Issue 108 February 2017 Lite by Asian Private Banker

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FEBRUARY 2017

Issue 108

ASIAN PRIVATE BANKER Independent, Authoritative, Indispensable

BACK TO SCHOOL TRAINING & DEVELOPMENT Leading T&D experts on what it takes to train an army of RMs P10

A PB MA NDAT E

Fundamentals play catchup with rhetoric P14

I NSI DE

Industry: High tech costs pushing smaller private banks to exit, says UBS’ Shih

Straight Talk: Yeng Fang Ong, managing director & head, UOB Private Bank

Industry: Credit Suisse’s Helman Sitohang satisfied with 2016 results

APB Mandate: Asset Management Heat Map: Monthly Insights

P17

p21

EFG Bank Building in Singapore

瑞士盈豐銀行

Practitioners of the craft of private banking 瑞士盈豐銀行瑞士盈豐銀行 EFG is the marketing name for EFG International and its subsidiaries. 18th Floor, International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong, T + 852 2298 3000. 4 locations worldwide. www.efginternational.com In Asia, also present in Singapore, Jakarta, Shanghai and Taipei. EFG Bank is part of EFG International, which operates in over 30

CONTENTS ISSUE 108

Letter from the Editor

Echo Chamber

February 2017

Industry Julius Baer’s Collardi says 2016 hiring spree is already paying dividends

6 Industry High tech costs pushing smaller private banks to exit, says UBS’ Shih 8 Industry Straight Talk: Yeng Fang Ong, managing director & head, UOB Private Bank 10 Industry Back to school: Leading T&D experts on what it takes to train an army of RMs CEO Andrew Shale Editor Sebastian Enberg Editorial Richard Otsuki Priyanka Boghani Charlene Cong Managing Director Paris Shepherd Business Development Madhuri Chatterjee Sonia Lam Sam Chan Joanne Tse Stacey Wong Kale Law Olaide Ogungbesan Eldar Gainutdinov

Digital Tristan Watkins Yiyang Zhou Cécile de Buor Wilfred Lam Koye Sun Jacqueline Lau Gloria Fan Alice Wong Samuel Chen Finance & Operations Karman Wu Benjamin Yang Jessie Cheng Dennis Luk Production DG3

Published by Key Positioning Limited 13B Greatmany Centre 111 Queen’s Road East Wanchai, Hong Kong Tel: +852 2529 1777 Fax: +852 3013 9984 Email: info@asianprivatebanker.com ISSN NO. 2076-5320

11 Industry One-on-one with the PWMA’s new managing director 13 Industry VP Bank “most likely” to acquire CIC’s PB in Asia: poll 14

APB Mandate Fundamentals play catch up with rhetoric

17 Industry Credit Suisse’s Helman Sitohang satisfied with 2016 results 18 Technology Migration to mobile/tablet apps 20

APB Mandate Hong Kong’s trailer fee disclosure rules could trigger price wars

Bank of Singapore raises over US$1 billion for fixed maturity bond fund

APB Mandate AM Heat Map: Monthly Insights

People Moves Movers & Shakers

LETTER FROM THE EDITOR

his time a year ago, the mood in the industry was, for the most part, dour. Fresh off the Shanghai Composite crash, private banks were confronted with the worst start to equities for two decades and a commensurate lull in transactional revenues for the first three quarters (recent financial results, on the whole, confirm how difficult 2016 was). By contrast, 2017 seems to have got off on the right foot and, while performance figures are still rolling in at APB, the general impression is that the good times (at least in relative terms) have returned. “Volatility, give me more volatility” was the message from one APAC CEO sitting at my lunch table just under a fortnight ago, who offered a muted “thank you” to Trump for stimulating ‘animal spirits’. Of course, these are early days and, if we have learnt anything from the past 12 months, it’s that we set ourselves up rude shocks if we do revisit probability distributions. No surprise, then, that CIOs are warning investors about fattening tail risks, in no small part due to an uncertain political horizon. Suitably, Issue 108 presents a roundup of CIOs’ views on the year going forward. At the time of publishing, fundamentals had yet to fully catch up with the rhetoric. We also take a look at the state of training and development in Asia’s private banking industry - an area of increasing focus for institutions that are coming to grips with a looming talent shortage and tightening regulatory environment that provides no room for error. And our Straight Talk this month is with Ong Yeng Fang, head of UOB Private Bank, who shares her ambitions for a business that, to quote Yeng Fang, has grown “into a very sizeable mid-tier private bank with a strong performance”. 2017 promises to be an exciting - if challenging year - for Asia’s private banking industry, and we’ll be here to cover it at every step.

Cheers,

Sebastian Enberg Editor Asian Private Banker

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e ch o cham be r “We cannot be hiring every year a number over and above the historical average and at the same time pursue an improvement of the cost/income ratio.” Boris Collardi, CEO, Julius Baer “I know that some of our competitors still use laminated plastic sheets with all the rules which can work if you are a small wealth manager. But if you want to be bigger and faster, you have to make quantum investments. The industry consolidation you are seeing has a lot to do with tech spend.” Kathy Shih, president, UBS APAC

“I would imagine [the abolishment of trailer fees] means that there will be potentially no hesitation to turnover funds within portfolios.” Terence Lam, APAC head of sales and marketing, AXA Investment Managers “Advisory and DPM services have been able to penetrate into the Barclays space, with a fairly high contribution from Indonesia.” OCBC representative at 2016 financial results briefing. “Bulking up Indonesia offshore desks are very much a focus across a number of private banks in the last six months. The rationale behind this is that there is an opportunity to pick up on transactional volumes from Indonesian clients that used to be under pressures from Indonesia’s tax amnesty.” Sean Kang, director, McLagan

“We believe the productivity of RMs has been improved as no more paper-based documents need to be prepared for client meetings or business trips.” Henny Chan, a senior business project manager for BEA’s wealth management division, on the impact of the bank’s recently launched iPortfolio Analyzer app.

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Julius Baer’s Collardi says 2016 hiring spree is already paying dividends

ulius Baer’s CEO, Boris Collardi, expects 2016’s hiring spree to bear fruit in 2017 and beyond, although a rise in the bank’s cost/income ratio has led it to scale back hiring targets for this year. The Swiss pure play added a net total of 116 relationship managers in 2016 (vs. 62 in 2015), primarily in Asia, Switzerland and Monaco, with net new money (NNM) inflows reaching CHF11.9 billion at an annualised rate of 4%, headlined by strong inflows in Asia, Middle East and Western Europe. At the same time, Julius Baer’s cost/income ratio increased by five percentage points YoY to 72%, excluding pension fund credit and gain from a revaluation of Kairos Investment Management, which the pure play has a majority stake in. According to CFO, Dieter Enkelmann, the “net impact costs” of new RM hires in 2016 was “a bit more than two percentage points”. Julius Baer has set itself a medium-term C/I ratio target of 64-68% (adjusted) and has scaled back its hiring ambitions for 2017 to around 80 RMs net. Though well above Julius Baer’s historical average of +40 RMs per year, this lower target, according to Collardi, is to improve profitability. “We cannot be hiring every year a number over and above the historical average and at the same time pursue an improvement of the cost/ income ratio,” he says. “So it’s a tradeoff – and I think with 80, we’re still at double our normal cruising speed.” Even so, the CEO points out that new joiners are already contributing to NNM flows in Asia, and that their contribution should be even more pronounced in 2017. With respect

to Asia, Enkelmann adds that new hires have “already contributed partly” to inflows. The sheer scale of Julius Baer’s Asia hiring spree in 2016 has raised questions over industry to question how these additions were impacting its margins in the region. Speaking with Asian Private Banker in October last year, Collardi said that the Asia business is both profitable in the region and “is starting to contribute significantly to the bottom line.” Of course, hiring, in cost terms, is a “front-loaded” process. The difficulty facing banks is in achieving and maintaining a balance between headcount growth (as a means to growing revenues) and managing the short-term impact on profitability, achieving a fast migration of assets and, as Collardi points out, “[increasing] the productivity of the existing [RM] population.” “And all of the while improving the C/I ratio,” he adds. In Asia, the majority of new hires joined in 2H16 or will join in early 2017, due to the fact that there is an inevitable lag between the time when a new hire signs on, when she can start opening accounts and when assets flow in and become fee-generating. Collardi puts a 9-12 month window on this process (others in the industry would suggest 12-18 months is more realistic), while the bank says that it would expect an “experienced” RM to have built up a book of at least CHF200300 million within 3-5 years depending on the market. However, it is unlikely that the bank will be so patient with non- or slow-performers given the current high operating cost environment.

