Issue 99 May 2016 Lite by Asian Private Banker

www.asianprivatebanker.com

Independent, Authoritative, Indispensable

ASIAN PRIVATE BANKER MAY 2016 • ISSUE 99

THE MULTI ASSET PLAY: HERE TO STAY? INSIDE: Our take on UBS’ new Kowloon office, pg 5 Why are RM numbers down across Asia?, pg 6 Exclusive polling results from our Rising Stars 2016 event, pg 15 A chat with Barclays India’s CEO, pg 21

STRAIGHT TALK

ALBERT CHIU, EFG BANK, p17

MAY 2016

CONTENTS 4

Letter from the Editor Funds, funds, everywhere, and not a drop to drink… OR, much ado about Multi Asset Funds

APB On-the-Spot Online poll results

Editorial The Scoop: Why UBS has a 36,000 sq ft billboard in Kowloon

Editorial Crow’s Nest: The case of the 40 missing RMs

APB Mandate 9

The multi asset play: Here to stay?

13 Asset Management Awards for Excellence 2016 15 Rising Stars 2016 Poll Results Exclusive

People Straight Talk: Albert Chiu, EFG Bank

Technology Shock of the new: Artificial intelligence comes to private banking

Industry A chat with… Satya Bansal, CEO, wealth and investment management at Barclays India

People Moves Movers & Shakers

CHIEF EXECUTIVE OFFICER Andrew Shale

MANAGING DIRECTOR Paris Shepherd

DIGITAL DIRECTOR Tristan Watkins

EDITOR Shruti Advani

OPERATIONS Benjamin Yang, Koye Sun

DESIGN Simon Kay

EDITORIAL Richard Otsuki, Priyanka Boghani, Tom Wan

BUSINESS DEVELOPMENT Madhuri Chatterjee, Sonia Lam, Michael Chan, Sam Chan, Stacey Wong

PRODUCTION DG3 ISSN NO. 2076-5320

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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LETTER FROM THE EDITOR

Funds, funds, everywhere, and not a drop to drink… OR, much ado about Multi Asset Funds There is nothing more tedious than having to talk (or write) about unsupportive markets and the difficulty of generating returns. So I won’t. Suffice to say, clients are being forced to diversify into multiple asset classes like they never have before. All hail the multi asset fund – quite literally, a fund that can and does invest in multiple assets like cash, equities or bonds – a special focus for this issue. In an ideal world, these funds leverage on the freedom they have been granted and construct portfolios pegged on various asset classes, effectively forcing diversification in core asset allocation strategy. That taken care of, advisors at private banks can focus on niche, satellite, strategies. But, have asset managers held up their end of the bargain? I would like to thank John Cappetta, head of managed solutions advisory, Julius Baer, Stefan Lecher, global head strategist, multi assets and solutions, UBS Asset Management, Tan Wei Mei, head of portfolio solutions, Asia Pacific, Credit Suisse and Charis Wong, head of mutual funds and ETFs, Hong Kong, Credit Suisse, for their contribution to this issue.

Albert Chiu, EFG’s CEO APAC, discusses the bank’s positioning in Asia in the wake of EFG’s acquisition of BSI in this month’s Straight Talk. We catch up with Satya Bansal, CEO, wealth and investment management at Barclays India, to find out how the bank’s onshore business is playing out. And, we have all our regular features, including my take on UBS’ new Kowloon offices in The Scoop with Shruti Advani, and Crow’s Nest featuring something of a whodunnit. Finally, to 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

How long does it take, on average, to set up a private banking account in Asia for the Þrst time?

Which of the following would you recommend your client to increase allocation for in next 6 months?

What proportion of your current clients have life insurance policy holdings?

