Issue 130 May 2020 Lite

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ASIA 2019 AUM & RM HEADCOUNT L E A G U E TA B L E S AUM growth across the board

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INSIDE Straight Talk RBC Wealth Management’s Terence Chow

Straight Talk Avaloq’s Asia head Imad Abou Haidar

Industry PBs share success in digital advisory during pandemic

Industry EFG zeroes in on HK IAM segment

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MON T H / Y E A R

THE FAC T IS

INVESTORS NEED MORE FROM THEIR FINANCIAL ADVISORS LE V ER AGE T ECHNOL O GY T H AT OFFER S A BE T T ER CL IEN T E X PERIENCE FOR IN V ES T OR S A ND B O O S T S A DV IS OR EFFICIENCY. FactSet’s all-in-one solution provides wealth management firms with the robust portfolio analytics, multi-asset class data and research, global market analysis, and flexible, open technology they need to consistently provide high-quality advice and intelligence to each of their clients. From relationship management to portfolio construction to client portals, FactSet is committed to delivering award-winning solutions across the enterprise.

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F I N A N C I A L

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CONTENTS CONTENTS ISSUE 121 ISSUE 130

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Letter from the Editor

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Letter from the Editor Echo Chamber

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Industry Echo Chamber

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Regulations Regulations September Regulatory Round-up: MAS lists priorities; Force majeure clause may affect PB enforcement trading contracts

CITIC Securities Brokerage (HK) launches new WM account for “sweet spot” clients

PWMA suggests PWM codes for HK; online suitability a “huge challenge”

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Straight Industry Talk Inside Wealth HSBC Private Banking’s silent renaissance RBC Management’s Terence Chow: “My mission is to amplify our story and execute our growth plan” ESG

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Asia’s private banksAwards 2019 Winners China Wealth

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Industry High barriers to SI adoption keen interest: UBSTables GWM Asia 2019 AUM & RMdespite Headcount League

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CEO Andrew Shale Editor Sebastian Enberg CEO Editorial Andrew Shale Richard Otsuki COO Benjamin Yang Jason Coles Charlene Cong Editor Alice So Sebastian Enberg Tin Tin Sze Rebecca Isjwara Editorial Tiffany Hopkins Benjamin Yang Gigi Lam Charlene Cong Managing Alice So Director Paris RogerShepherd Decavele Lorretta Chen Research Stratos Pourzitakis Managing Director Lisa Cheng Paris Shepherd Shunta Kamba Business Development Business Development Sonia Lam Sonia Lam Sam Chan Sam YanaChan Zhang Olaide CarolynOgungbesan Law Charis Charis Tse Tse

Digital Tristan Watkins Alice Wong Sanya Amin Digital Marketing Alice Wong Yasna Sanya Mostofi Amin Vivian Chong Design Evy Cheung Jacqueline Kwok Jacqueline Kwok Jordan Yim Events Marketing Koye Sun Patricia Jover Aleck Kwok Finance & Gerard Timbol Operations Finance & Karman Wu Operations Yuki Chan Karman Wu Xenia So Martina Ngai Taurus Mok Sandy Lau Production Yuki Chan DG3 So Xenia

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Director Europe Madhuri Chatterjee (Actaea Consultants)

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Production DG3

Published by Key Positioning Limited Published

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

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ESG: Examining shallow growth — scrutinising sustainable investing at

Hong Kong establishes Green Finance Association to engage private investments

DBS sees “encouraging” flows into SRI strategies

Investments BNP Paribas WM launches AMC-based mandate with reduced Advertorial Sustainability ticket size investing to raise financial performance in the long run ESG

Deutsche WM eyes DPM launch in Surge inBank demand for ESG Open Trading inAsia traditional bond market as liquidity tightens Investments Julius Baer raises US$450 million in seven days for FMP solution in Asia

and Middle East Mei: ETF mandates wise way for investors to stay DB’s Tan Wei invested at this juncture 91% of wealth managers in Asia confident about fund flow rebound in next 12 months

Advertorial Events Citi Serves Up a Best-of-Both-Worlds Recipe for an Uncertain Funds Selection Nexus 2018 Investment Universe Regulations

MAS’s new opt-in accredited investor regime to protect HNW investors Straight Talk Avaloq’s We’ve from ‘monolithic core CRS impactAsia couldhead: be blunted by moved “broadly away unorganised” data engines’ to open technology, customisation, personalisation DPM Nomura to buy 40% stake in Julius Baer’s Japan business, gain access to

Technology DPM capabilities Braving the storm: PBs share success in digital advisory during pandemic Private banks ramp up equity DPM product development in Asia

Investments Retro fee ban could prove double-edged sword for DPM BNP Paribas WM’s Royston Low: Signs point to bumper PE vintage HSBC Private Banking’s Asia DPM inflows grew five-fold in 2017

Regulations UBS raises US$100m in Asia for new ‘fund selection’ discretionary mandate PB paper trails under scrutiny as clients confront losses EFG in two-pronged recurring revenue push