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High tech costs pushing smaller private banks to exit, says UBS’ Shih

ising tech-related costs, driven in large part by regulatory developments and the tech-savviness of investors, are forcing private banks to rein in expansion ambitions, says Kathy Shih, president of UBS Asia Pacific. “For some [private banks], the cost of technology has [proven] an existential threat,” Shih notes in an exclusive conversation with Asian Private Banker during the bank’s Future Finance Forum in Hong Kong. According to Shih, UBS has spent tens of millions of dollars developing systems that help the wealth management arm deal with increasingly stringent investor suitability requirements. Processes that have required automation include: the classification of assets and products, by risk and level of sophistication; the classification of clients by risk-return profile and sophistication; and the matching of the two.

Still, Shih is very much aware of the rising tech-awareness of investors, especially in China and Japan, where adoption rates of new technology are higher, as is the risk that banks face disintermediation. One such offering UBS is providing to clients is UBS Advice. The solution involves 24-hour portfolio monitoring and automatically provides advice linked to a client’s risk profile or investment preferences. When asked about the risk posed to UBS by banks that choose to replicate its UBS Advice solution, as well as the potential for aggregator platforms to deliver such content, Shih cites UBS Americas’ adoption of Yodlee as a way that the bank is meeting industry needs and warding off competition. “There are many possibilities for us and it is very important for us to remain very open [to new ideas],” she says.

Tech potential in alternatives “I know that some of our competitors still use laminated plastic sheets with all the rules which can work if you are a small wealth manager,” Shih continues. “But if you want to be bigger and faster, you have to make quantum investments. The industry consolidation you are seeing has a lot to do with tech spend.” Mid-sized private banks that neither possess the means nor the appetite for in-house development can turn to external vendors. However, Shih says that senior management at these banks should be wary of front-loaded costs and be patient when it comes to returns. “I’ve seen some vendors come with pay-as-you-go models but the costs will be much more than what is initially set,” Shih says, adding that such approaches typically come at the expense of customisation. “It will eat a good percentage of your P&L and it will be most costly on an ongoing basis. Otherwise, a bank will just have to take the hit early.”

Disruptive disruption? Aspects of the bricks-and-mortar model have come under threat from technological innovations, particularly with the proliferation of online and mobile services. Unsurprisingly, Shih continues to champion the perspective that HNW or UHNW clients will always demand a human to bounce ideas and questions off and to engage with on an emotional level.

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Greater uncertainty and a less attractive return potential from public markets is causing investors to turn to alternative asset classes. Research estimates that, by 2020, the global alternative asset size could grow from US$12 trillion to US$18 trillion. At UBS’ Future Finance Forum, the bank highlighted the role of technology to introduce new assets to the alternatives universe. One such possibility is the use of technology to provide verification solutions to verify the vintage of a comic magazine. “I remember asking my father for US$100 to buy the first printing of a Teenage Mutant Ninja Turtle comic magazine,” says Will Ross, managing partner of Nest, a platform designed to support startups. “But later on, I found out that I didn’t have the first printing but the second. All those years, I was misled by that seller.” According to Ross, determining market value requires a market of traders; but without technological solutions to verify the validity of claims that determine the value of the asset, it is difficult to create such a market. Verification markers aside, tech solutions could create fractional shares for various assets, such as yachts or paintings.

For further details, please contact Koye Sun (koye.s@asianprivatebanker.com).

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Straight Talk: Yeng Fang Ong managing director & head UOB Private Bank

Yeng Fang, 2016 was a difficult year for the industry. How did UOB Private Bank fare? 2016 was a challenging but very fulfilling year. We were able to reap first fruits from our platform refresh and increased product capability as we saw our clients double their investment activity with us. We also saw our loan books increase by quite a bit due to the unique structures that we are now able to offer. For example – UOB Private Bank is now able to provide SBLCs (standby letters of credit) to clients onshore in Malaysia because we have a branch presence and banking licence [in Malaysia]. This is a source of competitive advantage for UOB. Going forward, how important is it to have an onshore licence rather than operate via partnership or simply bank Asia offshore? These days, with regulatory tightening, including CRS and KYC/AML issues, there is a need to have an onshore presence. We have a huge advantage because we already maintain an onshore presence in several countries - more so in the commercial and retail areas and not so much in private banking, but a strategic aim for us in 2017 is to expand regionally. Which markets are you targeting for expansion? Greater China is important for us and we aim to triple our clients from there by end2019. This means that we will be working on expanding our presence in Hong Kong and Shanghai. What types of services do you think Chinese investors are looking for from UOB? Chinese investors are becoming more sophisticated and many of them have a commercial and corporate banking and also a private banking relationship with us.

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Our Chinese clients are seeing value from our upgraded investment solutions platform and service offerings. As Asian entrepreneurs, they naturally look to investment, wealth planning and specialised credit solutions. Our physical footprint in Southeast Asia and China allows us to understand the Chinese businessman very well as many of them have expanded and are in the process of expanding their business into Southeast Asia as well. The problem is that it is difficult to go beyond what is already being offered due to regulations. That’s true, so I think that differentiation is more on your services and your ability to help them in other areas. The difference for UOB is that we are able to approach them with a one bank approach – from corporate banking to private banking. That is where UOB’s strength lies. Let’s look at your performance in 2016. Between 2014 and 2016, we grew AUM by 50 per cent. Wealth management AUM in 2016, including the privilege reserve and private bank, totalled S$93 billion. Over this same period, clients’ investment activities have doubled and revenue has grown by over two times. How much of this AUM is private banking specific? We don’t break down our AUM figures publicly. In terms of NNM, did inflows come primarily from new clients or existing clients? Both. We have a very strong base. Clients are finding it more interesting to work with us and they have started to increase their wallet share with us. At the same time, we have been recruiting new people, and these new talent are bringing new clients.

Are you comfortable with where the scale of the private bank is at the moment? There’s certainly room to grow. We’re still very small, and while we have grown in leaps and bounds, I think that is still not enough. We have certain economies of scale but we need to scale up a bit bigger and invest in more facilities for our clients. So at this point in time, we have ambitions to grow in a much bigger way. Your Singaporean rivals have both acquired. Will you follow suit? Thus far, we have not, but not because we don’t want to. We are very cautious. We want to make sure that what we do is meaningful and that the business model and structure makes sense. We still need to grow but quality growth is of utmost importance. Looking at recent acquisitions, are there any that stand out as deals that UOB would have liked to have made, or do you consider any to be ‘smart’ deals? We can’t comment on that, but from my point of view it is important that the [target’s] business model fits and that the pricing is sensible. Generally speaking, how important is the private banking business to the group as a whole and is there broad support within UOB to grow the private bank? To be very frank, UOB has always been a very strong commercial bank. It’s very well known in this region in Asia. The private bank is less well known. When I joined UOB two and a half years ago, the mandate was to actually strengthen and build up the platform and, obviously, to increase its visibility in the region.

