising generation’ developing from the wealth creators, rather than a segment in itself.
However, younger members of the family currently do impose their own views on how they want to be banked.
Ewart commented: "The parents wish to present their advisors and the people they have built confidence with over time, but the rising generation says ‘I want to choose for myself’. There needs to be a process of education in terms of understanding what it means to build up trust, and to do this in an inter-generational way, can not only be beneficial for the father or the mother or elder members, but meet the interests of the younger members."
Gary Tiernan from Standard Chartered suggested that the way to approach this issue of preserving the legacy of banking relationships is to have a team-based approach to serving the client.
Tiernan: "Our approach is to bring the heritage of your institution to that family and relationship, rather than having only one person involved in the banking relationship. It’s about ‘how do we institutionally develop a relationship across generations with a family?’."
Michelle Lau from HSBC highlighted that one of the key roles private banks play in family businesses is to act as a mediator of thoughts and ideals across generations, especially in the Asian context.
Lau: "In Asian families, a lot of the times the younger generations are still very respectful of what the parents think or believe.
"In board meetings, the patriarch may still make the key decisions and not want to let go. The private bank comes in to mediate this conversation.
To play that neutral party and make them communicate with each other in terms of expectations and the future."
Several view points were offered on this panel. Mark Smallwood’s from Deutsche Asset and Wealth Management highlighted that the demographic definition of ‘next-generation’ customers can be different across the client base – from individuals in their 20s to their mid-50s – and this may impact the servicing needs in turn.
Rather than being a mediator in the discussions within family businesses, banks should rather be effective coordinators for the well-informed client, he said.
Smallwood: "Margin compression is happening in the industry. When the margin gets compressed, you have to be a lot more focussed on what your real value-adds will be to the client. Where you should be just a coordinator to the client, for them to attain the advice that they need. One has to play to one strengths. I would prefer to contract out as much as possible the soft issues of state planning, trust with independent legal advice, and what is not our core business".
|Lai Mun Kit, Senior Portfolio Manager, Lombard OdierPaul Stefansson, Managing Director, Head of Investment Fund, Hedge Fund and Private Equity Distribution, APAC , UBS|
|Moderator:Elliott Shadforth, Partner, Wealth & Asset Management Assurance, EY|
Alongside an outlook on the investment product trends of private clients in Asia, this panel looked at the rising demands of investment advisory, including the opportunities in discretionary portfolio investment. The unpredictability of markets and the move towards a fee-foradvice model is something the industry must look into highlighted UBS’s Paul Stefansson in his keynote.
Stefansson: "Advice and products are intangible things, and if we move to a model where we provide advice, but it is going to be paid for by products, it is going to be a significant change for all of us."
Reaching a balance of risk and return in asset allocation for clients is a core need, especially in the current low yield and highly volatile markets.
With the easy availability of information, clients have become more impatient while waiting for returns. Investing in technology to provide a seamless flow of information and investment performance under one inter-phase, therefore, has become essential, it was discussed.
The panel members also highlighted that discretionary portfolio management is seeing significant traction in Asia, especially for second generation clients. Lombard Odier has seen great success in this mode of investment advice, with its risk-based asset allocation approach.
Lai Mun Kit, Lombard Odier commented that 50 to 60% of the lender’s 220bn AuM globally is on discretionary management alone. Kit: "Risk-based asset allocation is the primary driver. At the end of day we want to make a real return to the client and at same time give an air cushion for volatility.
|Renato de Guzman, Chief Executive Officer, Bank of SingaporeErnest Leung, Chief Operating Officer, BNP Paribas Wealth ManagementJullie Kan, Managing Director & Vice Chairman Southeast Asia, Private Banking Asia Pacific, Credit SuisseFrancis Koh, Director, MSc in Wealth Management Programme, Singapore Management UniversitySuvendu Ganguli, Chief Operating Officer, Temaswiss Wealth|
Reviewing the perennial issue of finding quality talent in the private banking sphere, a plethora of expert views came to the fore during this panel discussion about the approach that various industry players are taking to groom good quality private bankers.
Moderator and keynote speaker, Ernest Leung from BNP Paribas Wealth Management, introduced the approach that BNP Paribas is taking to groom its staff through its wealth management university to identify and support best practice, as well as ensure that the relationship managers (RM) are aligned with the culture and ideals of the institution.
Aligning the staff to the risk culture of the bank is integrally important, and it is the responsibility of the senior management, highlighted Renato de Guzman of Bank of Singapore.
De Guzman: "Risk culture has become increasingly important, especially with regulators becoming more demanding. Majority of private bankers are well intentioned but not up to date with the fast changes of regulation. So it’s a matter of ongoing training and communication." Suvendu Ganguli from wealth management training consultancy Temaswiss Wealth, opined that the industry is actually commoditising learning to the extent of over-engineering the training process.
Francis Koh from SMU, however, brought in a different view point saying that perhaps more standardisation is necessary to have an overall improvement in the quality of bankers.
Koh: "As an industry, there is no real degree for private banking. I think what is missing is the industry coming together. There needs to be some consensus of what should be done to create a standard of the skills and needs of the RM. We should move to a higher level of competency."
As Jullie Kan of Credit Suisse mentioned, catering to the needs of specific client segments such as the UHNW Is will require specific skills that will not leave all banks with a common pool of skills.
The informal sharing of skills and experiences through a mentorship programme and using with the expertise in-house is also effective in grooming RMs most effectively, it was mentioned.
|Peter Scott, General Manager, Avaloq Asia PacificSandipan Ray, Chief Information Officer, Asia Pacific, Deutsche Asset & Wealth ManagementJeroen Buwalda, Partner, Wealth & Asset Management Advisory,EYJean-Francois Mazaud, Head of Sociéte Générale Private Banking.|
Concluding the summit with the pertinent topic of technology was apt, with head of Sociéte Générale Private Banking making a keynote presentation on the digital needs of client servicing that are imperative in the current private banking scenario.
Mazaud: "Customers are better informed and have evolving needs. They want speed of service, security, and no barriers. Private banks have to adapt their infrastructure in three areas.
"First is the client inter-phase – how they interact with the clients. Second is data warehousing – how they store the data into a common referential.
Thirdly, how this data can be analysed and served back either to the bankers or to the customer.
A clear digital vision for private banks is lacking, said Mazaud, in comparison to other non-bank institutions such as Amazon and Google.
He highlighted that the industry needs to upgrade its client servicing capabilities. Sociéte Générale has approached this through a front-line first, faster and cost-effective go-to-market strategy.
However other panel members contested that without the right infrastructure in place, building a sustainable front line model cannot happen effectively.
Sandipan Ray from DeAWM argued: "If you don’t have a core banking platform and data in one place in a consistent manner, it is very difficult to conduct data mining. If the fundamental pipes are not built, then you won’t have the client experience they are looking for."
This approach has been taken by Deutsche Bank in outsourcing its back-office operations to the Avaloq Sourcing and creating a globally integrated service model. The potential of the business processing service model was highlighted by Avaloq’s Peter Scott as he spoke about the efficiency advantages it brings while dealing with compliance pressures.
Scott: "Banks are finding it difficult to deal with investment in front channels and still meet requirements set on the regulatory and compliance side. One solution is to consolidate and aggregate the volumes in a BPO environment, to effectively improve cost-income ratios."