More than 4 months

Commodities

>10%

14.00%

51.92%

3-4 months

16.67%

Credits

5-10% 25.00%

36.00% 1-2 months

22.22%

Equities 50.00%

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<5% 23.08%

61.11%

EDITORIAL

Why UBS has a 36,000 sq ft billboard in Kowloon

Express Centurion card, UBS-preferred Initially planned over two floors, the irst quarter numbers, as any prirates at hotels around the world, dining Kowloon offices will in fact spill over three vate bank on the street will tell privileges and shopping discounts and a floors or 36,000 square feet, accommoyou, have been less than stellar. A matchmaking service encouraging clients dating up to 60 client advisors. Yes, they quarter-on-quarter comparison to “engage with fellow Kowloon entreprehave got actual bankers either relocating with last year’s numbers paints an even neurs”. or specifically hired to man the office – it sorrier picture. To be fair, this is largely Adeline Chien, the newly minted head is not intended to be just a suite of meeting because the first quarter last year was of Kowloon, has managed to distinguish rooms. “gangbusters”, as one banker eloquently put herself as an extremely energetic and moNo, I don’t believe this is a retail banking it. tivated lady amongst a pool of extremeplay – you’d probably want ground floor “We are operating from a cost-conscious ly energetic and motivated ladies (think offices with road access for that – but there mindset but we continue to be focused on Kathy Shih, Amy Lo, Marina Lui, Ruth are undeniable influences from marketing growth,” was the response I got from one Chung amongst others). bank when I asked whether Cut through the noise and the the numbers from the first facts remain: Kowloon offices quarter were going to impact Cut through the noise and the facts put private banks plumb in the strategy for the rest of the remain: Kowloon offices put private banks middle of the teeming family year. office/multi family office ecoOk, good luck trying to do plumb in the middle of the teeming family system. In addition, they will alboth. office/multi family office ecosystem low UBS easier access to clients Coming as it does in the in the New Territories, many of midst of this “cost conscious whom have offices in Sha Tin mindset”, the opening of a and, as far as I am concerned, new UBS Wealth Managethat is the gamble that the bank ment office at One Peking must be hoping will pay off. While compestrategies previously used for the mass Road, Kowloon, is as conspicuous as its tition is thick and margins are thin for the affluent. The bank has reiterated that the signage atop that very building. Hong Kong-tycoon book, the Kowloon/ threshold remains uniform (CHF2 milTo be clear, UBS is by no means the first New Territories entrepreneur is virgin terlion) for both Hong Kong and Kowloon private bank to plant its flag in Kowloon – ritory for most international wealth manclients, but it is really after the swathe with ICC on Austin Road is home to the likes agers. A quick dipstick survey would, I am CHF5-25 million. of Credit Suisse, Deutsche Bank, Morgan certain, confirm that brand recognition for Yes, there is a membership club for cliStanley, EFG and ABN AMRO, amongst any international private bank – UBS inents. No, it isn’t a point-based, tiered sysothers. But it is the first private bank to cluded – is non-existent in this area. tem like an airline or credit card loyalty straddle a presence in both Hong Kong It would be premature to call its Kowprogramme. I am pretty sure you get the and Kowloon with fully fledged offices. loon foray a success, but I will go as far same quality of coffee and cookies regardPut another way, UBS is doubling down as saying that I think UBS is making the less of how many million you decide to on the Hong Kong market – using its exsmart play – and I may not be the only one fund your account with. But clients will isting penetration of the onshore market to to hold this view. It wouldn’t surprise me if “enjoy privileged access to an exclusive absorb the cost of expanding even further. we see at least one other major player roll community” via membership in the KowBecause I am always getting questions on out a high net worth platform within the loon Circle. Essentially, this translates into the details of the venture (especially from next six months. a referral from the bank for an American the CEO club), here are the bare bones.

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EDITORIAL

The case of the 40 missing RMs After four years of high single digit growth, the total number relationship managers (RM) at Asia’s top 20 private banks in 2015 dropped 0.8% (or 40 persons) to 5,213. But ask any private bank and they’ll tell you that they’re actively hiring. If this is indeed true, then last year’s decline – as marginal as it was – raises a few pertinent questions, not least, why was there a 40 RM exodus, and where did these bankers go? TOUGH TIMES

One possible answer is that financial institutions, in coping with the global economic slowdown, have became more prudent hirers – a position subscribed to by Pathik Gupta, head of wealth management, Asia Pacific, at consultancy McLagan. “Within Asia’s private banking industry, there was limited appetite for global banks to hire in 2015. Wherever [there was] selected hiring, it was difficult for RMs to move their clients,” says Gupta, who notes that the amount of client assets an RM can now move when

switching banks has fallen below 25% of their total book. “This has increased the overall breakeven timeframe for RMs to well beyond 3 years,” he adds. Widespread business restructuring has also impacted RM numbers, with a number of major banks opting to recalibrate their wealth management divisions to better cope with global economic volatility. “One of the main reasons for the hiring slowing down in 2015 as compared to previous years is that the banks took stock of their hires and allowed them to settle down/restructure internally, before

deciding on the next phase of growth,” says Rahul Sen, global head of private wealth management at headhunting firm, The Omerta Group. Recent examples include Citi, which sold its Japan consumer operations last year. As a result, Citi’s RM headcount (including Gold, Private Client and Private Bank) experienced the biggest headcount drop of 2015, falling 27.8% to 325 front-line bankers in Asia. Deutsche Bank also split its asset and wealth management divisions last October, and its RM headcount in the region has remained flat at 200 for the past four years.

TOTAL RM HEADCOUNT AT THE TOP 20 PRIVATE BANKS IN ASIA RM headcount YoY increase

2012

2013

2014

4,580 n/a

4,893 6.8%

5,253 7.4%

5,213 -0.8% Source: Asian Private Banker

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EDITORIAL

Overall then, 2015 will go down as an inglorious 12 months in terms of front-line numbers, and an anomaly when held against the previous couple of years, both of which saw healthy year-onyear increases in headcount. So where have these 40 bankers gone?

HELLO, EAMS

“It doesn’t surprise me that 40 RMs have moved out of the role as a relationship manager within a private bank,” notes Abimanu Jeyakumar, head of Carlton Senior Appointments in Hong Kong. “Firstly, over the last few years we have seen an increasing number of seasoned private bankers moving to external asset managers (EAMs) or setting up their own family office/multi family office.” Gupta would agree, observing that EAMs over the past year have grown assets under management (AUM) by more than 20% in the region, while Asia’s Top 20 private banks in terms of AUM posted a drop of 4%. For Gupta, more RMs are leaving private banks due to a mounting pressure to perform in adverse market conditions. “[B]anks are getting more serious about bottom performer management and driving higher productivity,” he continues. “This has led to bankers escaping the industry [for] a more stress free career.” Indeed, with Asia’s EAM industry valued at US$15.5 billion – a figure pegged to double over the next five years – private bankers are not only looking for comparatively stress-free working environments, but also money-making opportunities – a point touched upon by Charles Wong, CEO of Privé Financial, a Hong Kongbased software solutions provider for EAMs and family offices, who told Asian Private Banker that bankers “are realising that when facing private banking EAM desks as an external asset manager, the fees are split 50/50, while as a relationship manager sitting in the bank, only 10-15% of the revenue is retained.”