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Do synergies within the group extend to the internal movement of talent and does this internal pipeline insulate you from bidding wars? A few of my top bankers are groomed internally through our wealth management business. The internal pipeline is fantastic. My boss has done a very good job building the wealth management platform and has groomed a lot of very strong people from within. Of course, not everyone can be a private banker because private banking is very different from retail. But there are a few very bright bankers that have made the switch. In 2015, UOB Private Bank increased its frontline by 48 per cent from the year before and the total number of private wealth employees grew to around 300 in 2016. In early 2016 you launched your discretionary platform. How important is it for UOB Private Bank to have a competitive discretionary offering going forward given regulatory pressures and a downturn in transactional activity? We think it’s going to be necessary. I am very proud to say this is something I set out to do when I first joined the bank. Obviously, you need a strong base to begin with, and while we were still very small when I first joined, we grew into a very sizeable mid-tier private bank with a strong performance last year.

So how much resource are you dedicating to building a DPM offering? In terms of resources, we have a very small DPM team at the moment, and it’s one reason why we are so nimble. With the increased demand, we intend to hire more people this year. Our CIO guides the team in the direction of the larger funds. Let’s look at your tech investments. What are you doing and how are you going about measuring ROIs? We revamped quite a bit of our platform and systems a few years ago – through system upgrades and also some key strategic projects. In the last few months, we have also launched our RM workbench and look forward to launching our client dashboard by the end of the year. What functions does the dashboard have? Basically, our client advisors can now use an iPad to view and manage the client’s portfolio, while a team leader can see all of his/her client advisors’ portfolios. And then at the management level, we can view all our client advisors’ portfolios and how well they are managing their clients’ portfolios.

At the end of 2015, I told my CIO, that “we have to do DPM.” While he shared his concerns that we were still quite small and that it may be worth introducing the service at a later stage, I was of the belief that this was something we had to do for our customers. So, at the beginning of 2016, we brought in a team and launched our DPM offering in April the same year with five strategies. To date, our volumes have been quite good, they’re growing and the performance has been fantastic - we’re beating the benchmark.

How is the client advisor adoption rate? We just rolled out the pilot so it is early days. We believe that this will be extremely useful for our RMs to have the ability to view their clients’ portfolios anytime, anywhere.

How are you educating your RMs to sell discretionary mandates? We share with our bankers the various strategies that DPM offers and the benefits that can be brought to our clients. We run training sessions for our bankers and we have investment advisors who go out with these bankers to meet clients to talk about the mandates.

How do you allocate your IT budget? In total, 60% of our technology spend each year is on strategic projects and 40% is on ‘keep the lights on’ activities.

What percentage of your client assets are in fee-based mandates and do you have a mid-term target? Ideally, I’d like a funds and DPM penetration rate of around 40-50% although this is a dream for most banks. We have probably reached about 8-10%.

Does the dashboard include an onboarding function? This is being considered and we might integrate that into the pipeline of projects at a later stage.

What are your targets for 2017? We are definitely looking to grow in terms of profits and revenues. We are actively recruiting from within the industry. We aim to expand our regional presence, especially by strengthening our onshore presence in Malaysia and Greater China. Currently our cost-to-income ratio is very manageable and we want to maintain the profitability of the business while we expand and value-add to our clients’ portfolios.

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Back to school Leading T&D experts on what it takes to train an army of RMs Chances are that your first week on the job as a private banker will bear a striking resemblance to an orientation week at university: along with the requisite ‘festivities’, you are likely to be handed a curriculum and asked to file into ‘classrooms’ to sit through a number of educational talks covering topics as diverse as financial instruments, regulation and etiquette.

ndeed, training and development programmes of varying degrees of scope and sophistication have worked their way into the fabric of Asia’s private banking scene over the past few years. While there is a lack of consistency among those programmes currently on offer, what is clear is that effective training today depends on striking a fine balance between standardisation and personalisation, although that balance is heavily contingent upon the scale of the business in question. Asian Private Banker speaks to three leading institutions when it comes to training and development - UBS Wealth Management, Credit Suisse Private Banking and Goldman Sachs Private Wealth Management - about what an effective and sustainable programme looks like.

“Around 80% of the material tends to apply to all teams,” Ng says. At the other end of the spectrum are those private banks that have smaller relationship manager populations and, therefore, lean towards bespoke, or highly personalised training models that are, perhaps, more finely-tuned to the individual. “We have a team-oriented approach to take responsibility for the development of private wealth advisors,” says Anthony Nardini, head of ongoing development for new private wealth advisors in Europe and Asia at Goldman Sachs PWM. The American lender, which banks UHNW clients with investable assets of US$100 million or above, had approximately 90 frontliners in Asia at the beginning of last year.

Standardisation and scale Private banks should configure their training and development programmes according to the size of their operations, as doing so lends to a more sustainable model that leverages economies of scale while setting a bank-wide standard, explains Angel Ng, head of wealth management training and development for Asia Pacific at UBS. “UBS’ approach to training and development comprises both standard and bespoke programmes according to the needs of the end-user,” Ng says. “However, notwithstanding the participant, be it a client advisor, product specialist or line manager, the foundation of the programmes are broadly consistent.” Indeed, UBS Wealth Management is home to the largest frontline in the region, with 1,016 client advisors as of end-2016. The sheer scale of its operations means that the private bank in Asia can leverage its global training programme for best practice sharing and budget allocations, Ng explains. Accordingly, UBS Wealth Management keeps the core of its comprehensive suite of programmes more or less consistent across bankers.

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“All new private wealth advisors join the firm as part of a new team and receive support tailored to their unique background and experience level,” he continues. Still, Nardini points out that the bank’s programme - while highly personalised - retains a fair degree of structure. For example, its PWM training programmes, which include six weeks of classroom-based learning at the firm’s New York and Hong Kong offices, are supplemented with an ongoing monthly training series designed to address timely topics, Nardini tells Asian Private Banker. Similarly, Credit Suisse Private Banking, while one of the region’s largest employers of relationship managers in Asia (640 as of end-2016), favours a bespoke approach to training over a “cookie-cutter” model, explains John Paterson, Credit Suisse’s head of private banking talent development for Asia Pacific. “At Credit Suisse, the key to ensuring that our training programmes are successful is by ensuring that we involve all the line managers of the

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trainees,” Paterson explains. “The line managers are in a better position to follow-up with their respective relationship managers and reap the benefits of the programme.” Still, Paterson notes that a “factory approach” is better-suited to entry-level graduates.

External vs. internal There is also some divergence in opinion when it comes the use of externally (vs. internally) developed curricula. For Ng, UBS WM’s more

structured approach to training means that the bank can effectively slot in external vendors for its more rudimentary e-learning modules. “External vendors are particularly cost effective when it comes to generic content development and translation,” says Ng, who adds that the bank currently uses around ten external vendors. The approach is similar at Credit Suisse, which employs a mixture of externally and internally developed courses to “get the best of both worlds”, Paterson explains. Continued on page 12.

One-on-one with the PWMA’s new managing director Two months ago, Peter Stein was named managing director for the Private Wealth Management Association (PWMA), an organisation that promotes Hong Kong’s US$700 billion private banking industry. Stein, who brings with him a bounty of ideas for fixing the city’s looming talent shortage, chats with Asian Private Banker. A few weeks in and it’s clear you already have a lot on your plate. What is your top priority for PWMA at present? Yes absolutely. Ever since PWMA’s Wealth and Asset Management (WAM) Pilot Programme – a summer internship for third year graduates – teamed up with the Hong Kong Monetary Authority (HKMA) and the Hong Kong Securities and Investment Institute (HKSI) and opened up for submissions last October, we have been receiving a flood of applications. Last year, HKSI said that it was looking to achieve 450 intern placements. Are you on track to meet this target? We’re not in a position to comment on how strong the uptake has been for the summer internship programme. The PWMA has encouraged its member firms to support the WAM Pilot Programme. We can say that, for our certificate programme in compliance and risk management for private wealth management professionals, which we partnered with the Hong Kong University last April, 37 people have completed all six modules of the programme and were certified. 56 people have attended individual modules,

which can be used to earn ongoing professional training (OPT) hours that are required to maintain their CPWP accreditation.

apply need to have at least 10 years of relevant customer facing experience, five of which need to be in the front office.

