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ASIAN PRIVATE BANKER DECEMBER 2015 • ISSUE 94
THE FINAL WORD WHAT PRIVATE BANKING HEADS SAY ABOUT THE PAST 12 MONTHS AS WE LOOK TO 2016, pg 8 STRAIGHT TALK
MORGAN STANLEY’S VINCENT CHUI: STAYING AHEAD OF THE GLOBAL AND LOCAL REGULATORY ENVIRONMENT A TOP PRIORITY IN 2016, pg 16
DECEMBER IN NUMBERS 6 We delve into this number of recent mergers to see what the private banking industry in Asia might expect from consolidation going forward, pg 4
US$2.5 trillion The amount
of money being laundered globally each year, pg 18
10% A third of private banking COOs polled expect this amount of ROI from recent tech investments, pg 20
DECEMBER 2015
CONTENTS 3
Letter from the Editor 2015 – The Year of Two Halves – if ever there was one
4
Editorial Crow’s Nest: Will consolidation pick up in 2016?
6
2015 Review 6
Top ten private banking moments in Asia
8
The Final Word
14
People Man of the Hour: Edmund Koh, UBS
16
People Straight Talk: Vincent Chui, Morgan Stanley
18
Regulation The pressure is on
20
Technology COOLC 2015: Front focus
22
Structured Products Stepping up to the plate: Asian Private Banker Structured Products Awards for Excellence 2015
23
People Moves Movers & Shakers
PUBLISHER Andrew Shale
MANAGING DIRECTOR Paris Shepherd
DIGITAL DIRECTOR Tristan Watkins
EDITOR Shruti Advani
OPERATIONS Benjamin Yang, Sam Chan
DESIGN Simon Kay
ASSOCIATE EDITOR Vince Chong
BUSINESS DEVELOPMENT Madhuri Chatterjee, Sonia Lam, Michael Chan
PRODUCTION DG3
EDITORIAL Richard Otsuki, Priyanka Boghani, Tom Wan
PUBLISHED BY KEY POSITIONING LIMITED 1205 The Dominion Centre, 43-49 Queen’s Road East, Wanchai, Hong Kong Tel: +852 2529 5577 Fax: +852 3013 9984 Email: info@asianprivatebanker.com
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ISSN NO. 2076-5320
LETTER FROM THE EDITOR
2015 – The Year of Two Halves - if ever there was one
A
n auspicious start in the first quarter tantalised, but in the end proved to be an inaccurate predictor of what lay in store. For the remainder of the year, private banks in Asia have had to grapple with a largely unexpected tempering of growth in China while continuing to battle unprecedented regulatory action including record fines, and resolutely unsupportive markets. The most optimistic among us would be hard pressed to say 2016 – The Year of the Monkey – will bring with it a panacea for all of these ills. However, the snake is the symbol of intelligence and versatility, especially in the context of financial wealth and profit. Over myriad conversations with industry veterans, Asian Private Banker found that those on the frontlines of this industry are using the lull to re-evaluate their business model, reconnect with clients, and redefine the norm. As we ring in a new year, it’s time to turn to these thought leaders and ask them what they think is in store for 2016. Thank you for all the feedback on the last issue. For those of you I have met before, it should come as little surprise that every time you make a suggestion, it is keenly debated at our weekly editorial meetings. For the uninitiated, join the debate by mailing your comments to editor@asianprivatebanker.com. I look forward to hearing from you. Until we meet again,
Shruti Advani Editor Asian Private Banker
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EDITORIAL
Will consolidation pick up in 2016? As private banks in the region face cost and revenue pressures from rising compliance requirements and the threat of online investment options – one private banking head reckons robo-advisers could gradually chip away at private wealth models that target the US$1-3 million client segment – consolidation and scale-building have been two large buzzwords in the industry.
T
he latest on the acquisition trail is Union Bancaire Privée (UBP), which is aiming to finish its Asian integration of Coutts by Q1 next year. And over the past decade there have been many other acquisitions, with diverse results. Private banking acquisitions are about growing big quickly, because if there is one industry where organic growth benefits, this is it. Build a complete set up and it makes it easier to attract big whale bankers who bring with them billion dollar books. However, the other extreme speaks true too: when a platform is not adequate enough for competent bankers to do more for their clients in terms of product and investment variety, for example, the bank will find it difficult to grow. In such a case, acquiring might be a better option especially now, with rising IT and compliance costs ratcheting up the pressure to deliver revenue. As 2015 approaches its end, many private banking heads tell us that the new year will bring more mergers. We shall come back to them in a year’s time and see if they got it right. For now, let us take a look at how recent buys have panned out:
RBS – ABN AMRO
In 2007, the botched acquisition of ABN Amro launched by a consortium of RBS, Fortis and Santander bank cost the group nearly US$100 billion, and a loss of £24.1 billion (US$37 billion) for RBS in 2008 – the biggest corporate loss in the UK. The then-ABN Amro board actually favoured Barclays to win the bid, praising it for being “consistent with ABN Amro’s…
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strategic vision”, even though the RBS-led consortium offered more than Barclays’ US$ 91.2 billion. Under the agreement, RBS took ABN Amro’s Asia business and wholesale businesses, while Fortis took the Dutch and Belgian operations. Banco Santander absorbed the Brazil and Italy businesses. In 2010, ABN Amro’s international private banking business was hived off into ABN Amro Bank NV. This came after the acquisition created large debts for RBS and Fortis, depleting their reserves right before the Global Financial Crisis hit in 2007/08. With the credit well already drying up with global debt levels climbing to 269% of global GDP in Q4 2007, making the biggest bank acquisition then was, on hindsight, not exactly the wisest choice. RBS and ABN Amro were both eventually bailed out by their respective governments. In Asia, ABN Amro Private Bank now appears unscathed from recent history; as at end-2014, it managed some US$20 billion in assets, based on Asian Private Banker’s Asia AUM (assets under management) League Table. This was a 5% growth from 2013 numbers, and up from US$17.3 billion in 2012.
OCBC – ING
The salvaging of ING’s Asia private banking business was perhaps one of the shrewdest moves made by OCBC, despite what was seen as a high bid. The latter paid 5.8% of the target’s AUM of US$16 billion, or US$1.5 billion. A retention deal was signed with senior ING staff and the two banks merged to become the Bank of Singapore (BOS), with former ING private banking head Renato de Guzman at the helm until his retirement
in May 2015. Former OCBC private bank head Olivier Denis is still serving as global marketing head, Singapore and International Market. BOS has since grown from US$23 billion immediately after the merger to US$51 billion in 2014, when it ranked number 11 in AUM among Asian private banks, based on our League Table.