MAS shows signs of moving towards Hong Kong standard of Regional DPM expansion in the offing for CIMB suitability: Synpulse Events

Asian Fixed Income Forum Technology COVID-19 pilesallocation pressuretoon PBsLCtobonds digitalise — without losing A case for strategic Asian human touch Industry Lombard Odier: Strategic partnerships to relieve pressures of local banks

“We are creating a marketplace for FIs to accelerate their business”: DBS takes root to bank Indonesia’s rising affluence Symphony Technology

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Technology Awards 2019 Winners APIs expose FIs to greater cybersecurity threats: MAS’s CSAP

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Asia at the epicentre of Deutsche Bank WM’s tech ambitions Industry Coronavirus outbreak exposes gapsisin"abusiness plansFinChat at PBs HNWIs' preference for instant messaging pain pointcontinuity unique to Asia":

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Industry EFG zeroes in on Hong Kong IAM segment with new team and All quiet on the Eastern front as private banking consolidation slows, “expert-to-expert” support model but for how long?

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People Moves People Movers & Shakers Movers & Shakers

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LETTER FROM THE EDITOR

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hen this edition hits desks, Hong Kong may well have relaxed measures that have been in place for the better part of two months to help stem the spread of the coronavirus disease known as COVID-19. The way forward for Singapore appears murkier, at least at this point in time.

The impact on the private banking industry will not be felt until the third and fourth quarters this year.

Thus far, business has been more or less buoyant. Transactional activity was strong leading into the late-Feb correction and then the sharp sell-off will have played its part in keep trading revenues healthy thereafter. But I fear things have slowed down. UBS GWM’s quarterly investor sentiment survey — which is always worth a read — found almost half of those polled had no plans to “adjust” their portfolios amid a downturn in shortterm confidence, while over two-thirds said they would wait until stocks “drop more” to add exposure. This implies that many investors are now sitting on their hands. Some fascinating data from Canopy, the fintech that provides ‘live’ account aggregation and analysis direct to end-investors, also shows as much (see chart below). Its record of trade volumes since early December through April indicate a tapering off around the time markets began to recover.

Source: Canopy

So, again the third and fourth quarters will be very telling in terms of how PBs will encourage clients to come off the sidelines and, indeed, how clients respond.

Amid this turmoil, we are proud to present our latest AUM and RM Headcount League Tables for Asia (ex-China onshore… and with a long list of caveats and footnotes). The key takeaways are fairly obvious: PB books, on the whole, swelled on account of strong market performance and less so NNA. Net hiring was generally flat and as a result — and perhaps due to productivity drives within banks — average AUM per RM was up some US$50 million.

This dataset is always provocative. Feel free to reach out to me at editor@asianprivatebanker.com if you have any feedback or queries. Thank you for your support during these challenging times.

Sebastian Enberg Editor Asian Private Banker

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Asian Bonds: !

In Times of Heightened Volatility The recent spikes in volatility caused by the escalating global Covid-19 pandemic have shaken markets in unprecedented ways. In response, investors have tried to contain their exposure to risk by moving their money into what they perceive to be safer havens. Against this backdrop, we will look at how the flight-to-quality has impacted bond markets, particularly in Asia.

Assessing the recent uncertainty The spreading virus has prompted fears that shutdown of economic activity and supply chain disruptions would lead to significant damage to the global economy. The situation was not helped

by Saudi Arabia’s decision to launch an oil-price challenge against Russia, which caused energy prices to tumble.

Since then, markets have been highly unsettled, even as governments and central banks around the world announced supportive measures.

We believe that higher levels of volatility will remain a fact of life until markets can establish a clearer picture of when the pandemic’s peak point will be reached.

Central banks take unprecedented action Governments and central banks have responded to the rapidly changing situation by taking aggressive and unprecedented actions to protect individual economies. The US Federal Reserve (the Fed) announced emergency rate cuts of 150 basis points (bps) in total, which brought rates down to 0%.

The Fed’s moves were mirrored in other countries, with the European Central Bank and Bank of Japan both announcing accommodative measures, while the Bank of England cut rates by 50bps and introduced a term-funding scheme. Elsewhere there was policy easing in New Zealand, South Korea, Australia, and, more recently, Thailand.

Global fiscal coordination within the European Union (EU) and across other regions must support income, credit lines, insurance and basic health care for the vulnerable. Germany’s offer to help Italy and issue EU-wide debt is a positive step in this direction.

In addition, the US Senate and House of Representatives approved a US$2.2 trillion aid package – the largest in history – targeting mortgages, student loans, credit cards and public housing. It should set the tone for other countries.

Investors find an unexpected haven in Chinese bonds While global stock markets have plunged, the surge in safe-haven demand has primarily benefitted bond markets. Yields have fallen, with the 10-year US Treasury yield dipping below 1% in March.

However, as the situation deteriorated, market volatility began to simmer in bond markets too.