In December 2016, the HKMA included anti-money laundering and counter-terrorist financing in its enhanced competency framework (ECF). Have you made any commensurate changes to PWMA’s Certified Private Wealth Professional (CPWP) process? When the ECF and CPWP were first introduced back in 2014, it was an important milestone for the industry. We are constantly tweaking and updating the programme to meet the evolving industry needs.

How many applicants have your received for grandfathering? We aren’t in a position to provide specific data on grandfathering.

In February, PWMA told Asian Private Banker that it approved and certified 1,600 private wealth practitioners. Has there been an uptick since then? Yes, at the end of December 2016, we certified 1,800 in total. How popular has the ‘grandfathering’ route proven? It was a very popular path among senior relationship managers. However we are clear that private banking experience is vital. Those that

Last year’s PWMA and PwC report stated that Hong Kong’s private banking industry will face a shortage of quality middle and back office talent within the next five years. What specifically are you doing to remedy or, at least, to alleviate this shortage? We are currently working with the HKMA to introduce an apprenticeship programme. This will provide an opportunity for Hong Kong students to partake in training, including in various front-to-back aspects of private banking. It will offer a multi-year experience that can lead to a variety of career paths.

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However, Goldman Sachs’ bespoke approach extends to the development and delivery of content. By going ‘in-house’, the bank has more “scope to customise training based on people’s needs,” says Nardini.

UHNW bankers have participated in the programme, reveals Ng. She adds that flexibility in the curriculum is especially important when it comes to training bankers on cross-border regulatory requirements.

However, all three experts agree that UHNW bankers demand something differentiated. Indeed, both Credit Suisse and UBS offers training and development programmes that cater specifically to relationship managers covering the ultra space.

Training trials

“For the UHNW bankers, a bespoke approach is a must,” Paterson says. “This is where Credit Suisse’s role play strategy – within the first nine months of joining, we simulate a client meeting where bankers need to demonstrate their learned advisory processes and risk profiling – is unique.” Rival UBS Wealth Management rolled out its UHNW Academy in 2016 to provide RMs with specialist training. So far, more than 100

Combined, UBS, Credit Suisse and Goldman Sachs account for around 35% of relationship managers employed by the region’s top 20 (by end-2015 data); and other banks have their own designs on what an effective training programme looks like. For example, Bank of Singapore and Siam Commercial Bank are collaborating with the Wealth Management Institute in a Singapore to launch their own training courses, while Citi Private Bank has linked up with The Wharton School from the University of Pennsylvania to provide training facilities in Beijing for top performing relationship managers and financial advisors.

Regulators and industry bodies, too, are stepping into the fray. Ravi Menon, CEO of the Monetary Authority of Singapore (MAS) recently announced that the watchdog will help institutions set up training facilities and the Hong Kong Monetary Authority (HKMA) is promoting talent development via its Enhanced Competence Framework (ECF) for private wealth management practitioners, with close assistance from the Private Wealth Management Association (PWMA). As the number of programmes aimed at refining and upskilling Asia’s private bankers multiply, however, more pointed questions need to be asked about the standardisation of training and curricula across institutions. What is clear is that, for the vast majority of private banks where resources are limited, collaboration could be key to achieve economies of scale and to maximise effectiveness. This is especially true for an industry that witnesses a high degree of churn amongst its frontline and would therefore benefit from greater standardisation.

Should private banks band together to develop and deliver a common training and development curriculum for junior relationship managers? Switzerland is already moving towards a shared curriculum model. Championed by UBS, a number of institutions, including Credit Suisse and the Banques Cantonales Latines (the cantonal banks of Ticino, Fribourg, Geneva, Jura, Valais, Neuchâtel and Vaud) and the Swiss Association for Quality (SAQ) all agreed to a joint, state-accredited certification standard for client advisors in October 2015. The aim was to give bankers a standardised and recognised means of documenting their capabilities. Asian Private Banker speaks off-the-record to industry experts who, on the face of it, seem split on the idea. S H A RI NG I S K E Y

SHA R I N G WON ’ T ( N E C E SSA R I LY) WOR K

“Would a shared curriculum for private banks work in Asia? Yes, for example, entry level exams in Hong Kong and Singapore where new graduates who join private banks go through tests - here it would make sense to have a shared curriculum. Will private banks join hands? It has not happened yet, but perhaps it can.”

“Shared curriculums have yet to achieve critical mass in terms of banks on board and, more specifically, it remains to be seen to what degree of the course material should be bank or industry-specific.”

“With today’s access to technology, an online course that is standard across the industry is extremely feasible. It would also make it easier to measure the performance of fresh graduates.”

“At this point, the ECF is providing the benchmark for Hong Kong to do just this.”

“When it comes to ethics and conduct training, each bank should make its staff aware of its legal obligations, and since many have multiple booking centres, this content needs to standardised across the board.”

“In Switzerland, it was UBS that led the conversation regarding a shared curriculum. It may not be as easy for a bank to step up to the plate if regulators and industry bodies have already been active in this area.”

“It could increase training transparency and create benchmarks for RMs, acting as a seal of quality.”

“Private banks pride themselves on providing a differentiated approach to clients. Will a standardised curriculum for RMs encroach on this proposition?”

“A shared curriculum will also equate to shared costs and therefore possibly the reduction of operating costs for private banks.”

“Perhaps a shared curriculum can work within countries but given that Singapore and Hong Kong are the two main booking centres for Asia - is it possible to curate content that is relevant and that takes into account the different regulations in Singapore and Hong Kong?”

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VP bank “most likely” to acquire CIC’s PB in Asia: poll

P Bank, the Liechtensteinian pure play, is the most likely institution to acquire Crédit Industriel et Commercial (CIC)’s private banking franchise in Asia, should the French bank decide to exit, according to a poll run by Asian Private Banker. Sources indicate that CIC is exploring a possible sale of its private bank in Asia. A Hong Kong-based spokesperson for CIC declined to comment on the matter when contacted earlier. At the time of publishing, 19% of respondents said that VP Bank is the most likely to acquire CIC’s Asia private bank. Notably, VP Bank has pinpointed Asia as a strategic priority. In December, Andrew Tjia, VP Bank’s head of private banking in the region, told Asian Private Banker that the bank will target five markets: Singapore, Indonesia, Malaysia, Thailand and the Philippines. Tjia also said that VP Bank is “open to acquisitions” but that “there

is nothing in the pipeline”. In August, global CEO Alfred Moeckli said that he expects to see “significant inflows of client money” in Asia due to “market development activities”. VP Bank has a merchant bank licence in Singapore but only a representative office in Hong Kong, Asia’s other major booking centre. CIC obtained a Hong Kong banking licence last August. The recent appointment of CIC’s former private banking head in Singapore, Bruno Morel, as VP Bank’s Singapore CEO will have only added to the conjecture. Coming in second, with 15% of votes received, is DBS. This is not surprising given that the Singaporean lender has an established track record of bidding and acquiring. Last November, DBS said that it would acquire ANZ’s wealth management and retail business in five markets across Asia, accounting for S$23 billion in client assets. However, Piyush Gupta, DBS’ CEO, told a media briefing last

week that another deal is “unlikely” during the ANZ integration period. Rounding out the top three with 14% is Union Bancaire Privée (UBP), the Swiss pure play, which completed its integration of Coutts International last year. UBP has made no secret about its willingness to acquire and the Coutts deal was largely driven by the bank’s need to gain scale in the region. The acquisition brought UBP’s Asia private banking client assets to approximately CHF11 billion (US$11 billion), well below the US$20-25 billion threshold that many consider necessary condition for sustainability in Asia. UBP has set itself the goal of doubling AUM in the region over the mid-term. Speaking with Asian Private Banker last year, Michael Blake, UBP’s CEO for private banking in Asia, said that consolidation in the region could lead to inorganic growth opportunities for the bank.