DBS – SOCIÉTÉ GÉNÉRALE (SOCGEN)
DBS’ acquisition of SocGen SA’s Asian private banking business in March 2014 is seen as a success for both parties; not only has the private banking AUM of DBS grown more than 20% following the acquisition, it is also notable that the sale helped “to have a positive impact on (SocGen) Group net income and on the Basel 3 Common Equity Tier 1 ratio”, the French lender said. Olivier Gougeon, then-CEO of SocGen’s Asian private banking operation, remains with the majority of the staff. He is now DBS Private Bank’s International head. Many have also spoke of DBS buying over a strong products team. The Singapore lender paid 1.75%, or US$220 million, of SocGen’s US$12.6 billion AUM. DBS’ private banking growth has accelerated since, with its relationship manager (RM) headcount growing to 267 at end-2014 following the merger, from 215, based on our Asia RM research numbers. Its AUM has also exceeded US$100 billion as of July this year.
JULIUS BAER – MERRILL LYNCH
In 2012, the Swiss pure play transformed itself from a boutique to a major private wealth player via the acquisition of Merrill Lynch’s
EDITORIAL
International Wealth Management Unit in 2012. Originally salvaged in 2008 by Bank of America (BOA) for what was seen as a high US$50 billion – on the day before Lehman Brothers filed for bankruptcy – BOA subsequently sold all non-US businesses to Julius Baer. The latter paid roughly 1.2% of the target’s US$84 billion AUM, or US$880 million, and in that same year grew in Asia from just 100 RMs to 239, based on our research. Its AUM in the region also expanded from US$43 billion to US$72 billion. Julius Baer has soared from boutique to bulge bracket competitor, backed by a safe level of capital and scale, and has carved out a top ten spot on our League Table.
EFG – FALCON
Falcon Private Bank’s exit from Hong Kong showed how big a challenge it was for smaller pure plays even in favourable market conditions. In early 2014, the pure play was forced to exit a market that it had been established
in for 25 years, citing increasing costs; indeed, this year alone, private banking experts say regulatory expenses in terms of upgrading IT platforms and hiring experienced staff have risen at least 30-50%. Falcon then sold all of its assets in Hong Kong to another Swiss private bank EFG International, so that it can focus elsewhere. EFG has reportedly completed the transfer of 80% of the assets originally held by Falcon, which totalled US$883 million. It was a positive move for EFG, with the pure play expanding its RM headcount aggressively in 2015, with a target of 115 before the year closes.
UBP – COUTTS
UBP bought the international arm of private bank Coutts from the RBS group in a bid to revive its fortunes after struggling in its home market. The EMEA portion of the integration was completed successfully last month, with the Asia leg aiming to finish by Q1 of the new
year. The deal is significant as an embodiment of survival by scale – both banks have been in legal trouble lately, with UBP making a settlement worth up to US$500 million in relation to Madoff-linked investments. Coutts meanwhile, set aside £100 million (US$151 million) in 2014 to compensate thousands of customers who may have been sold unsuitable investments, among other things. Although Coutts held US$15 billion of assets in Asia in 2014 and had even grown its RM team by five, based on our research, it was the only private bank on our League Table, which features the top 20 banks in Asia by AUM, to see a reduction in AUM between 2013 and 2014. With the purchase of the Coutts’ international arm – that is, a complete set up of operations in Singapore, Hong Kong, Switzerland, Monaco, and the Middle East worth some CHF30 billion (US$29.7 billion) in AUM – UBP should have a stronger foothold in Asia even if it remains relatively smallish in the region.
Selected banks
Tier 1 capital adequacy ratio*
Credit ratings (Moody's, unless otherwise stated)
Asia wealth management AUM 2014 (US$ billion)**
Head of private wealth management, Asia Pacific/ Asia-based global
Tenure of head of private wealth management, Asia Pacific/ Asia-based global (years )
UBS Group
14.3%
Long Term - BBB+ Short Term - A-2 (Standard & Poor’s)
272
Kathryn Shih (to be UBS group president Asia Pacific, effective 1 Jan 2016)
13+
Citigroup
11.6%
Long Term - Baa1 Short Term - P-2
255
Bassam Salem
4+
Credit Suisse Group
14%
Long Term - Baa2
154
Francesco de Ferrari
3+
HSBC Holdings
11.8%
Long Term - A1 Short Term - P-1
112
Bernard Rennell
2+
Deutsche Bank
11.5%
Long Term - A3 Short Term - P-2
105
avi a u
8+
J.P. Morgan Chase & Co
11.4%
Long Term - A3 Short Term- P-2
90
Andrew Cohen
5+
Julius Baer
18.4%
Long Term - A3
78.7
Thomas Meier (to be Julius Baer ealth Management vice chairman, based in Switzerland, effective 1 Jan 2016)
10+
DBS Group
12.9%
Long Term - Aa2 Short Term - P-1
73.2
Tan Su Shan
5+
Morgan Stanley
13.9%
Long Term - A3 Short Term - P-2
70
Vincent Chui
3+
BNP Paribas
10.7%
Long Term - A1 Short Term - P-1
59.3
Mignonne Cheng
5+
OCBC Group (Bank of Singapore)
14.5%
Long Term - Aa1 Short Term - P-1
51
Bahren Shaari
nearly 1
Goldman Sachs Group
12.7%
Long Term - A3 Short Term - P-2
50
Ronald Lee
4+
Standard Chartered
11.4%
Long Term - Aa3
45
Michael Benz
1+
*As of 30 Sept 2015 **Based on Asian Private Banker Asia AUM League Table 2014
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2015 REVIEW
Top 10 private banking moments in Asia IBM WATSON DATA DRIVER
HSBC CONTINUES TO MULL OVER HQ DECISION
Amid the growing hype of technology buzzword “big data”, DBS Private Bank became the first Asian private bank to officially roll out a data analysis solution called DBS Wealth Advisor for its relationship managers (RMs). The Singaporean lender partnered with supercomputer IBM Watson and is currently in the process of giving access to all of its 267 RMs in Hong Kong and Singapore. At the moment, all its Singaporean RMs have access to IBM Watson.
January
HSBC group chairman Douglas Flint and CEO Stuart Gulliver said the British lender would make a call on whether to shift its headquarters to Hong Kong by the end of the year. Speaking from Hong Kong in May, Gulliver set out criteria for retaining its UK base and added that a decision would be made soon, noting too that the Hong Kong Monetary Authority was capable of regulating the bank. Indeed, in November, HSBC’s global private banking business posted US$261 million in profits before tax, with 80% of it derived from Asia – proof that the region is the dominant growth engine for wealth managers.
March February
May April
COUTTS SALE
After much teeter-tottering, state-owned Royal Bank of Scotland decided to let go of its international private banking business, selling most of Coutts International to Swiss pure play Union Bancaire Privée. The international business of the 300-year old British wealth manager had 15,000 to 20,000 clients with assets under management (AUM) of some US$30 billion, about half of which lie with its Asia operations (see page 4). Upon completion, the deal will likely lift the Picciotto-owned family business into Asia’s top 20 by AUM based on our research, joining just two other Swiss pure play private banks Julius Baer and EFG.
