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Wealth Management & Private Banking

Adding value in Asian private banking

Patrick Donaldson

13 Oct 2017

Photographer: Kim Kyung-Hoon

Asian private banking and wealth management firms should think less about their digital prowess and more about delivering what their private banking clients want, business leaders said at our recent discussion co-hosted with Hubbis.

The changing landscape of Asian private banking has brought a wide variety of newcomers, from the offshoots of larger financial services firms to those using new technology for a low-fee business model.

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There’s also an influx of new non-traditional wealth managers to consider.

For the wealthy individuals they target, there are now many more ways to satisfy their need for guidance on how to protect, grow and pass on their assets amid tough markets and complex regulations.

At a recent thought-leadership event in Hong Kong, co-hosted by Thomson Reuters and Hubbis, private banking leaders discussed the trends in Asia private banking, including the need to provide access to asset classes that are not run-of-the-mill or available via a digital platform.

The debate highlighted the requirement for institutions to genuinely understand — and then deliver on — the needs of a client, especially when it comes to accessing opportunities which are off the beaten track.

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China competition

Chinese banks, in particular, are causing quite a stir as they move into Hong Kong and Singapore to service existing clients who are looking to broaden their horizons and portfolios.

How the incumbent European and U.S. wealth managers will be impacted by such disruption — and therefore respond with strategies to defend their turf and assets under management — will be interesting to watch.

Actionable trading insight, digital channels to entice millennials, or simply to enhance service levels and the overall client experience are all among the options.

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Yet the cost of acquiring clients is still very high for the traditional players.

For Chinese banks, by contrast, they benefit from the long list of existing customers who are looking to diversify and offshore their wealth.

However, Chinese banks need to be able to articulate a clear proposition if they want to attract clients based outside the mainland.

Finding extra value

In the race to grow market share, the rate of adoption of new technology and digital tools has been a key focal point for many institutions.

As a result, trading fees have plummeted and the Millennial generation knows exactly how much it costs to transact.

Commissions are also transparent and there seems to be little that the private banker can offer which a client is not already aware of.

Yet there is value for clients to still work with an individual adviser who knows them and their goals.

Relationship managers

To address this, the answer might be for more firms to find a balance in their digital and human interactions.

This means proactively embracing the speed and low cost of digital solutions and blending this with the value-added element of the traditional relationship manager (RM).

The RM works with a specialized team of risk managers to conserve wealth, as well as an investment adviser to seek opportunities beyond the public domain, such as private equity.

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This can also help the client to access certain industry sectors or markets that also facilitate horizontal or vertical diversification.

Such a model creates a double whammy, meaning that high-net worth (HNW) clients can reduce their transaction costs, while the institution can still charge meaningful fees to compensate for the difficult and time-consuming business of tracking local and global opportunities.

Platform-based propositions

The technology for investments is already widespread.

However, the bigger private banks and wealth management institutions continue to invest in their own proprietary or complementary platforms to respond to what customers already do with their other relationships outside banking.

Yet many of Asia’s HNW population are multi-banked, so the key for the smaller players vying for market share is about emphasizing the value of the relationships they have, beyond transactions.

This is becoming more viable as clients realize the increasing value and need for succession and legacy planning solutions and structures, not just financial instruments.

Asia’s wealthy also want suggestions and advice about education for their children and residency or citizenship guidance.

How, for example, should a client view the U.S. compared with Australia or various parts of Europe when weighing tax transparency versus lifestyle and other important considerations?

Watch video — The Digital Platform in Wealth Management

Global reach

For the bigger banks, the unique selling point will inevitably remain their global reach. The ‘Think global, act local’ slogan might be a thing of the past, whereas ‘Glocal’ might start to get a second wind.

These larger institutions, especially the consumer banks, will also continue to bang the technology drum, given the challenge in a single individual RM serving enough customers sufficiently.

While these organizations appreciate the value of personal relationships and engendering trust, many individuals increasingly prefer the online interaction, with the flexibility to do it at any time they choose.

For these players, platforms are crucial to handle the volume of recurring transactions, keeping costs low given the preference of clients to pay as little as possible.

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