WHICH INSTITUTION IS MOST LIKELY TO ACQUIRE CIC’S PRIVATE BANKING BUSINESS IN ASIA, SHOULD IT DECIDE TO SELL? 19% 15%

14% 12% 10%

10% 7% 5%

5% 3%

VP Bank

DBS

UBP

Indosuez

Bank of Singapore

Other

Julius Baer

LGT

UOB

Vontobel

Source: Asian Private Banker On-the-spot

ASIAN PRIVATE BANKER

A P B M A N DAT E

Fundamentals play catch up with rhetoric

he difference between the 2016 and 2017 kick-offs to markets has been night and day.

Market sentiment has been reinvigorated, in no small part by Trump’s promise to “make America great again” via fiscal stimulus and deregulation. The S&P 500 shot up 6.2% from election day to inauguration day—the best streak for any US president over the same period since 1968. In the global markets, equity (MSCI AC World YTD: +2.3%) and bond (Barclays Aggregate YTD: +1.03%) prices have rallied month-onmonth. At the same time, major economies are experiencing sentimental or material improvement. China closed the year out with 6.7% growth, headlined by qualitative economic developments such as an increase in the share of consumption-driven growth, soothing fears of a hard landing. A 1.8% year-on-year increase in Eurozone inflation during the fourth quarter beat expectations (1.7%). Better macro data in Japan led the BoJ to up its growth forecast for 2017 and 2018 to 1.5% (from 1.3%) and 1.1% (from 0.9%), respectively. The US was relatively less impressive, registering 1.6% growth, driven in part by weaker exports caused by a stronger dollar.

Have animal spirits returned? Perhaps, but private banks have been careful not to allow sentiment, rhetoric or vague policy drive their investment strategies. “The Trump Administration’s policies continue to be the single dominant factor driving market sentiments,” said DBS in an early February investment note. “Essentially, the US banking sector rallied on news that President Trump has ordered a review of the Dodd-Frank legislation.” So what are some of the key recurring themes driving private banks’ strategic investment decisions?

Thinner in the middle, fatter at the ends Events like Brexit and Trump’s election victory point to the fact that tail risk discussions in the context of risk management must be taken more seriously. Indeed, the wider private banking industry has taken to reshaping probability distribution models to reflect a less likely base case scenario and higher probability for extreme positive or negative outcomes. Bank J. Safra Sarasin’s base case scenario is an increase in infrastructure spending and fiscal stimulus, thereby driving growth. Positive out-

UNCERTAINTY AROUND “TRUMPONOMICS” SCENARIO Occurrence probability

USA leaves Europe alone Fed independence undermined

Partnership with Russia

Nuclear deal with Iran cancelled

Making peace in the Middle East Deep-rooted structural reforms

Trade wars & protectionism

Negative Result

Positive Result Distribution with better outlook, but fatter tails “Normal Distribution”

APB MANDATE

Source: J. Safra Sarasin

A P B M A N DAT E

comes include rekindled Russian ties, a peace settlement in the Middle East and deep-rooted structural reforms. At the other end, the US could see deteriorating relations with Europe, an erosion in the Federal Reserve’s independence, a cancelled nuclear deal with Iran and trade wars. “The big question is whether we have a regime shift under a new US president and whether the world will look differently,” said Dr. Jan Amrit Poser, chief strategist & head of sustainability of Bank J. Safra Sarasin. “What is certain for now is that there is huge uncertainty.”

LOWER AND WIDER RANGE OF EQUITY RETURNS (IN USD, %) 20 15 10 5 0 -5 -10 -15

Bank of Singapore has also made -20 US equities Europe equities Japan equities Asia equities changes to its probability distribution. The bank has respectively Good Scenario Not so Bad Scenario Ugly Scenario labelled its positive, base case and negative scenarios, “the good, the not Source: Bank of Singapore so bad, and the ugly”. On the US, its views are similar to those held by J. Safra Sarasin, but adds to the negative scenario the possibility that fiscal expansion will engender more infla- A lack of faith in early earnings growth has led Bank of Singapore to be tion than growth. underweight on equities, albeit slightly. With a 10-15% earnings growth projection for 2017, the bank believes markets are over-optimistic and “Given Trump’s uncertainty, it is more difficult to make accurate market that the reality will be closer to the single-digit growth of 2016. predictions,” said James Cheo, an investment strategist at Bank of Singapore. “The broader ramification of Trump’s policies is that it creates But elsewhere, including with LGT, there is greater optimism. The Liechfatter tail outcomes—either very good or ugly—which translates into tensteinian private bank is especially positive on European equities due higher uncertainty for equity returns. to above-average earnings growth, relatively attractive valuations and strong dividend yield (more than 3.5%)

Equities: EPS growth bets divided Despite general optimism over an acceleration in growth, private banks disagree over whether this will translate into equity returns. This is primarily due to differing earnings per share (EPS) growth projections on top of already high valuations—global equities are trading at a trailing price-to-earnings ratio of 17.9, not far off the 30-year average of 18.4. “While the macroeconomic environment has clearly improved over the last few months, we believe that a lot is already priced in,” said Jin Wiederkehr, an equity strategist at Credit Suisse. The bank is currently neutral on the asset class. “After five years of stagnant earnings, global earnings growth expectations of +13% in 2017 are therefore elevated, in our view,” Wiederkehr continued. “In the very short term, the positive sentiment could result in equities trending away from fundamentals, but we do believe that already extended valuations are capping the upside over the medium term.”

“These [10% earnings growth projection for 2017] are certainly impressive expectations which seem, however, absolutely reachable,” the bank said. UBS echoes LGT’s sentiments, underlying positive economic indicators, corporate earnings growth, equity market momentum and resilience as sound reasons to be overweight in the asset class relative to high grade bonds. “In our base case, we expect continued global growth and central bank support against a backdrop of politically-induced volatility,” the bank said in a February report, adding that its equity quant model, which measures the relative appeal of global equities to cash, is at its highest since June 2014. “While global equities are no longer undervalued we believe EPS growth is sufficient to drive markets higher.”

APB MANDATE

A P B M A N DAT E

“We also maintain our positive view on US investment grade and high yield bonds and emerging markets hard currency bonds as we believe any reversal of US yields after the first quarter of 2017 should support the global search for yield and the recovery of the credit market.”

FLOATING RATE NOTES VERSUS GLOBAL FIXED INCOME

The most widely agreed upon fixed income view, by far, is the need to have an allocation in floating rate bonds amidst a rising rate environment, with the industry broadly predicting two-to-three hikes in 2017. Be it US Treasury Inflation-Protected Securities (TIPS) or, for more risk-averse investors, senior loans, private banks are actively advising clients to allocate to fixed income instruments that can take advantage of the normalisation of US rates regardless of market views on anticipated rate hike trajectory.

Active discretion advised Last updated: 31 Dec 2016

Source: Datastream, Credit Suisse

Fixed income: Floating rate consensus In stark contrast to equities, fixed income market views are significantly more uniform. While there is divergence within fixed income segments, private banks are broadly positive on various bonds of the high yield type, especially in the US and emerging markets. “The 406 bps spread over government bonds looks appealing given the solid fundamentals in the US,” UBS said. “Strong economic performance, rising business sentiment, and recent oil price rises reduce the risk of defaults among US high yield issuers. We expect the default rate to fall to 2.5% over the next 12 months.” “In our view, medium to long-term structural drivers, including global economic challenges, quantitative easing in Europe and Japan, and elevated debt levels globally, should constrain the scope of the Federal Reserve to raise interest rates,” said Fan Cheuk Wan, head of investment strategy, Asia at HSBC Private Bank. The bank expects US 10-year Treasury yields to creep downwards in Q1 before moving towards 1.35% by 2017-end.