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J.P. MORGAN INTEGRATES ITS DUAL-SEGMENT MODEL IN ASIA
After extended speculation about the future of J.P. Morgan’s private banking business in Asia, the US wealth manager decided to integrate its two businesses, one focused on clients with net worth of US$10-30 million and the other on the UHNW segment with net worth of over US$30 million. There had long been speculation about the future of its two-tier business and the two heavyweights spearheading them, Peter Flavel and Andrew Cohen. The sixth largest private bank in Asia by AUMs in 2014, based on our research, then broke its silence mid-year to confirm to this publication that the latter and former head of UHNW clients would inherit the title of Asia head of the newly integrated private bank. Flavel was named its deputy CEO, Asia.
June
2015 REVIEW
FUND MARKET EXPANDS WITH MRF LAUNCH
As part of its ongoing efforts to internationalise its markets, financial regulators in Hong Kong and China jointly launched the Mutual Recognition of Funds (MRF) scheme. While experts have told this publication that the appetite for A-share products is relatively muted after the Shanghai benchmark’s steep slide in the third quarter, asset managers distributing to the mainland are particularly excited by the opportunity to help retail investors in the second largest economy diversify beyond the still limited options due to tight capital controls.
July
JULIUS BAER HIRES EXTERNALLY TO REPLACE MEIER
To the surprise of many, Julius Baer went outside to hire a new Asia Pacific head, Jimmy Lee, to replace Thomas Meier in the new year. Meier will return to Switzerland as the bank’s non-executive vice chairman of wealth management after ten years in the region. Lee was most recently Credit Suisse’s head of Hong Kong after joining it as part of the Clariden Leu acquisition in 2012. After Julius Baer’s successful integration with Merrill Lynch, Lee has been tasked with what CEO Boris Collardi called “the next phase of growth” to take the pure play’s presence in Asia to “the next level.”
September August
STRUCTURED PRODUCTS CONSORTIUM GOES LIVE, ADDS PRIVATE BANK
Multi-issuer platform and messaging network Contineo, backed by HSBC, BNP Paribas, Goldman Sachs, JP Morgan, Barclays and Societe Generale, launched at the start of the year to automate the distribution of structured products to private banks in Asia. This marked a shift in the distribution of structured products to private banks as they turn to technology for faster and more efficient price discovery. In June, Contineo announced the first private bank to join its buy-side roster: Julius Baer.
DEUTSCHE BANK SPLITS ASSET AND WEALTH MANAGEMENT – AGAIN
Months after the appointment of John Cryan as Deutsche Bank’s co-CEO, the German lender has once again split its wealth and asset management division after integrating them in 2012. The former head of the division, Michael Faissola, stepped down to give way to Quintin Price and Christian Sewing, who will oversee the asset and wealth management units respectively. The move has left spectators divided on the future of the fund arm, with some believing it will now be free of distractions to engage in growth mode while others believing the restructuring could open options for a sale – something the German lender attempted but failed to do three years ago.
November October
December
SHIH PASSES THE TORCH CHINA’S MALAISE DRIVE FLAT-FEE REVENUE IN ASIA
As markets felt the shock of an over 40% wipeout of the A-share benchmark, coupled with China’s unexpected decision to weaken the yuan, a flurry of Asian HNWIs decided to reduce their share of actively traded assets and test private banks’ discretionary offerings instead. The industry is uniformly expanding these capabilities to cope with the increased willingness to delegate, and as the global outlook continues to be driven by less than optimistic economic forecasts and compressed return expectations, the trend is expected to continue.
29 years after joining UBS, 13 of them as its Asia Pacific head of wealth management (WM), Kathryn Shih will in the new year step up to the group’s regional president role. She will also be promoted to the Group Executive Board, the firm’s most senior management body. Edmund Koh, the current WM head of Southeast Asia and Asia Pacific hub, is set to take over as the unit’s regional head (see page 14). Shih will succeed Chi-Won Yoon, who will take a planned sabbatical.
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2015 REVIEW
The Final Word Top private banking heads talk to Asian Private Banker about this year and the next. Standard Chartered Private Bank - Michael Benz, global head (MB, SC) Union Bancaire Privée - Michel Longhini, executive managing director, Private Banking (ML, UBP) BNP Paribas Wealth Management - i nonne en c ir n nd E si P ci c BNP Citi Private Bank - B ss S le E si P ci c BS iti Deutsche Asset & Wealth Management - Ravi Raju, head, APAC (RR, DAWM) EFG - Albert Chiu, CEO Asia (AC, EFG) Goldman Sachs - on ld ee e d Priv te e lt n e ent si P ci c S Hang Seng - Alan Luk, head, Private Banking and Trust Services (AL, HS) HSBC Private Bank - Bern rd ennell re ion l e d si P ci c nd lo l e d ily overn nce nd Enterprise Succession (BR, HSBC) Morgan Stanley - incent ui e d si nstitution l Equity istri ution Priv te e lt n e ent (see also page 16) Pictet - Claude Haberer, CEO Asia (CH, PT) Vontobel Wealth Management - Alex Fung, CEO Asia (AF, VWM) Julius Baer - Luigi Vignola, head, Investment Solutions Group, Asia (LV, JB)
ON 2016, COMING OFF A 2015 MARKED BY MARKET VOLATILITY AND ECONOMIC UNCERTAINTY IN THE LATTER HALF OF THE YEAR
MB, SC: 2015 saw the weakening of many Southeast Asian markets and their currencies, which has to some degree resulted in a challenging year for many Asian HNWIs whose businesses or portfolios were substantially exposed to commodities and Asian currencies. On a brighter note, we are seeing an increasing recognition of the importance of “unconstrained” strategies and alternatives for diversification and return enhancement among our clients. They are now also more willing to commit to longer investment horizons and accept illiquidity if provided with access to suitable product platforms. ML, UBP: One major thing to look out for is the change of trends in interest rates. Some people try to tell you it’s a non-event when the Fed (US Federal Reserve) is moving rates. It’s not true. When the Fed is moving rates, it’s a major event because it has major impact on many things like on the debt of some countries, asset allocations, global trends, and volatility. We still favour equities, where valuations, in developed counMichael Benz, tries, have never been so good. Standard Chartered Private Bank
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ily S
More specifically, there are sectors growing fast, like technology; this time around, the companies emerging in the IT sector are true businesses with millions of customers. It is not like in 2000 (before the dotcom bust). MC, BNP: The key drivers (of revenue)… will continue to come Michel Longhini, from transactional volumes…we Union Bancaire Privée have ambitious goals for Discretionary Portfolio Management and other managed assets, credit revenue, as well as fees from collaborations with different parts of the bank. BS, Citi: We continue to see growth across the franchise in both North and South Asia. In particular China and India will continue to outpace the more developed markets. From a product perspective, investment management will be a key driver as we continue to both attract and develop the discretionary mandates of our clients’ share of wallet. One of the main and ongoing discussions we do have with all our clients is about diversification as a proactive rather than a reactive exercise. RR, DAWM: In 2016, we seek to continue to grow our UHNW client segment with a key focus on Asian tycoons in Greater China, Singapore and Indonesia.