[Bankers] are realising that when facing private banking EAM desks as an external asset manager, the fees are split 50/50, while as a relationship manager sitting in the bank, only 10-15% of the revenue is retained

“Private banks have had a big push over the last few years on prioritising financial technology, so many front office staff have gone into a more technology-focused roles where their client facing experience can be used to build the best client-centric systems,” he explains. To be sure, it is uncommon today to meet founders or sales representatives at wealth management-focused fintechs who have not worked at a private bank. Case in point, Bert-Jan van Essen and Divyesh Vithlani, both former Credit Suisse private bankers, have set up their own fintech companies.

LIGHT COMPENSATION

Salaries saw a healthy 8-10% rise in 2015; at the same time, RM bonuses fell 15% on average, according to headhunters. And there is little hope that things will improve in 2016, says a Singapore-based headhunter, who asked to remain anonymous. “The growth in compensation level has tapered off. What used to be 7-10% compensation growth has gone below 4%,” he says. “This has created negative sentiment among private bankers and provided the impetus for them to look elsewhere.”

FINDING FINTECH

The lure of running or joining the mushrooming fintech corner in Asia has also led to a number of RMs leaving the industry, Jeyakumar says.

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EDITORIAL

So will 2015’s ‘40’ become 2016’s ‘flood’? Gupta predicts that, as private banks feel the squeeze of tightening regulations, internal restructuring and acquisitions, the outbound flow of RMs may well continue – and intensify – into 2016. “Most of the private banks have become very selective in hiring and this trend will continue,” he says. “The focus that banks have is on increasing productivity and share of the wallet rather than asset growth through RM acquisition. The industry has gradually realised that hiring RMs to grow by paying them more has only increased the cost pressure and has not served the clients and banks well.” Sen is more optimistic, however, suggesting that private banks will become more sagacious in their hiring strategy, without halting altogether. “Although we will continue to see some further consolidation/ attrition to multi family offices, the private banking hiring in 2016 will be better as compared to 2015, as quite a few banks have completed their internal restructuring and are ready for

Although we will continue to see some further consolidation/attrition to multi family offices, the private banking hiring in 2016 will be better as compared to 2015, as quite a few banks have completed their internal restructuring and are ready for their next phase of growth, whether organically or through acquisitions

their next phase of growth, whether organically or through acquisitions,” Sen concludes.

APB MANDATE

The multi asset play: Here to stay?

itting on the boardroom table is a dot plot resembling a violent spray of paint. The chart in question visualises the performance of Asian private client accounts at a major wealth house in 2015, plotting absolute returns against volatility. Explaining why the dot plot looks this way, the manager cites an all-too-familiar range of causes: excessive attempts at timing markets, poorly diversified portfolios and a lack of discipline to stay invested to realise the benefits of managed solutions. And yet, nestled deep within this amorphous cluster of data points lies a source of optimism – the multi asset fund. Designed to invest across various asset classes, multi asset strategies allow for a degree of flexibility and nimbleness that is not found in a traditional 60/40 balanced fund. Indeed, multi asset funds are at their most compelling when market volatility is high, for the simple reason that they increase a portfolio’s diversification, thereby widening the opportunity set, while at the same time tempering the risk that comes with investing in a single asset class. Research conducted by UBS shows just how well multi asset portfolios can perform under present market conditions, relative to self-directed accounts. “We did a thorough study covering over three years on the private banking side on accounts, analysing individual client account performance and comparing risk-return with multi asset accounts and multi asset funds,” says Stefan Lecher, global head strategist, multi-assets and solutions, for UBS Asset Management. “From the study, we found that just 8% did better (trading in lieu of multi asset funds) and 92% did worse. Those who did worse have either similar return but higher risk, lower return at similar risk, or even lower return but higher risk.” It is perhaps unsurprising, then, that multi asset fund sales in Asia have enjoyed a broad three-year uptrend, even amidst the general gloom. Indeed, fund selectors tell Asian Private Banker that while the first quarter of 2016 was a consensus write-off (a recent Asian Private Banker survey found that 46% of respondents had met less than a tenth of their annual fund targets by early April), the multi asset sector remains in robust shape, with flows holding steady or even increasing in year-on-year terms.