Although most base cases predict a decent outcome for markets and the global economy, the very real potential for negative tail risks to arise means that investors must continue to exercise caution. One such risk is a US-China trade war. Trump’s selection of Peter Navarro as his new US National Trade Council head does little to subside this risk - Navarro is on record calling the Chinese government a “despicable, parasitic, brutal, brass-knuckled, crass, callous, amoral, ruthless and totally totalitarian imperialist power”. Judging by the way markets are being led by rhetoric and Trump’s theatrics, the environment in 2017 could very well be choppy. This is before taking into account the growing threat of populism in other parts of the world - whether in France or the Philippines - which threatens to derail a multi-decade project of globalisation. “Into the cocktail hour the rumour spread that Prime Minister Theresa May is going to build a wall facing Europe and ask President Trump to get Mexico to pay for it,” said Mark Haefele, global wealth management CIO at UBS, in a note about this year’s World Economic Forum’s (WEF) Annual Meeting in Davos. “Many seem to worry that, as the US and UK focus more on national affairs, there could be a ‘crisis’ of globalisation.” Could Trump lead a national capitalist revolution or will he trigger costly trade wars? Private banks share their asset allocation strategies for 2017.

2017 MONTHLY ASSET ALLOCATION COMPILATION 1

FIXED INCOME

ALTERNATIVES

CASH & OTHERS

Deutsche Bank Wealth Management

50%

36.5%

10%

3.5%

UBS Wealth Management2

44%

31%

20%

Julius Baer3

49%

38%

Credit Suisse

LGT5 6

45%

32%

18%

40%

39%

19%

50%

32%

14%

Bank of Singapore7

40%

45%

10%

Citi Private Bank8

53%

34%

12%

BNP Paribas Wealth Management

EQUITY

Deutsche Bank Wealth Management, USD profile, Feb 2017; 2 UBS, Global Model Portfolios (Balanced Risk Portfolio), Feb 2017; 3 Julius Baer, Research Weekly “Earnings and Checks and Balances”, Feb 2017; 4 Credit Suisse, Investment Solutions and Products Investment Monthly, Jan 2017; 5 LGT Investment Services Europe (USD Generic Asset Allocation), Jan 2017; 6 BNP Paribas Wealth Management, Global Balanced Profiled Mandate, Feb 2017; 7 Bank of Singapore, Monthly Investment Guide, ”Investing in Trump’s first 100 days”, Feb 2017; 8 Citi GIC Global Investment Committee (GIC) Asset Allocation, Jan 2017

INDUSTRY

Credit Suisse’s Helman Sitohang satisfied with 2016 results

elman Sitohang, CEO for Credit Suisse APAC, is clearly a satisfied man following the release of the Swiss major’s 2016 financials this week.

In an exclusive conversation with Asian Private Banker, Sitohang said that the bank’s integrated approach to Asia – while still requiring refinement – is taking grip, as evidenced by resilient growth in its wealth management business in 2016.

The APAC division as a whole accounted for 17% of group revenues and 21% of group PTI in 2016. However, with the group posting an overall loss of CHF2.44 billion, largely on the back of an approximate US$2 billion settlement agreement with the US Department of Justice stemming from the sale of mortgage-backed securities, Credit Suisse will look to cut up to 6,500 jobs globally in 2017.

“The key differentiation is that this is not only a private banking model, but it is model that is client-driven [as opposed to product-driven],” said Sitohang. “Clients in Asia want private banking, yes, but at the same time they are looking for financing, investment banking and maybe even, once in awhile, ideas and advice on securities products. Therefore, we need to ensure that our delivery is seamless and unbiased.”

The impact on Asia is less clear, with Sitohang refusing to be drawn on redundancies in the region.

The decision to shift towards an integrated model in APAC was predicated on the notion that a more structured approach to the entire region would increase synergies across the platform. The bank initially set itself the target of doubling PTI and AUM in APAC by the end of 2018. The target was revised last year to CHF1.6 billion in PTI for 2018.

However, Sitohang emphasised that the APAC model means that the bank can “look at things from a divisional perspective and [reallocate] to where the opportunities are.”

“You’ve seen what we’ve done in 2016,” Sitohang said. “We’ve updated our targets. But I think it’s always good to be ambitious. Obviously, we all depend on the markets. What we can control is efficiency and the operating model. The businesses that we can control more – private banking and financing activities – we have driven very well.” In 2016, the APAC division recorded strong growth in its wealth management business, with revenues jumping 17% YoY and PTI rising 8% YoY to CHF372 million. Moreover, net new asset inflows for the year totalled CHF14.6 billion – up 10% on an annualised basis – with pronounced inflows from Greater China and Australia. The private bank ended 2016 with CHF168.3 billion in AUM in APAC, slightly down from its record total of CHF169 billion in Q3. Outflows of CHF2.4 billion in 2016, including CHF1.4 billion in Q4, were attributed to “regularisation”, particularly in the Southeast Asian markets. The Southeast Asian outflows coincided with Indonesia’s tax amnesty programme, which is scheduled to end in March this year.

“In Asia, we look at things from an overall number,” he said. “There are always efficiency opportunities... given that human capital is one of the highest costs within the firm.”

Credit Suisse Private Banking APAC rounded out the year with 640 relationship managers, up 10% YoY but ten RMs fewer on a quarterly basis. The bank is not disclosing hiring targets but said that it will focus on productivity. Sitohang said during an earlier media briefing that his priorities for 2017 include “[building] on positive momentum”, “[driving] division and bank-wide interconnectivity” and “[remaining] focused on responsible, profitable growth”. When asked for specifics regarding these goals, Sitohang said that, like any recent setup, there is always room for refinement. “When the divisional model was announced in 2015, we had a lot of work to do, including setting up risk limits and a new financing department,” he said. We are now beyond that, and I think the real opportunity for us now is creating operational leverage – and we are starting to see that. Especially in less market-oriented businesses. The cost is now similar to last year and we expect overall costs to decrease in 2017, while revenues should go up depending on the market.”

ASIAN PRIVATE BANKER

TECHNOLOGY

Migration to mobile/tablet apps

n 2016, six private banks rolled out mobile/tablet apps in the region, bringing the total number of private banks with an app for relationship managers and/or clients to 14. This marks a 40% increase in the number of private banks with digital offerings since Asian Private Banker first surveyed the top 20 private banks in the region in May 2015.

New additions include Bank of Singapore, BEA Private Banking, Deutsche Bank Wealth Management, Standard Chartered Private Bank and UOB Private Bank. At the same time, both LGT and BNP Paribas Wealth Management have pulled offerings: the former discarded its Publication app and the latter scrapped its Structured Product Selector app, as confirmed by their respective spokespeople (BNP Paribas WM has since launched two new solutions in Asia). The surge in apps for private bankers and/or clients comes as institutions expand their budgets for front-end technology investments. As indicated by the table below, COOs are exploring different digital strategies: 10 private banks have rolled out client-only mobile apps, one has launched an app that is solely for relationship managers and three have introduced solutions that are tailored to both bankers and clients. However, most private banking apps share at least a few basic functionalities, including the ability to access portfolio information, view transactions and access proprietary investment research. More advanced or differentiated offerings at present permit clients to trade on selected products and to chat with bankers.

PR IVATE B A NK BANK OF SINGAPORE “We have deepened investments in strategic initiatives to help the business serve clients better and to provide an enhanced experience for our clients. In 2016, we introduced two apps, one for clients and one for our relationship managers.”