15_03337 DB2015_098 AWM Fingerprint for Asian Private Banking A4 P.indd 1
26/11/15 10:44 am
2015 REVIEW
Mignonne Cheng, BNP Paribas Wealth Management
Bassam Salem, Citi Private Bank
Mainland Chinese A-share equities have gone from a technical bull market (April/May 2015) to bear (summer months) and back to a bull market – highlighting the volatility of a relatively less institutionalised equity market. Going forward, we believe that the percentage of institutional/ retail participants should be more balanced as the domestic market becomes more available as an asset class through MSCI EM and MSCI China inclusion and stock connect initiatives. However, valuations for A-shares may keep investors less attracted, despite relatively better A-share access. We therefore believe global investors focused on fundamentals will find more attractive valuations in H-shares, with less volatility. RL, GS: We are focused on Greater China, which is consistent with the opportunities in the region and also with the firm’s strategy. The clients that we target tend to have interests that are of relevance to the other parts of the firm, and we connect them with people in other divisions when appropriate. AL, HS: Looking at a global level, the performance of A shares and the devaluation of the renminbi over the past year have taken some investors by surprise. With respect to the year ahead, given the uncertainty… clients are advised to assess their asset allocation strategy and, if necessary, increase the geographical diversity of their portfolio by shifting some of their investment to equities and foreign exchange around the globe. BR, HSBC: With regard to investments, to help clients achieve appropriate diversification, we have adopted a portfolio-based approach to allow us to have a more holistic view of clients’ wealth based on their objectives and key investment criteria, including risk strategy, maximum level of investment risk, asset allocation, investment time horizon and liquidity needs. VC, MS: Given our very strong institutional platform on flow products particularly equity and FX, I think we will continue to have well over half of our revenues coming from the flow business while we continue to expand the fees business. 2015 has been a very challenging. Even balanced funds, which by definition are lower risk, mostly lost money. Investor convic-
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Ravi Raju, Deutsche Asset & Wealth Management
Albert Chiu, EFG
tion is low. Principal preservation is a priority for many clients. Given this, discretionary mandates on lower risk portfolios and products focusing on sustainable returns are in vogue. CH, PT: We continue to focus on our strengths in discretionary, family offices services, asset servicing and wealth planning. We also expect hedge funds and private equity to maintain an attractive proposition for clients in the region. Clients have now learnt that assets, including their own currencies, don’t always go up. This has shown them the need for risk assessment and diversification into international assets. LV, JB: As there are still varying degrees of uncertainty with regards to China slow down, CNY depreciation, financial industry probes, among others, most clients have been kept sidelined for now. I reckon the most likely outcome, or rather our optimism, would be that investors might be more willing to entrust their funds with professional money managers after this heart wrenching ride.
ON COMPLIANCE
MB, SC: The cost of non-compliance is higher than ever before. The bar on compliance continues to rise with increasing regulatory changes and expectations in the areas of client due diligence (CDD)/money laundering, tax compliance, common reporting standards and investment suitability. We strongly believe that compliance should not just be seen as a cost centre but rather, use it as an additional way to deepen your knowledge about clients and improve your ability to deliver bespoke advice. To that end, we have been investing significantly in our CDD platforms, as well as in our people. ML, UBP: Suitability is the next milestone. You don’t really have a choice: you just need to comply. MC, BNP: We are strengthening our control and monitoring units… For example, we have put in place a new Business Risk Management team this year to monitor risk related issues concerning our front office teams.
2015 REVIEW
Ronald Lee, Goldman Sachs
Alan Luk, Hang Seng
BS, Citi: For us the cost of compliance is very much part of BAU (business as usual). We don’t have these additional costs. However I can imagine that those who do have big and/or serious compliance issues will undoubtedly “throw” money at the problem so that they can remain open for business. RR, DAWM: Owing to extraterritoriality guidelines, global regulatory adherence come into play over and above regional regulations, which also pose additional challenges including from a competitive landscape perspective. Going forward further streamlining in AI (accredited investors) regime by MAS (Monetary Authority of Singapore) would also be a key change that would need to be appropriately implemented from a consistency standpoint by the industry. With Common Reporting Standards and EOI (Exchange of Information) also coming, starting 2016, the industry is also gearing up in handling the changes in procedures & documentation, associated with the subject. Having said this, it is equally critical not to let down the focus on the key areas like KYC, AML and Suitability, on which the industry has come a long way, post the 2008 financial crisis. We continue to accord the highest priority on these areas, specifically on regulatory changes, in terms of not just increased technology spend towards solutions but also senior management time and efforts in our efforts to ensure that these are understood by our frontline for effective implementation and execution. VC, MS: In this regulatory environment we have very little control on costs related to compliance, anti-money laundering and risk control. So our focus is to invest in our platform per regulatory requirement but spend as much time on exploring revenue opportunities. CH, PT: There are constantly “interesting developments” in regulations. The selling process and suitability are permanent priorities.
ON HIRING
MC, BNP: Talent scarcity is pronounced in the wealth management industry. This challenge is wide ranging from front
Bernard Rennell, HSBC Private Bank
Vincent Chui, Morgan Stanley
office to compliance, risk management and middle office functions. To bridge the talent gap, training and development has evolved beyond sales skills related training to include reinforcing a “risk based culture” in our bank. In fact, the majority of training programs and initiatives these days are heavily focused on raising compliance and risk awareness. BS, Citi: Many banks set up shop out in Asia based on some of the consultancy reports that cite the explosive growth of “millionaires” in Asia. As a result, some, whose growth at home has slowed or is not as exciting as the numbers they are reading about Asia, decide to expand out here and what they find in reality are high costs in setting up and maintaining shop. A large part of those costs can be attributed to hiring from a thin talent pool. I would say many overpay for what they are getting and then face the problem of turnover as another bank poaches from them by bidding up the price for that talent. This doesn’t bode well for a client who typically wants continuity in their relationships. One of the trends is to “grow your own” which means looking within your own organization to develop and train your talent. And as a large organization, we have that advantage of drawing from a large pool of potential candidates. RR, DAWM: The industry does face talent pool constraints and this is a challenge for further growth. Deutsche Bank has focused on the quality of our talent pool rather than the quantity. This is reflected by the fact that our relationship manager numbers are slightly down over six years, whereas the average revenue per relationship manager is up nearly 200%. We continue to hire selectively with a focus on experienced talent with large books in the UHNW client segment, this segment currently being best suited to our platform. We are putting into place platform enhancements which will enable us to scale up in the high net worth client segment and associated RMs. AC, EFG: As of now, we have 108 RMs (relationship managers) in the region and are looking to have around 115 RMs by the end of this year. We continue to see very strong pipeline of senior RM candidates and are confident to grow our numbers of senior bankers in the region.
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2015 REVIEW
RL, GS: We have a different approach to selecting bankers. The traditional way is to look at their books and how much they can bring over. We look at that only as a metric that the banker was able to do it at another bank. But we assume that the banker is coming over with zero, and from that we ask if the person has the skills to build the business on our platform, with our approach. In Asia, our new hires are currently about 60% lateral and 40% from schools. Over the next five years that will reverse to 30-40% from other firms, and 60-70% from schools.