DEEP SHELVES RETAIN FLOWS

At UBS, for example, year-to-date flows into the Swiss lender’s in-house multi asset funds, which are aligned with the house view, are comparable to those experienced in 2015, according to Sean Cochran, APAC head of portfolio specialists at the bank. Indeed, UBS’ multi asset product range has booked US$1.4 bil-

Sean Cochran, UBS

lion from Hong Kong and Singapore alone over the past five quarters, outdoing single asset class funds that focus on equities or bonds. “In fact, the volatility of the markets in 2016 is likely contributing to investor appetite for the disciplined portfolio construction of the UBS House View,” Cochrane explains, adding that the funds have also benefited from third-party outflows. Industry research shows that mixed asset funds in Asia (ex-China) saw total net inflows of US$3.5 billion in January and February this year and US$5.1 billion for the same period last year. A significant portion of this is believed to have benefited multi asset managers. This may well be due to the sheer range of multi asset products available in the market, as well as their inherent versatility, in that they allow for assets to be switched to another product within the same universe. Charis Wong, Credit Suisse Private Banking’s head of funds and ETFs, APAC, confirms that first quarter flows were comparable to those experienced last year, citing a shift in investor preference towards low volatility multi asset solutions in light of shaky markets. “The rapid rise of popularity in this region can be associated with the special product features designed for this relatively new

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APB MANDATE

Charis Wong, Credit Suisse

asset category – frequent and stable payout, as well as availability of multiple currency share classes,” points out Wong. “However, managers with income focus found it more difficult to rebalance their portfolios swiftly into alternative sources of income when high yield and emerging market debt became less favourable at the end of last year, which significantly detracted from their portfolio performance. Investors began to realise the implicit costs of receiving regular income versus the flexibility to truly diversify across global investment opportunities. Thus, we see inflows this year towards low-volatility multi asset solutions at the expense of income-oriented multi asset funds.”

solutions at Julius Baer, partly due to the advisory unit’s decision to shift from last year’s barbell approach to core/satellite. As with its industry peers, the bank’s Asia inflows into multi asset funds year-to-date are also comparable with those experienced last year. “Our team would rather suggest a diversified Asian fund where managers can pick the best companies in each Asian country instead of trying to pick a single country to invest in for a core holding. Investors can trade around those positions in opportune times, be it through single-country ETFs or even long-only funds.” UBS’ Cochran believes that distributors, providers and markets are not alone in driving multi asset demand, as clients shift their focus from the performance of individual trades to total return. “I believe this trend [of asset managers developing broader strategies] will continue as investors look more closely at their actual account performance over time rather than focusing on particular instruments,” Cochran notes. “There is a tendency to look at the performance stated on investment fund fact sheets rather than looking at the actual cumulative performance of client accounts. Many investment funds have greater performance track records but private clients tend to shift in and out of various funds in a manner that destroys their actual realised performance.” But with the development of a suite of products with such broad coverage (many are also invested in alternatives such as private equity) and reference benchmarks tweaked for investor-specific needs, one wonders whether the multi asset solution is, in effect, a

EXTERNAL CIO SOLUTION

Rising demand for multi asset funds can also be linked to risks associated with advisory sales, especially here in Asia where it is not uncommon for high net worth investors to make performance-destroying decisions by buying or selling at inopportune junctures. When market uncertainty is high, there is a pressing need for dynamic strategies that can adapt to market events, and offset poor client-directed actions (or inaction). Thus given the difficulty of making precise market calls, visible headwinds for single asset class strategies are, in turn, expected to benefit portfolios with a larger remit of securities. “This is something we discussed among the team here and we’ve made a conscious decision not to take overly granular calls for core assets,” says John Cappetta, regional head of managed

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Stefan Lecher, UBS Asset Management

APB MANDATE

John Cappetta, Julius Baer

thinly veiled alternative to the crown jewel of Swiss private banking, discretionary portfolio management (DPM).

and multi asset solutions are not so easily distinguished from one another, particularly when it comes to products with strategies that are aligned with the house view at a sister private bank. “If all you care about is performance and you trust in a certain CIO of a multi asset fund, what is the point of buying a discretionary portfolio,” questions one veteran Hong Kong-based private banker, preferring to remain anonymous. “As clients take a portfolio-centric approach to investing, I expect them to focus on total returns and the purpose of each holding. Other dynamics will then come into play, such as fee differential.” Notwithstanding the dynamics at play in Asia’s multi asset fund space, demand for such strategies is expected to remain sustainable for the foreseeable future with the global economy undergoing a deep structural transformation. Of course, there may be short rallies that tempt investors back to their trading ways, but few are predicting the emergence of a sustained bull run in the markets. Especially in Asia, the hunger for yield is not expected to diminish anytime soon, and over-dependence on a single bond or asset class may prove risky. What’s more, the region plays host to a wealth of untouched cash and equity holdings that are expected to lose out as China’s economy transitions, and which can readily be converted into inflation-beating, income-yielding vehicles. Heads of private banks across Asia are, indeed, grappling with the challenges of managing a still trade-heavy and market-correlated business. Multi asset funds may be first true all-weather tool that is not a discretionary portfolio.

COMPETITION FOR DPM?