M O B I LE / TA B L E T A PP Bank of Singapore client app (iPad only)

ASI A L AU N C H DAT E Dec 2016

M A I N F E AT U R E S • Access to tailored research, monthly statements/contract notes and the ability to navigate portfolios by sectors, geographical distribution, transaction history, asset and currency allocation. • Contextualised portfolio alerts and recommendations available later this year

Marc Van de Walle, global head of products Bank of Singapore

Bank of Singapore RM Navigator app (iPad)

Dec 2016

• RMs can access clients’ portfolio information, view tailored research based on clients’ portfolios and preferences

BEA PRIVATE BANKING

iPortfolio Analyzer (iPad)

July 2016

• Built with IBM, the app can slice client portfolio data by asset class, currency mix, transaction details & historical performance

“The iPortfolio Analyzer app underscores BEA’s ongoing digital transformation, which is designed to enhance customer experience and satisfaction.”

• Compares client portfolios with pre-defined standard investment models • Inbuilt paperless risk assessment questionnaire to calculate clients’ risk & tolerance levels

Grace Chow, general manager and head of wealth management division, BEA

BNP PARIBAS WEALTH MANAGEMENT “Each of these new services and technologies is improving a part of the client journey, be it starting a relationship with us, creating or seizing investment opportunities or reaching the highest level of security.” Vincent Lecomte, co-CEO BNP Paribas Wealth Management

Voice of Wealth (tablet only)

Aug 2016

• Access to financial markets news, market data across asset classes and exclusive reports on entrepreneurs and philanthropy • Helps clients to understand investment fundamentals

iWealth (tablet only)

2016

• Access to e-documents and report generation, real-time market news and data • Clients can trade and transfer on US, Europe and Asia equity markets • Multiple languages and currencies • Clients can contact RMs directly

myAdvisory

Jan 2017

• Clients can view investments and receive recommendations from advisors • Clients can analyse their portfolios and place orders from a recommendation provided by the bank

Leaders’ Connection (mobile &tablet)

ASIAN PRIVATE BANKER

Jan 2017

• Allows BNP WM investors to contact each other, view sell-side mandates from the bank, share and discuss investment ideas on co-investments

TECHNOLOGY

CITI PRIVATE BANK

In View (mobile)

Feb 2014

“As clients are looking at their portfolio, they may decide they want to engage with their banker, investment counsellor or product specialist and they’ll be able to see if they are available online and immediately speak to them.”

• Clients can view portfolio, including asset allocation, recent transactions, performance analysis • Access research, descriptions of products & services • Real-time communication with RMs, specialists

Dena Brumpton, COO, Citigroup at the time of roll-out. CREDIT SUISSE PRIVATE BANKING

Digital Private Bank (iPhone and iPad)

“Developing the digital private banking platform in less than a year, the team embraced a completely new delivery model, inspired by successful technology companies, adopting a much more agile approach to developing banking technology solutions.”

Mar 2015 (Singapore) March 2016 (Hong Kong)

• Clients can oversee portfolio valuations & performance • Access to research • Message or voice call RMs • Clients can trade securities incl. equities, ETFs, REITs and spot foreign exchange

François Monnet, Credit Suisse’s chief operating officer for private banking Asia at the time of launch.

• Updated portal has biometric logins, notifications, FX forward trading • Chinese translations

DBS PRIVATE BANK “The digital revolution has changed the way our clients live, work and play, and we are focused on always being relevant to our clients. Client experience and usability are key for us, and we have taken bold steps to enhance the delivery of financial and banking capabilities, giving our clients a faster, smarter and more personalised way to manage their wealth.”

Your DBS (mobile)

Date not stated

• Transfer funds to DBS or other local bank accounts • 24 hour foreign currency exchange DBS iWealth (mobile)

2014

GOLDMAN SACHS PRIVATE WEALTH MANAGEMENT

• Access to insights & analysis customised to clients’ preferences & holdings • Clients can trade stocks in seven markets

Tan Su Shan, group head of consumer banking and wealth management, DBS Bank DEUTSCHE BANK WEALTH MANAGEMENT

• Clients can check account balances & transaction history

• Provides access to over data and analysis for over 400 funds Spotlight (mobile)

Jan 2017

• Provides RMs with access to market news & updates across all asset classes

ECQ Pricer (mobile)

Feb 2017

• Price discovery app in Asia empowering RMs with “on-the-go” equity structured product solutions and live pricing

Goldman Sachs Private Wealth Management App (mobile)

Sep 2012

• Access to portfolio information, including positions, asset allocation and recent transactions • News, data on markets • Access to insights, strategies and research

HSBC PRIVATE BANK

Investment Outlook (tablet)

Date not stated

• Quarterly publication featuring latest investment views on global economy • Exclusive access to articles, charts & videos

JULIUS BAER

STANDARD CHARTERED PRIVATE BANK

HSBC Private Bank mobile app (mobile)

Date not stated

• Access to accounts, portfolios, transaction history

Julius Baer Gen-Y Investment Workshop

Jul 2014

• For Julius Baer Gen-Y Investment Workshop participants providing info on workshop

Julius Baer Next Generation- The Future

Sep 2013

• Research & thought leadership content related to bank’s next-gen investment philosophy

Portfolio view and messaging app (mobile)

Mar 2016

• Overview of portfolio holdings & portfolio summary

• Can contact RMs securely

• View of cash account transaction history • Clients can request forms for various purposes • Secure messaging service • Clear payment instructions

UBS WEALTH MANAGEMENT “UBS understands that clients in Asia have stronger demands for digital offerings and has invested in a new programme in Asia to specially cater to their digital needs.”

Navigator

Apr 2014

• Clients can explore various investment scenarios via interactive simulations • Clients can directly contact advisors and investment specialists

Advisory

Geoffroy De Ridder, managing director and operating head, Asia Pacific at UBS Wealth Management

Newsstand

UOB PRIVATE BANK

UOB PB client and RM app (mobile)

Q2 2015 2015 Nov 2016

• Clients can follow a specific research analyst and message advisors directly • Access to research, analysis & insights from CIO office • Provides market research, portfolio reviews • Access to UOB’s internal reports

VONTOBEL WEALTH MANAGEMENT “Our capital expenditure has certainly increased as we see technology as an important tool for our client advisors. However as a boutique bank, it is important to use our Swiss platform rather than build a team in Asia which is capital intensive. This strategy is both an effective and cost-optimising strategy.”

Vontobel Mobile Private Banking app (mobile and tablet)

Nov 2015

• For clients & RMs • Overview of portfolio and account and price information for single assets • Clients can message client advisors

Michael Haupt, COO, Asia, Vontobel Wealth Management

ASIAN PRIVATE BANKER

A P B M A N DAT E

Hong Kong’s trailer fee disclosure rules could trigger price war

ong Kong’s fund industry is one week out from the end of an SFC (Securities and Futures Commission) consultation period that could lead to the introduction of new rules, including the full disclosure of retrocession fees, triggering a price war between distributors. “Clients will be able to actively review kickbacks from funds sold to them and it is only natural for them to be suspicious when bankers are consistently selling products with more retrocession fees,” says an unnamed head of advisory from a Swiss wealth manager. “It’s hard to say exactly how the market will react but clients are still very sensitive to fees.”

Price War? In the event of full disclosure, a potential price war could ensue whereby distributors attempt to capture the market of fee-sensitive clients by explicitly reducing the kickbacks they receive. This is likely to be especially favourable to large banks with track records of high volume distribution, which can afford to reduce retrocessions. “It is only natural for large distributors to take advantage of their scale with pricing advantages, where necessary,” says another seasoned private banker from an American private bank. The source is especially wary of the still significant share of private banks’ transactional income generated from clients heavily engaged in self-directed trading. Such clients often value advisory services less and use private banks merely as execution and financing platforms.

Admittedly, distributors largely employ a 50-50 industry standard with regards to retrocession fees. But the source believes that a large percentage of HNWIs banking in Hong Kong are still likely to react to any shift towards full disclosure.