Claude Haberer, Pictet
AL, HS: The private banking industry as a whole is growing at an unprecedented speed and top talent is in high demand. Our approach is to focus on nurturing a strong pool of inhouse talent and ensure we provide attractive training and promotion opportunities for high achievers.
CH, PT: Hiring is difficult. The uncertain market environment and ever heavier regulations lead many to carefully ponder a move. On the other hand, the fast changing business models with a move by many into broking (under the guise of so-called “cross-selling”) and heavier pressure on revenue generation lead senior bankers to look for different working environments where they can develop their clientele and remain worthy of the trust their clients place in them. AF, VWM: As a boutique player, we have 20 staff and six RMs in Hong Kong. When it comes to hiring, we focus on seasoned bankers in Asia with a lot of experience.
ON CLIENT SOPHISTICATION, TRENDS AND NEEDS
MB, SC: An area of change (in 2015) is (in) wealth transfer and succession planning. Specifically in Asia where more than 50% of family enterprises are controlled by the founder and the majority of this passing of wealth is happening for the first time, ensuring the successful transfer of intergenerational wealth becomes even more important.
Alex Fung, Vontobel Wealth Management
ML, UBP: A big subject in Asia has been the volatility in Chinese equities. But there’s still lots of interest to invest in market leaders in China, like Alibaba - even if it is not on a worldwide scale, these are of a worldwide size. That’s a fundamental change in opportunities
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in China. Combined with the potential further opening up of its market, it’s very positive for China and indirectly for the whole region. RR, DAWM: There continues to be a propensity to wish to control the investment process, while at the same time within this process there is a growing adjustment to longer term views and increased holdings of managed products. Discretionary portfolio management remains stable in relative terms while in absolute terms the number continues to grow well, and their continues to be a growing allocation to other managed solutions including mutual funds, hedge funds and private equity funds. RL, GS: We continue to advise and educate clients on two things. The first is risk budgeting, meaning how they assess their appetite for risk, because once they can establish that, everything comes easier. The second is in-source versus out-source. This can be in many different forms, EAM (external asset management) and FO (family offices) is one axis, picking your own stocks versus buying a fund is another. BR, HSBC: In Asia, a high proportion of wealth is still concentrated in the first or second generations and focused on wealth creation instead of preservation. As such, Luigi Vignola, many entrepreneurs still have one Julius Baer third to half their wealth in their business and another third in property investments. The traditional approach to succession planning is to focus on how wealth will be distributed after the wealth creator’s lifetime. While appropriate in most situations, this is not sufficient in the context of substantial wealth involving assets, such as family businesses, that are expected to remain in the hands of different family branches over time. CH, PT: There is wariness toward investments in general, search for variety in advice and banks with specific expertise (“how are you different from the other banks?” is a basic yet key question) and desperate search for the elusive yield. AF, VWM: We are seeing a change from the transaction model to the advisory where clients are happier with the quality of advice. LV, JB: Amid a backdrop where clients continue to favor product simplicity and high liquidity as prerequisites, it’s a challenge to position products with longer investment horizons in client portfolios. While funds, equities and fixed income and shorter tenor structured investments saw increased flows, we did see interest in private equity opportunities, as well as in discretionary mandates.
SPONSORED CONTENT
A heightened role for life insurance in wealth protection Wealth in Asia is changing, but the fundamental need to safeguard it for future generations remains. By Damiaan Jacobovits de Szeged, CEO of Transamerica Life (Bermuda) Ltd. (Transamerica Life Bermuda), and board member of Aegon THTF Life Insurance, headquartered in Shanghai.
W
ealth in Asia is changing. Not only is it expected to surpass North America as the world’s wealthiest region in 2016, but the nature of the wealth being created, and the people driving it, continues to evolve. High Net Worth individuals (“HNWI”) in fast-growing markets in Asia, including Taiwan, Hong Kong, Indonesia, Thailand and Malaysia, have become drivers of wealth. According to the 2014 Asia-Pacific Wealth Report by Capgemini and RBC Wealth Management, the wealth of HNWI in Asia-Pacific grew 11.4% to a record USD15.8 trillion last year. As pointed out in a 2013 Private Banker International report, a large part of this wealth will be passed on to future generations in the next 15 years. Many in this new generation, which includes emerging young entrepreneurs, are well educated with an international outlook on business. They will have vastly different needs and face different risks when looking to safeguard their wealth legacies and that of their businesses.
A SHARED LEGACY
An important way of measuring wealth lies in its legacy that is shared with loved ones and future generations. Crucially, particularly as one ages, this encompasses peace of mind achieved with the establishment of a legacy plan - one from which loved ones can enjoy benefits, not just from financial assets but also values, memories and philanthropic efforts. Life insurance is an effective and flexible tool within the broader wealth planning toolbox that plays a key role in ensuring HNWI have that peace of mind. It gives them confidence that in the event of unforeseen circumstances, their families won’t be financially burdened.
SMOOTH TRANSITION OF WEALTH
As family businesses make provisions for succession planning, it is vital they consider how best to transfer their assets and what options are available to ensure their wealth and business success live on with minimal complications. In the case of HNWI in particular, the bigger the deceased’s estate the more complicated things are likely to become upon his or her passing, due mainly to legal issues. The legal wrangling can often take many years to sort out. With a life insurance policy that pays out upon
death, the money is generally readily accessible if you have designated a named beneficiary. In this way it may serve as a real liquidity tool to straddle this transitional period of uncertainty. Transamerica Life Bermuda, for example, accommodates these specific needs of High Net Worth (“HNW”) clients by carefully engineering universal life insurance plans to offer life protection plus allow wealth accumulation and preservation. For instance, a HNWI could use part of his/her wealth to purchase a Transamerica Life Bermuda universal life plan. Upon death, one would benefit from an increase in the value of his/her total estate, and the re-allocation of estate according to one’s specific needs.
MOVING INTO THE DIGITAL AGE
Life insurance providers must adapt to the forces of change brought about by the transition from traditional to digital models. The fundamental need to protect wealth has not changed. The prevalence of digital information, however, has further heightened consumer expectations. Business partners and end-customers are increasingly expecting to interact with service providers and their products via digital channels. Moving forward, the digital era isn’t only defined by distribution channels. It’s also creating new efficiencies when applied to internal processes and data analytics. This leads to an improved decision-making process and ultimately, better outcomes for customers.