The industry as a whole has been quick to point out that this allweather “set-it-and-forget-it” product is in no way an alternative to discretionary portfolio management. Credit Suisse, Julius Baer and UBS all note that their discretionary mandates are devoid of multi asset funds, given that such instruments can compromise house views. “Multi assets funds would have their own asset allocation views [which] might be in conflict with our CIO house view,” says Tan Wei Mei, head of portfolio solutions, APAC, at Credit Suisse Private Banking, adding that even those with similar views are still hard to implement due to the time lag of communicating allocation shifts. “We prefer to express our views through single asset funds, ETFs and direct securities, as these provide more flexibility for us to implement the Credit Suisse strategic and tactical asset allocation views.” Indeed, the level of reporting, customisation and servicing that DPM requires is far more intensive than is the case with multi asset funds. And should tail-risk events play out, discretionary portfolios are not limited by industry practices or regulations from making unorthodox decisions, such as a full conversion into cash. But on an average day, especially from the perspective of lower-end clients within the high net worth segment, discretionary

Tan Wei Mei, Credit Suisse

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ASSET MANAGEMENT AWARDS FOR EXCELLENCE 2016 Congratulations to all the winners of the Asset Management Awards for Excellence 2016 – as voted by 36 fund selection decision makers across 28 private banks. For full details on the methodology and winners, please visit: apb.news/ama2016

Best Fund Provider – Multi-asset Solution | J.P. Morgan Asset Management Best Fund Provider – Global Equity | Fidelity International Best Fund Provider – Greater China Equity | Value Partners C

Best Fund Provider – Europe Equity | UBS Asset Management Best Fund Provider – US Equity | T. Rowe Price Best Fund Provider – Global Bond | PIMCO

CMY

Best Fund Provider – Asia Bond | BlackRock Best Fund Provider – Asia ex-Japan Equity | BlackRock Best Fund Provider – Global Emerging Market Equity | Mirae Asset Global Investments Best Fund Provider – Japan Equity | Man Group Best Fund Provider – Global Emerging Market Bond | J.P. Morgan Asset Management Best Fund Provider – High Yield Bond | Neuberger Berman Best Fund Provider – RMB Bond | CSOP Asset Management Best Fund Provider – Europe Bond | AllianceBernstein Best Fund Provider – ETF | iShares Best Fund Provider – Sector Equity | Pictet Asset Management Best Fund Provider – ASEAN Equity | J.P. Morgan Asset Management Best Fund Provider – India Equity | Goldman Sachs Asset Management Best Fund Provider – Liquid Alternative | Standard Life Investments Best Service Provider – Hedge Fund Platform | Lyxor Asset Management Best Fund Provider – Real Estate Asset | AXA Investment Managers Best Service Provider – Fund Research | Morningstar

APB MANDATE

Asset Management Awards for Excellence 2016 On Friday 29th April, Asian Private Banker hosted its third annual Asset Management Awards for Excellence luncheon at the Grand Hyatt in Hong Kong. Relive the affair with some of our favourite images from the day.

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APB MANDATE

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APB MANDATE

Rising Stars 2016 Poll Results Exclusive Asian Private Bankerâ&#x20AC;&#x2122;s inaugural Rising Stars event, held on 7th April at The Fullerton Hotel in Singapore, brought together fund houses, fund selectors and external asset managers from across Asia for a day of discussion, networking and polling. Here we present our exclusive poll results.

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APB MANDATE

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PEOPLE

Straight Talk:

Albert Chiu, chief executive, Asia Pacific EFG Bank In February this year, EFG announced that it will acquire private bank BSI from BTG Pactual for US$1.34 billion. The deal should catapult EFG into the big leagues by making it one of Switzerland’s largest private banks with around CHF170 billion (US$176 billion) in assets under management (AUM). It should also bring scale to EFG’s Asia business, according to the bank’s chief executive for Asia Pacific, Albert Chiu, who tells Asian Private Banker that “size matters more than ever in financial services”. Why BSI? “The two businesses (EFG & BSI) are very complementary in Asia and globally, with a lot of synergies in client coverage. Thanks to BSI’s 150-year old Swiss tradition, EFG will gain a much stronger foothold in Southern Switzerland and in Italy. We will also benefit from its presence in the Middle East. In turn, BSI will benefit from EFG’s established position in both the UK and Spain. Both banks will enhance their position in Monaco and Luxembourg. In Asia, where EFG has a stronger presence in North Asia and BSI shines in South Asia, as well as in Latin America, we will significantly increase our assets under management. There is also a strong cultural fit between our two businesses. We have a shared focus on private banking, and both banks are extremely client-focused. We are very excited about this merger as we can explore new market opportunities in the fastest growing wealth management market – Asia.” What is expected to result from the planned merger? “Following the merger, which is planned for the end of this year, we will become one of the largest private banks in Switzerland, with approximately CHF170 billion

in assets under management and over 850 private bankers worldwide. We will be a leading Swiss private bank with significant scale and global reach. In Asia, we will become a top pure play private bank, and will continue to serve our clients with our entrepreneurial spirit and solution-driven mindset. By coming together, both banks will improve their competitive positions in a rapidly changing market. The newly merged business should be attractive for clients, employees, private bankers and shareholders as we can offer size, scale and stability. Post-merger, what’s next? “Size matters more than ever in financial services. The scale of the combined business will enhance our competitive position, allowing us to further increase our resources; seek growth in different markets and segments; and, most importantly, serve our clients better. For example, we are looking to hire a new investment head in South Asia to lead our discretionary portfolio management team

in Singapore. We will also launch an active advisory offering for Asia. The challenge of finding senior talent is a question the entire private banking industry in Asia faces, where growth in wealth continues to outpace growth in talent. For