“Hopefully, clients will understand the value behind fees but there are still clients that are just seeking the best price on a trade they’ve already made up their mind on.”

“You can always expect there to be clients that will ask you why you are selling funds with 1.6% rebate more than those with 1.5%, especially in this region,” he adds, hinting at an ongoing reluctance towards paying for advisory services.

“I would imagine [the abolishment of trailer fees] means that there will be potentially no hesitation to turnover funds within portfolios,” said Terence Lam, APAC head of sales and marketing at AXA Investment Managers.

Bank of Singapore raises over US$1 billion for fixed maturity bond fund

The bank’s advisory and sales team for management investments is believed to have spearheaded the success of distributing the fund in a mere two weeks in mid-January, amid a series of political developments in both the US and Europe which have the potential to both stimulate reflation and derail global growth.

ank of Singapore is the latest private bank to capitalise on fixed maturity bond fund fever in Asia, raising more than US$1 billion from its clients for a strategy that is specifically focused on senior secured loans. The product provider of the senior secured loan fixed maturity fund is Invesco and the solution, the first of its kind in Asia, is believed to be exclusive to Bank of Singapore.

APB MANDATE

Funds in DPM also under potential threat

When contacted, a spokesperson for Bank of Singapore declined to comment on the matter. While Bank of Singapore is the first to deliver fixed maturity bond funds in a senior loan format, the craze for predictable income is not new to HNWIs in the region. In mid-2016, Credit Suisse opened the floodgates with the successful distribution of an

According to Lam, funds are typically hard to remove from the platform once they are added for the “long haul” unless adverse conditions demand otherwise, such as three consecutive quarters of underperformance. He believes that the ban of rebates could lead to a “no sacred cow” approach to fund distribution which could lead to a greater degree of fund switching. “This will, in turn, force the distributors to be even more vigilant when critically selecting the best-in-class funds on a more dynamic basis, at the same time forcing asset management houses to perform more efficiently without other distracting factors that distributors need to consider beyond performance and service support,” Lam continues. While the SFC has said in the past that banning retrocessions fees could be “inappropriate for Hong Kong” due to a lacklustre local reception for the “pay-for-advice” model, greater transparency could lead to greater standardisation of kickbacks. By standardising retrocession fees, the amount received could become irrelevant for discretionary managers when their sole aim is to achieve returns for their mandates. In November last year, the SFC invited feedback from the industry on the enhancement of transparency across various issues, including fund distribution. The consultation window remains open until 22 February 2017.

estimated US$2 billion in fixed maturity bond funds from Credit Suisse Asset Management (CSAM), as revealed by Asian Private Banker Private banks and asset managers followed suit. For example, Julius Baer delivered US$628 million through an AllianceBernstein fixed maturity bond fund in November last year, also reported exclusively by Asian Private Banker. Despite an increasingly positive market sentiment, uncertainty looms and tail risks, such as a potential trade war between the US and other nations, are growing. Investors are understandably deploying greater risk awareness, especially in the region, where some were burnt by recent SGD bond defaults.

A P B M A N DAT E

AM HEAT MAP: MONTHLY INSIGHTS APB Mandate’s Monthly Insights draws on compiled data from our weekly column, the AM (Asset Management) Heat Map, which identifies leading global and regional (Asia) trends in funds based on traffic data from distributors and provided by the global fund documents library, fundinfo. [24%] Equity interest on rise More than 24% of traffic share from distributors in Hong Kong and Singapore was directed towards funds from equity-related peer groups. But the focus was not just on broad equity strategies. Leading the global traffic share for all funds was Pictet Asset Management’s Robotics fund, with 1.5% of traffic - proof that global investors are seeking long-term, macro opportunities.

HO NG KO NG & S INGA P O RE P RO D U CT Rank

CO MPA N Y

Peer Group

Fund Group

PIMCO Funds GIS plc Income

4.89%

USD, Strategy Balanced (Portfolio Funds)

10.67%

BlackRock

8.58%

Invesco Zodiac Funds Invesco US Senior Loan

4.60%

World, Aggregate (Bond / Multi Currency)

9.82%

Fidelity

8.04%

FF - Global Multi Asset Income Fund

3.27%

World, High Yield (Bond / Multi Currency)

8.92%

Schroders

8.03%

BlackRock BGF - Global Multi-Asset Income

2.40%

Asia/Pacific, ex Japan (Equity / Regions)

7.91%

Pimco

6.53%

JPMorgan Investment Funds - Global Income Fund

2.32%

World (Equity / Regions)

5.11%

J.P. Morgan Asset Management

5.81%

Schroder Int. Opportunities PF - Asian Income

2.23%

USA (Equity / Countries)

3.44%

Invesco

5.32%

The Jupiter Global Fund Jupiter Dynamic Bond

2.05%

USD, High Yield (Bond / Single Currency)

3.40%

First State

5.15%

First State GGF - Dividend Advantage Fund

2.00%

Asia/Pacific, External Debt (Bond / Multi Currency)

2.94%

AllianceBernstein

5.05%

AB FCP I - Global High Yield Portfolio

1.80%

Asia, ex Japan (Equity / Regions)

2.87%

Franklin Templeton

4.81%

Allianz GIF - Income and Growth

1.77%

CHF, Strategy Balanced (Portfolio Funds)

2.30%

Allianz Global Investors

4.23%

[+127%] Default risk fears surge: Since August 2016, Asia-based (Hong Kong and Singapore) traffic into secured loan funds has surged 127%. The last time traffic in the peer group reached a similar level was in September 2015, when ECB head Mario Draghi signalled that the central bank would not expand its asset-purchase and quantitative easing programmes, sparking a global sell-off.

P EER GRO U P

Product

GLO B A L

[12%] High yield still en vogue Despite fears over default risks, income remains king in Asia and private banks continue to recognise this need, increasing weightings to high yield bond allocations, specifically in the US and emerging markets. High yield fixed income peer groups represented 12% of overall traffic from distributors in the region.

Data from this section is collected from leading fund document library, fundinfo, which attracts more than 10,000 monthly views from a network of global distributors. Asia traffic refers strictly to traffic relating to the Hong Kong and Singapore booking centre. The traffic

P RO D U CT Rank

P EER GRO U P

CO MPA N Y

Product

Peer Group

Fund Group

PIMCO Funds GIS plc Income

1.81%

World (Equity / Regions)

7.13%

BlackRock

5.72%

M&G IF (7) - M&G Global Floating Rate High Yield Fund

1.66%

World, High Yield (Bond / Multi Currency)

5.58%

Credit Suisse AM

4.95%

Pictet - Robotics

1.62%

World, Aggregate (Bond / Multi Currency)

5.48%

Pictet

4.37%

Invesco Zodiac Funds Invesco US Senior Loan

1.57%

Multi Strategy (Liquid Alternatives)

3.85%

Fidelity

4.24%

M&G Optimal Income Fund

0.92%

Technology (Equity / Sectors)

3.85%

iShares

3.94%

FF - Global Multi Asset Income Fund

0.88%

USA (Equity / Countries)

3.49%

Schroders

3.77%

Carmignac Sécurité

0.87%

CHF, Strategy Balanced (Portfolio Funds)

3.45%

J.P. Morgan Asset Management

3.75%

JPMorgan Investment Funds - Global Income Fund

0.85%

USD, Strategy Balanced (Portfolio Funds)

3.43%

M&G Investments

3.64%

The Jupiter Global Fund Jupiter Dynamic Bond

0.79%

Europe (Equity / Regions)

3.16%

Pimco

3.36%

Nordea 1 - European High Yield Bond Fund

0.71%

CHF, Strategy Income (Portfolio Funds)

2.73%

Raiffeisen

3.24%

Data as of 27 January 2017.

share rankings are based on 1-year, 1-week rolling data updated on a weekly basis.

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