SAFEGUARDING GENERATIONS OF WEALTH
The forces of change currently facing the life insurance industry, both in terms of technology advancements and the changing needs of HNWI, require a transformation in the way providers do business to ensure they keep up with consumer demand. The mounting challenges facing family wealth – including ensuring a smooth transition of wealth, preventing family conflict, and the increasing internationalisation of assets – remain best served by life insurance, which is fundamentally about safeguarding wealth and preserving the hard-earned assets for future generations.
asian private banker 13
PEOPLE
Man of the Hour: Edmund Koh, UBS Veteran banker Edmund Koh takes the reins of UBS Wealth Management’s (WM) Asia Pacific business on the first day of the new year. He will succeed long time APAC head Kathryn Shih, who is stepping up to the group’s regional president role. Koh, the current head of UBS WM’s Singapore, Southeast Asia and APAC Hub operations, talks here to Asian Private Banker about the industry. What are some of the key takeaways from Asian HNWIs this year? Typically, Asian clients have a strong bias towards Asian assets and portfolios exhibit high concentration risk on a singular asset class. But increasingly, they are seeking investment opportunities in Europe and US. In the past year, client interest in overseas markets has increased markedly. The trend is underlined by the more than 1,000 guests at UBS’s Wealth Insights Forums in Singapore and in Hong Kong earlier this year respectively. As a global wealth manager, we are positioned to provide our clients with optimal investment opportunities from around the globe and avoid a tendency to “home biased” investing. How would you describe the current state of hiring at private banks in Asia? By our estimates, there is likely to be a shortage of talented wealth managers in the industry unless we continue to build a talent-pipeline. The costs in the wealth management industry remain high due to the rise in hiring, compliance and technology costs. To be profitable in this industry, wealth managers need to have economies of scale. The traditional private banking model continues to evolve. Clients today demand a rapid investment process and an active advisory approach to allow them to make timely investment decisions even during times of market turbulence. Training and development are… key differentiators in a competitive industry. UBS is determined to build client adviser teams capable of providing holistic and research-based advice in a tightly regulated market. Currently, most of UBS’ over-1,000-strong client adviser base across Asia Pacific have obtained the Wealth Management Diploma – a rigorous internal certification framework. Many have also taken the Masters Programme
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which was jointly developed by UBS and Rochester-Bern to promote the long-term development of UBS senior employees. UBS also launched its UBS Business University Asia Pacific Campus, located at the historic Command House in Singapore. It offers a rigorous training curriculum that covers leadership and management, financial education, sales and advisory, personal effectiveness, and legal, risk and compliance.
In the past year, client interest in overseas markets has increased markedly
Has your technology budget increased this year in light of higher compliance requirements as well as the advent of financial technology? We have identified digitalisation as one of the key changes on how UBS can enhance our clients’ experience. With easy access to information through technology, clients are more demanding of the quality of investment advice. This means that rather than just being told by their clients what to buy or sell, our client advisers have to have a view, convey it timely, and hence support the client with quality advice to protect and grow his portfolio – in short, be an active investment manager. This is one of the reasons why we have invested significantly over the past few years into the technology to link our research based content, our know-how, our investment specialists and our client advisers into a unique value chain. UBS launched several projects in various markets that focus on how we can advise clients with the assistance of digital media. This year, UBS had launched EVOLVE – UBS Centre for Design Thinking and Innovation in Singapore, the first of its kind for UBS in Asia Pacific. Located at the UBS Business University Asia Pacific, EVOLVE focuses on creating new innovative and user-centric products. Earlier this year, UBS launched UBS Advice in Taiwan as well. (It) monitors client portfolios against their chosen investment strategy and the UBS CIO House view. Clients are alerted of matching opportunities and risks, but have full control and discretion over their investment decisions, within a simple, flat-fee structure. Demand has been strong since its launch in March 2014 in Hong Kong and Singapore.
Trim Size: 210mm x 297mm Bleed: 220mm x 307mm
SAFEGUARDING GENERATIONS OF WEALTH Our history of excellence lies in Transamerica’s over 100 years' experience in providing unequalled life insurance products and services to high net worth clients. It is a testament to our expertise in preserving wealth and prosperity as well as providing enduring legacies.
www.transamericalifebermuda.com Transamerica Life (Bermuda) Ltd. is incorporated in Bermuda with limited liability. Part of the
Group
PEOPLE
Straight Talk:
Vincent Chui, managing director, head of Asia Institutional Equity Distribution & Private Wealth Management, Morgan Stanley Nothing is more important than safeguarding the Morgan Stanley franchise, says the former civil servant, citing compliance as the private banking operation’s top priority for 2016.
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015 has been the most important year in the history of Morgan Stanley’s wealth business in Asia, says the bank’s private banking head in the region. “We transitioned our Swiss bank platform into an Asia domiciled platform in February, through the establishment of Morgan Stanley Asia International Ltd, a restricted licence bank in Hong Kong and a wholesale bank in Singapore,” Chui tells Asian Private Banker during our visit to the bank’s Hong Kong offices at the International Commerce Centre in Kowloon, right next to Victoria Harbour. “The Asia domiciled banking platform evidences the strategic importance and the potential of the wealth business.” The bank has deepened the integration of its wealth business – which targets the region’s ultra high net worth (UHNW) – with its institutional footprint, a process that began in 2013, the same year that Chui was tasked to head private banking in the region. This cross pollination approach was one of three goals set that year, and mirrors what other global institutions are doing today: Credit Suisse and Deutsche Bank are two names tweaking their investment banking platforms to service the burgeoning private wealth sector, especially in Asia. Morgan Stanley Asia has also stayed focused and disciplined on its approach to client segmentation, which was another goal set in 2013. As a global bulge bracket bank, Chui says the firm’s core competences play best to UHNW customers who are actively running their own business or investing their assets.He also notes the business’ relatively high account opening and maintenance thresholds in terms of account balance and liquid investible assets. The third and last goal however, Chui says, remains a top priority: the upgrading of the bank’s platform to “stay ahead of the global and local regulatory environment.” IT and compliance budgets, he says, “might be easily doubled.” The other aims were to deepen the integration between the private wealth and institutional businesses, and specifically target UHNW
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active business and asset owners. Chui says these have been well performed, with the bank seeing a “relatively high account opening and maintenance threshold” from such clients. Generally, it is expected that a Morgan Stanley client has US$5 million in initial assets under management (AUM) and, from client prospecting perspectives, US$25 million in liquid investible assets.
CROSSOVER SUCCESS
Morgan Stanley, Chui continues, has “a pole position across most institutional business in Asia.” For the wider firm to expand further in Asia, he notes, wealth management can open a lot of relationship opportunities in terms of referring business to “investment banking, equity, FX, credit, commodities and investment management.”
IT and compliance budgets... “might be easily doubled.”
“I am confident to say cross selling has now been institutionalised between our institutional businesses and wealth management,” he notes, citing by way of example the bank’s wealth clients being among the first to access Shanghai-listed A shares through the Shanghai-Hong Kong Stock Connect scheme that was launched in November 2014. “In the first quarter, they accounted for as much as a third of the firm’s A share flow,” Chui reveals. “In the capital market business, as much as a third of IPOs and blocks in Hong Kong are sourced through the wealth business. And our investment bankers also refer their issuer clients to the private bank.” But what is most crucial is the institution’s ongoing “multi-year” process to upgrade and “sustain our competitiveness.”