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PEOPLE

us, access to senior talent has actually improved over the years as our franchise has grown significantly in Asia. With the planned merger, we will roughly double in size, putting us up to another league in terms of scale. EFG has long had strong appeal among high quality private bankers, but this can only help us to persuade those who might have been hesitant to come on board.” The EFG-BSI deal joins UBP-Coutts, Bank of Singapore-Barclays, Julius Baer-Merrill Lynch as four out of the five major private banking M&A deals in recent years. Is this proof that non-universal banks face an uphill battle to grow organically? “Not at all. Challenges in the increased cost of doing business due to the regulatory landscape and greater capital requirements is an industry-wide issue that is causing the market to consolidate and that is why we are seeing all of this M&A activity. This applies not just to pure plays but, as you can see from the deals you named, also to universal banks. Moving forward, I believe that pure plays continue to have a better chance than universal banks at growing assets, as we have a stronger value proposition relating to our independence. Although regulation has changed and universal banks may no longer be able to distribute investment banking products internally to private clients as easily, many clients still remember the crisis. A lot of HNWIs still prefer a pure play private bank which is more client-oriented and is allowed to make an independent assessment of client requirements, and recommend the most appropriate solution accordingly.” One of the strengths of smaller private banks is their ability to be flexible and allow their private bankers to take an entrepreneurial approach to business. Will the planned merger impact this? “EFG has a unique and successful Client Relationship Officer (CRO) model. In Asia, we’ve developed very strong growth of our businesses in the last 15 years with bankers that are experienced, Asia-centric and entrepreneurial. After the planned merger, our team will be on a completely different scale to when we first started on day one with 10 to 15 people! However, although we shall get bigger, we are still determined to preserve our longstanding entrepreneurial spirit and I believe it is in our DNA to do so.” Transactional income used to be the majority part of EFG’s business in Asia. How has it transitioned from that state to becoming more focused on recurring income, especially in light of market conditions? “I think every CEO in the private banking industry knows that annuitised income is critical - not only to avoid day-to-day volatility from markets but also to help clients grow or preserve wealth. We believe that if clients move their money into discretionary or advisory mandates, not only do they receive professional advice on their investments, they can also spend more time running their

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Name: Albert Chiu Bank: EFG Bank Position: Chief executive, Asia Pacific Previously: HSBC Bank, Citibank Best kept culinary secret in Asia: “新記車仔麵 (‘Sun Kee Cart Noodles’), 49 Tang Lung Street, Hong Kong” If not banking? “I’d like to own/run a boutique hotel. I think it would be a lot of fun!” Hidden talent: “I can skip a few days sleep straight without appearing to have done so (with a lot of coffee)” EFG Bank Asia AUM (end-2015): US$20 billion (↓4.8% YOY) Relationship Manager headcount (end 2015) : 120 (↓4.0% YOY)

businesses, pursuing their interests, and so on. Asia is always a challenge because a lot of the wealth is still first generation and clients like to exercise control over their investments. However, we also notice that client mindsets are slowly changing. In China, for example, they are experiencing unprecedented equity volatility, a depreciating renminbi and a structurally shifting economy. This is motivating them to diversify and internationalise their wealth to book assets beyond only Hong Kong and Singapore. Now, they need people on the ground to support their businesses and family members in the US, the UK, Switzerland, Luxembourg, Cayman Islands and more. EFG, with our global network, is well positioned to support such clients. Progress in growing our recurring income businesses has been very good under our team built by Jaye Chiu from EFG Asset Management in Hong Kong. We’ve made good progress in encouraging clients to look at managed investments to avoid too frequent day trading and achieve more stable returns. Today, those efforts are being realised and roughly 70% of the bank’s income is from banking products like deposits, loans, FX and discretionary portfolio management. This is a significant contrast to five years ago when the same figure was only around 50%.”

TECHNOLOGY

Shock of the new: Artificial intelligence comes to private banking In the financial sector, tech buzzwords are a dime a dozen, the newest being Artificial Intelligence (AI). Stripping away all the hype, Asian Private Banker looks closely at how AI works at a private bank and whether it will last.

t’s a humid and overcast afternoon in Hong Kong. A 30-something private banker, her laptop blinking, swivels on a chair to check the message. It says her client wants to change his asset allocation in response to Apple stock movements. The banker swivels again to face another screen, this one showing a pair of twitching, lifelike hands. She asks, “What is the client’s risk profile? What is Apple’s stock right now?” Within moments, the screen is populated with tables, dashboards, and graphs, and then the hands return, gesticulate, and a voice somewhat reminiscent of Apple’s Siri says, “Here’s what I can suggest…” It has all the trappings of a typical sci-fi flick. But while most of the genre classics are staged in the distant future and err on the side of fanciful, private banks today are a lot closer than you may think to realising the above scene. Indeed, specialists say that many banks are already using forms of AI such as “intelligent assistants”, or are on the cusp of unleashing the technology’s potential. AI involves the use cognitive systems to give meaning to unstructured and dark data by understanding it, reasoning with it and continuously learning from it. Put simply, cognitive computing brings the power of human reasoning, cognition and insight at a scale vastly greater than what humans themselves can manage. And the wealth management industry, already obsessed with trialing various big data and analytics technologies, is starting to see the benefits of AI as it works its way into the whirring systems of private banks.