PEOPLE
“This entails front- to back-end evolution and expansion,” Chui says, leaning forward as if to stress his point. “We need to hire more IRs (investment representatives, similar to relationship managers) and product specialists and keep training them so they perform to the highest standard. We also need to bring in more talent across compliance, risk management, financing and technology. Sourcing talent, particularly IRs with the right product skills and culture, is extremely challenging.” This, he adds, “is the top priority of the management of every bank.” “If we are not in compliance with our regulators’ requirement, we don’t have a sustainable business. It’s that simple,” he adds. “For Morgan Stanley, the importance of satisfying our regulators goes beyond the wealth business. It’s about the firm’s global franchise… In our case, I simply told all of my colleagues that it had to be done.” He reveals that a strategic consultancy has been hired to to review the bank’s front to back platforms, which “will entail significant investment across all functions, but technology and regulatory compliance will likely top the list.”
In the capital market business, as much as a third of IPOs and blocks in Hong Kong are sourced through the wealth business
Compliance reforms, Chui admits, have been challenging in terms of operations, such as the increase in volume of documentation required when on-boarding new clients. This is not so much an issue for those domiciled in Hong Kong or Singapore who want to open individual accounts, he says, with such processes typically taking “four to six weeks assuming AML (anti-money laundering) checks are satisfactory.” “For offshore clients and those who use trust or offshore investment vehicles, it typically takes considerably longer depending on the degree of complexity and amount of documentation required,” Chui notes, with some separate industry benchmarks putting this at as long as six months. “AML checks also tend to take longer.”
...a strategic consultancy has been hired to to review the bank’s front to back platforms, which “will entail significant investment across all functions, but technology and regulatory compliance will likely top the list
He does disclose however that he “would love to have 120 – 130” IRs by the end of 2016, from the current 100. And a lot more afterwards, he adds. “However, quality, culture and compatibility are always more important than numbers. We look for experienced and product savvy professionals,” Chui continues. “They don’t need to be an expert in all products but it would be great if they have expertise on some. This is important to build credibility with clients. So for us, an IR’s role is not just about relationship, but more about delivering their own expertise and then linking in with the firm.” Going forward, Chui expects 2016 to be “a year of expansion for a few major private banks and a year of consolidation for most others” though he, unlike many others, does not expect the mergers and acquisitions scene to heat up. For most international private banks, he notes, Asia is strategic “so they would like to expand notwithstanding competition and cost.” “A number of European and Swiss banks have recently made very upbeat statements on growth targets for Asia,” Chui adds. “Even for the smaller banks, they would like to maintain a footprint here to support their global clients who want to book business in Asia. So the pace of consolidation will be slow.”
TARGETS
The bank does not disclose the amount of assets that it manages in Asia – Asian Private Banker research puts this at US$70 billion in 2014, a 7% rise from 2013 figures – though Chui says pre-tax profit and AUM have been “very satisfactory.”
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REGULATION
The pressure is on Says Niall Coburn, Asia Pacific regulatory intelligence expert for Thomson Reuters, especially for less regulated offshore jurisdictions. The former senior specialist adviser to the Australian Securities and Investments Commission (ASIC) and enforcement head of the Dubai Financial Services Authority (DFSA), talks to Asian Private Banker on the one thing that is giving private banking heads all around the world sleepless nights – regulation. The private wealth management sector has been subjected to greater regulatory influences in recent years. For example, client on-boarding processes now stretch to as long as six months, compared to days or weeks in the past. As someone who has led post GFC corporate investigations related to high profile collapses of financial institutions in Australia, do you think these reforms are justified?
and other parts of Asia, respectable “front people� have been used to move funds and purchase property and other assets as a way of laundering funds. At the moment, the AML burden has been on financial institutions and in the next three years, the same scrutiny will move to casinos, cruise ship casinos, lawyers, real estate agents and gem merchants. All these areas are exposed to AML because of their trust accounts and their ability to move large funds internationally.
In short, these changes are justified and had to occur. In my view there will be more international pressure to bring the less regulated offshore What are the reforms, local or global, that have been most crucial or jurisdictions into line and also improve their standards. influential in determining how wealth management/banking compliThe on-boarding processes do not need to take months and should ance works today? not take months or even weeks if clients produce the relevant documents to the bank and can establish the origin of the wealth, the sale The most important that banks need to work on is re-emphasising of business or the assets. There is an expectation of banks to be the de their integrity and ensuring that there is an effective culture where cusfacto enforcement to prevent money laundering internationally as they tomers are put first. are best placed to do so. It is estimated that there is US$2.5 trillion laundered internationally each year. Obviously it still happens and governments should not only rely on the banking industry to be the line of defence. The G20 in Brisbane in 2014, has brought major governments together to fight tax evasion and once these laws are enforced internationally, then there will be a higher expectation to report on the money flows that may be tainted. In the past, money launderers, terrorists and tax evaders have gone and still go to the weaker jurisdictions where there is less scrutiny. In my view, governments are only starting to clean up the weaknesses in AML. This is reflected in some of the international banks receiving harsh fines and other penalties that can even stop banks doing business. The number one issue for the world today is fighting terrorism and this is not only a land war, but a financial one in the sense that these terrorists groups have money flows that need to be stopped. The other major important thing that banks need to concentrate on a lot more is beneficial ownership. There needs to be more emphasis on training of Niall Coburn, Thomson Reuters front line staff because as we have found in Australia
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REGULATION
Compliance should be involved in all major business decisions from the start and should be represented on the board
Since the GFC, the most important change has been a renewed emphasis on ethics and culture. The buzz word in the industry is “conduct risk.” All this really means, is that banks have to fully understand how to conduct their business and understand the risks and how this translates into their customers’ welfare. Investigations into Libor and Euribor have exposed the ethical workings within banks and the need for the banking industry to change its professional perception internationally. This is a work in progress. Fifty years ago, a banker was a highly respected profession and was associated with integrity. However, this is not the case any more and nearly every week, there unfolds another prosecution or investigation from the Vatican to the large international banks to traders where the whole spectrum of their work has been scrutinised by governments and regulators. It seems that no jurisdiction is not without its banking story. The weaknesses in banking compliance have been a failure to have strong compliance departments that are integrated in the business and can stop disasters from occurring. Compliance should be involved in all major business decisions from the start and should be represented on the board. A compliance department must be the “guardian at the gate” not in the sense of stopping business, but to prevent products from entering the market which are not aligned with the interests of consumers. The major things that banks should learn, is you can have all the regulations and compliance in the world, but if the staff are not acting with integrity and if there are cultural issues, then it doesn’t matter what compliance systems which the businesses have in place. Banks should start rewarding their officers for acting with integrity rather on winning business. At the end of the day, it is the ethics and integrity that will save a bank, not the business - we only have to look at Lehman Bros to see what can happen! From an inhouse point of view, how do you think the relationship between banks and regulators have evolved with regard to private wealth management? How more crucial is it now to hire someone with regulatory experience, notwithstanding that this has always been a trend in the banking sector? The relationship between a bank and regulator has become more crucial than ever. It would be extremely beneficial for international or large banks to hire someone with a regulatory enforcement background as they know the mindset of the regulator and what is required.
There has definitely been an evolution where regulators now play an important part in making banks resolve customer issues or change their culture compared to a decade ago. For example, in Australia, three of the major banks have conditions on their licence to improve compliance and one of the international German banks, intervened to remove senior compliance professionals that were not moving fast enough to make change. In London, a chairman of the Board and his CEO were pressured to resign over major compliance failings. Under the new senior management regime in the UK, financial institutions have to show that senior management have the requisite experience and sign off as being responsible for a line of business. Given these few examples, banks have been hiring senior and experience regulators which will have an influence going forward and will improve relations with regulators but most importantly these people will know what to do when things go wrong. When do you see such regulatory reforms slowing down? Is the industry overreacting, relative to how a bank runs its business today? I see things slowing down after this year when the Financial Stability Board finishes this round of bank capital reforms which the major jurisdictions will adopt. There is still work to do, but at least we know what is on the runway. I say this with the exception of China, which I will refer to shortly.
For the last five years, we have been effectively subjected to regulation “factories”
It is important that regulators just do not churn out new rules as they have been doing without thinking through the nuts and bolts or seeing how the current reforms are working. For the last five years, we have been effectively subjected to regulation “factories.” As I have pointed out in other papers, there is a requirement to monitor these reforms and reduce unnecessary rules that are not working. I have always maintained that you cannot legislate for honesty but you can make sure honesty occurs and enforcement will play a major part in this in the future. In fact, in Asia, there have been more banning of advisers and investigations into individual conduct than ever before. Asia is still recovering from the share market meltdown. This will bring China in line with a more international approach to its securities legislation, so in this region, I do expect a lot more reform in China.
asian private banker 19
TECHNOLOGY
COOLC 2015: Front focus Asian Private Banker’s inaugural Chief Operating Officers Leaders Conversation (COOLC) 2015 brought together 19 COOs from 15 private banks for a morning of informal peer sharing and networking around the most dynamic and challenging area of responsibility: technology and digital strategy.
H
eld at The Fullerton Hotel in Singapore on 17 November, the intimate, off-the-record roundtable conversation focused on four key themes plaguing the private banking technology industry. These were namely front office client engagement, big data analytics, concerns on data security and cybercrime, and overarching strategies on budget allocation and technology headcount. From conversations and anonymous polls, it was clear that the industry’s focus for the next wave of technology investments will be centred around the front office. COOs and heads of IT and technology at private banks debated the effectiveness of rolling out mobile and tablet applications to appease their end-clients, as well as ways to increase the productivity of relationship managers through predictive analytics that harness big and small data sitting in the warehouses of banks. Given the sensitivity of client information, cybercrime was also outlined as a key concern as COOs analysed different ways to combat it through antimoney laundering technology. The bottomline for many, however, was projecting the return on investment (ROI) on such technology investments. With 40% of respondents revealing that the private banks’ technology budgets have increased from 6-10% over the
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last two years and 33% expecting 10% ROI on their investments, private banks in Asia are clearly in an experimental stage, trying and testing out new technologies as they emerge.
TECHNOLOGY
FRONT FOCUS
Private banks in Asia will most likely devote its next technology investment to reinforcing client engagement and RM productivity, say 73% of COOs and IT heads polled at Asian Private Banker’s recent COOLC conference.
FINANCIAL FRAUD FEARS
With cybercrime becoming an increasing concern – 82% of respondents labelled this at a “serious level” – there has been a rise in demand for anti-money laundering solutions, with 64% polled saying that technology risk management platforms will best address this issue. This is particularly true in Asia, where multiple jurisdictions come into play requiring private banks to gain access to more data and documentation from their clients.
Source of data: Asian Private Banker COOLC 2015
asian private banker 21
STRUCTURED PRODUCTS
Stepping up to the plate: Asian Private Banker Structured Products Awards for Excellence 2015 After what was a bumper year for structured products in Asia with sales surging by 13% in 2013 and 2014, the market has had to withstand undulating macroeconomic conditions this year. Heads of structured products at private banks and investment banks have been kept on their toes due to events such as Europe on the brink of a “Grexit”, the Hang Seng Index hitting a seven-year high, the more recent Asia market volatility and the impending US Federal Reserve rate hike.
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or the fifth consecutive year, Asian Private Banker’s annual Structured Products Awards for Excellence polled 48 leading gatekeepers spanning 31 private banks, as well as 19 external asset managers (EAMs), in Singapore and Hong Kong on who they thought were the year’s best providers across specific asset classes. To reflect industry evolution, two new categories were added in 2015 to the usual robust roster of groupings: Best MultiDealer Platform Provider for Structured Products and Best Structured Products Provider for EAMs. The votes were based on four key competencies: pricing, service, structured and research analysis, and innovation and structuring capabilities.
RELEVANCE AND COMPETENCE Over the last five years, as demand for structured products changed, so has its providers. Indeed in 2011, Credit Suisse and J.P. Morgan dominated the space and were the lead houses distributing structured products to private banks in the region. The former took home the structured product house of the year award in 2012, followed by the latter in 2013. Meanwhile, the 2015 winner is a bank that had in previous years kept close to the top. Société Générale won the most innovative index-linked provider in 2013 and 2014. And this year, in addition to taking that segment for the third year in a row, and the award for Best Provider of Europe Equity-linked Flow Structured Products, the French lender is also the choice for Structured Products House of the Year. Société Générale has further endeavoured to provide quick market access, offer best pricing and the most innovative range of products. It has achieved this by building strong connectivity between teams in Asia and Europe while maintaining an impressive platform.
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And the winners are: • Structured Products House of the Year - Société Générale • Best Provider of Asia Equity-linked Flow Structured Products - Credit Suisse • Best Provider of US Equity-linked Flow Structured Products - Citi • Best Provider of Europe Equity-linked Flow Structured Products - Société Générale • Best Provider of Equity-linked Non-flow Structured Products - BNP Paribas • Best Provider of FX-linked Structured Products - Citi • Best Provider of Credit-linked Structured Products - J.P. Morgan • Best Provider of Interest Rate-linked Structured Products - Barclays • Best Provider of Commodity-linked Structured Products - Commerzbank • Best Provider of RMB-linked Structured Products - HSBC • Most Innovative Index Provider - Société Générale • Best Provider of Exotic Currency-linked Structured Products - BNP Paribas • Best Structured Products Provider to External Asset Managers - Leonteq • Best Single-dealer Platform for Structured Products - BNP Paribas Smart Derivatives • Best Multi-dealer Platform Provider for Structured Products - AGDelta For further details, please visit our online Awards page.
PE O PL E MO V ES
MOVERS & SHAKERS
Movers & Shakers is a monthly compilation of the private banking industry’s key talent moves. For the full version of Movers & Shakers, login or register at:
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