AI ON THE RISE

“Over the last two years, we have seen a number of large and medium-sized private banks looking at how cognitive systems can help deepen engagement between the RM and clients and also the RM and the bank itself,” says Rohitha Perrera, vice president and senior partner, IBM Industry Academy Member, IBM.

Connie Leung, senior financial services industry director at Microsoft makes a similar observation, adding that those institutions that are sitting on big data effectively have a head start on the competition. “Private banks are in a trial and error phase in machine learning but the tier two and tier three private banks are already using machine learning as the banks have more data that can target other client segments as well.” And as its powers and potentials are explored, AI is also being used in different parts of the bank. “We are seeing cognitive systems now being implemented throughout a private bank; not just for front-end client engagement but also middle and back office operations to drive efficiency, profitability and growth,” says Perrera, adding that AI projects typically start out as small-scale affairs focusing on one or two processes such as reconciliation, risk management, client opening or due diligence, before gaining scale.

AN INDUSTRY CATCHES ON

UBS Wealth Management’s Asia Pacific chief digital officer, Ketan Samani, points out that the Swiss lender has been using artificial intelligence for some time now. “Our UBS Advice clients receive daily portfolio intelligence scans via Cornerstone technology. This means that they are given portfolio health checks and if we find any breach based on strategy, risk profile, regional or sectoral preferences, an alert is sent to both the client and client advisor (CA) to take steps to rectify or for further discussion,” he says. For Samani, the turn to AI is as much about the technology’s potential as it is about human limitations. Indeed, with UBS’ portfolio book comprising of nearly 2,000 equities, 30 FX currencies and around 15,000 funds, he points out that it is “not humanly possible to adequately monitor and make recommendations without AI as [the bank’s] ‘intelligence assistant’”.

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TECHNOLOGY

Likewise, UBS engaged Singapore-based Sqreem Technologies in December 2014 to help the bank deliver personalised digital content to clients, by crawling through a vast universe of open source, unstructured data and identifying the preferences and interests of the Singaporean population based on a list of 130,000 things that people do every day. And the Swiss bank isn’t alone in its pivot towards AI-driven solutions. Last January, DBS Private Bank teamed up with ‘Watson’, IBM’s supercomputer of Jeopardy fame, to implement the cloudbased Watson Engagement Advisor. This front-end solution is designed to help relationship managers dispense timely advice by reviewing client portfolios and trading preferences, analysing realms of data and monitoring the performance of more than 1,000 product offerings. At present, DBS is feeding the system with some 1,200 pieces of research as it learns how to handle increasingly complex and nuanced information. Singaporean rival OCBC has also singled out cognitive computing as a major point of focus for the bank. For Pranav Sheth, OCBC’s e-business and business transformation head, AI constitutes

an opportunity to “bring down the cost of wealth management” allowing the bank to service a larger pool of clients. Should this come to pass, Sheth predicts that the industry will in time undergo a “democratisation of wealth management services”.

MOVE OVER ROBO?

For the time being, however, AI continues to play second fiddle to robo advisory technologies, with the latter garnering widespread media coverage over the past year. Robo advisors – effectively automated financial advisors – use complex algorithms and predictive analysis to generate portfolio management advice; yet despite being the talk of the town, robo advisory is little more than a rudimentary form of artificial intelligence, experts tell Asian Private Banker. Indeed, advocates of AI go so far as to label robo advisory “out-ofplace” and “inferior” in its ability to mimic human reasoning. So are artificial intelligence-based systems poised to usurp robo advisors? It’s a matter of progression, Perera explains. Private banks are moving in an incremental fashion, from big data to robo advisory

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and, ultimately, to artificial intelligence. Robo advisory falls into IBM’s cognitive engagement domain of cognitive banking, which deals with sale productivity. Leung agrees, stating that private banks’ use of robo advisory demonstrates early stage where many are still pooling its big data together. “Most private banks are using robo advisory to benchmark clients by analysing their risk appetite and creating ‘what if ’ scenarios. However there is certainly a change in how such financial institutions are looking at data as a whole,” she says. “Once banks go beyond the traditional method and begin to glean the data sets created from new cognitive computing, they will be able to target clients by geographies, income class and net worth segments.”

MOVE OVER HUMANS?

Of course, as humans, it is only natural that we consider what impact AI will have on our roles going forward. Doomsayers typically equate artificial intelligence with human obsolescence – and even subversion. Industry experts are less sure. “All our digital enhancements are designed to make the client experience a meaningful and joyful one, and not replace our client advisors,” says Samani, who states that the role of the RM is not under threat in the private banking sphere, where clients typically require a further round of discussions beyond the initial advice. Perrera echoes this sentiment. “We do not foresee a situation where machines would play the same cognitive role as humans. Instead, we look at them as helpers. The opportunity here is not to replicate human cognition, but to use computers to help us reason over human-created data – our communications, documents, images and designs,” he says.

THE YEAR 2026

So if the future is now, what lies in store for private banks that employ cognitive computing technologies? For Perrera, the coming decade will be a transformative one. “In the next five years, there will certainly be greater adoption of cognitive systems by private banks in Asia. However in the next 10 years, adoption of cognitive will be pervasive. The client experience and cognitive value will be deeper and, as a result, offer more opportunities for efficiency, profitability and growth.” Leung, however, resists the temptation of playing soothsayer. “With technology moving at this pace, in the next 10 years, machine learning may be called something else!” she exclaims. “Some of the banks do not even know what [their] businesses will be like that far ahead; but what is clear is that being technologically-enabled and investing more is going to continue.”

INDUSTRY

A chat with…

Satya Bansal, CEO, wealth and investment management at Barclays India

20% increase in assets under management (AUM) in 2015 stands as compelling evidence that Barclays’ private banking business in India remains in good health, despite the bank’s decision to offload its Hong Kong and Singapore businesses earlier this year to Bank of Singapore. That’s the message coming from Satya Bansal, CEO, wealth and investment management at Barclays India, who confirms that the standalone onshore business has been relatively insulated from external happenings, including the aforementioned sales. “While we do have non resident Indian (NRI) clients, a majority are from the UK market, and therefore the purchase of Barclays Hong Kong and Singapore divisions by Bank of Singapore will not impact our business in terms of volume or the standalone franchise in India in any significant manner,” Bansal asserts in an exclusive conversation with Asian Private Banker. For the few NRI clients that do reside in Hong Kong and Singapore, Bansal adds that the India onshore desk has been able to handle their requirements. Barclays India’s assets under management (AUM) rose by 20% year-on-year to US$6 billion, according to Asian Private Banker’s research. Bansal attributes this to a record year for the bank.

“In 2015 there was a lot of volatility in the market and India was dealing with negative sentiment from the new government. However, it was one of the best years for Barclays India as revenue for the private banking business onshore was up by 18% year-on-year, while invested client assets were up by 20%,” he says.

BARCLAYS INDIA AUM 2013

2014

2015

US$4 bn

US$5 bn

US$6 bn

2014-2015 YoY

20% Source: Asian Private Banker

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INDUSTRY

BARCLAYS HEADCOUNT IN INDIA 2013

2014

2015

2014-2015 YoY

0% Source: Asian Private Banker

And while a number of foreign banks have exited the India onshore market – including UBS Wealth Management, Morgan Stanley Private Wealth Management, HSBC Private Bank and, most recently, RBS – Barclays India has recorded steadfast AUM growth since it launched six years ago. Domestic success has put a premium on top talent, however, with Bansal noting that an aggressive form of musical chairs has beset a shallow onshore talent pool, as new domestic players set up shop. Recently, eight senior Barclays employees joined India Infoline Wealth Management (IIFL), recruitment agencies tell Asian Private Banker. The resulting vacancies have since been filled by internal hires from Barclays’ corporate and investment banking divisions as well as externally from competition, according to Bansal. By the end of 2015, Barclays’ India relationship manager (RM) headcount remained unchanged at 40, accounting for just over 30% of Barclays’ total for Asia, according to Asian Private Banker’s latest figures. The India onshore scene is currently dominated by IIFL, Centrum Wealth Management and Kotak Wealth, alongside Barclays India. IIFL Wealth Management currently has US$11.8 billion in AUM, Centrum Wealth houses US$10.5 billion, while Kotak Wealth Management has just under US$6 billion, according to Asian Private Banker’s estimates.

However, Bansal believes that there is plenty of room for all players to grow, adding that those with a universal brand can add value for Indians that have one foot outside of India. “There is enough scope and space for local and foreign players given the size and demand of the India market. In our experience, most of the families from a business and family perspective deal globally, and therefore look for a global brand to leverage from,” he notes.

DIGITAL DRIVE

After rolling out a digital app that grants clients access to their portfolio performance and tools for analytics, Bansal says that the technology will now be fitted on all RM tablets. The bank has also automated its risk management processes in a bid to tighten up on due diligence. “We have automated all internal portfolio review processes and reconciliation processes so any abnormal behaviour can be tracked and flagged,” he explains, while stressing that Indian wealth businesses in general face less regulatory risk than their global peers due to the relative paucity of cross border flows. In addition, Barclays India continues to focus on internal technology initiatives, “where the objective is to make an entire straight through process (STP) workflow”. Bansal says that the bank has been working on this for the past 16-18 months, and will continue to do so.

INDIA AS A % OF ASIA IN 2015 AUM

16.7%

RM HEADCOUNT

30.8% Source: Asian Private Banker

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May 11, 2016 | HONG KONG | 09:00 – 15:20

Albert Chiu Chief Executive Asia Pacific EFG Bank

François Monnet Managing Director Head Greater China Private Banking Asia Pacific Credit Suisse

Jimmy Lee Head Asia Pacific Bank Julius Baer

Ravi Raju Head of Wealth Management APAC Deutsche Bank

Ronald Lee Head of Private Wealth Management Asia Goldman Sachs

Vincent Chui Managing Director Head of Asia Institutional Equity Distribution & Private Wealth Management, Morgan Stanley

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May 17, 2016 | SINGAPORE | 09:00 – 16:00

Amit Shah Co-Founder & Executive Director IIFL Private Wealth

Bahren Shaari Chief Executive Officer Bank of Singapore

Francesco de Ferrari Head of Private Banking Asia Pacific Credit Suisse

Rahul Malhotra Head of Southeast Asia J.P. Morgan Private Bank

Tan Su Shan Group Head of Consumer Banking & Wealth Management DBS

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