What’s more, investors have been flocking towards cash, resulting in a change of direction for bonds and a sell-off in mid March; yields on US, German, and UK government debt climbed sharply.

Asian bonds were also initially supported by global central bank easing, but they have not been immune to the recent sell-off. However, Chinese bonds have followed a different trajectory. Due to China’s aggressive moves to ringfence the spread of the virus, and the fact that new cases in the country have been declining, investors now view China as a more resilient and a somewhat unlikely ”haven” amid the virus-linked sell-off. As a result, Chinese government bonds have rallied. The yield premium that the asset class continues to offer is a bonus for investors, especially in the lower-for-longer rate environment. South Korea also offers a glimmer of hope, as the country appears to be containing the epidemic.

It is worth taking a pause to evaluate the performance and ponder on the fundamentals of Asian local currency bonds vis-à-vis the other peers especially in turbulent time like this. For the month of March, Asian local currency bonds returned -3.31%, while Asian credit in USD returned -5.83% and the global emerging market local currency bonds returned -9.67%.1 The stronger fundamentals, market structures and dynamics of Asian economies and bond markets are some of the main factors underpinning the resilience of Asian local currency bonds. This is a crucial point of consideration for investors seeking to diversify their portfolios as Asian bond markets continue the positive momentum of market reforms.

Kheng-Siang Ng Asia Pacific Head of Fixed Income State Street Global Advisors

Visit www.abfpaif.com* for our latest insights and investment ideas for Asian fixed income.

1

Source: State Street Global Advisors, data as of 31 March 2020. The return of Asian local currency bonds is calculated based on Markit iBoxx ABF Pan Asia Index. The return of Asian credit is calculated based on JP Morgan Asia Credit Index. The return of global emerging market local currency bonds is calculated based on JP Morgan GBI-EM Global Diversified Index.

FOR USE WITH THE PUBLIC. All forms of investments carry risks, including the risk of losing all of the invested amount. Such activities may not be suitable for everyone. Past performance is not a guarantee of future results. The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information. The views expressed in this advertisement are the views of Kheng Siang Ng through the period ended 6 April 2020 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent. Singapore: State Street Global Advisors Singapore Limited, 168 Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore) • Telephone: +65 6826-7555 • Facsimile: +65 6826-7501 • Web: www.SSGA.com* This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong • Telephone: +852 2103-0288 • Facsimile: +852 2103-0200 • Web: www.SSGA.com* This advertisement has not been reviewed by the Securities and Futures Commission of Hong Kong (the “SFC”). © 2020 State Street Corporation - All Rights Reserved.

3023978.1.1.APAC.RTL. Exp. Date: 04/30/2021 *This website has not been reviewed by the SFC.

R E G U L AT I O N S

ech o c h am b e r “When I first came to the region, a typical account might take around 45 days to onboard. We are now down to 20-25 days.

We are working hard in terms of digitalising onboarding and on new functionalities such as e-signatures, which we recognise as an important part of the way we will do business.”

Terence Chow, CEO, Asia, RBC Wealth Management “This is obviously anecdotal, but I have heard a private bank doesn’t have enough laptops for their employees to WFH, so they are experimenting with third-party solution providers to support employees in accessing the bank’s system through their own laptop. Some aspects of work require access to core banking systems. Other involve regulatory requirements for the execution of trades. Together, this makes it almost impossible to completely WFH.” Ricardo Wenzel, director, wealth & asset management, advisory, KPMG China “[Regional banks] do tend to be extremely ambitious and, by virtue of having a clean slate to work from — from a technology standpoint — they are often in a position to leapfrog others quite quickly.”

Imad Abou Haidar, head of Asia, Avaloq “Private banking is a people business. No travel means being unable to make visits to prospective clients. This dims the prospects of attracting new clients, so new money will have to come mostly from increasing the share of wallet of existing clients, or converting advanced prospects into clients.”

Brian Chan, partner, banking & capital markets leader (Hong Kong), Deloitte China “2019 was a tough year for Noah as the Camsing incident tested the bottom line of our business ethics and operations. We didn’t expect 2020 to pose an even bigger or more ultimate challenge, which tests our attitude as humanity when facing a crisis that’s life-threatening.”

Wang Jingbo, chairlady and CEO, Noah Holdings

Force majeure clause may affect PB trading contracts

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n view of the global COVID-19 pandemic, private banks must be mindful of the possible impact on their trading contracts of force majeure or other duty-exemption clauses.

A force majeure clause is a contractual provision that changes or suspends parties’ contractual duty when there are circumstances out of the parties’ control that prevent one or all of them from fulfilling those obligations.

“Force majeure clauses vary but it would usually specify a non-exhaustive list of force majeure events. The coronavirus outbreak and any related epidemic control measures may be captured by wording such as ‘disease’, ‘epidemics’, ‘Acts of God’, ‘Acts of Government’ or a general catch-all like ‘other circumstances beyond the parties’ control’,” Richard Mazzochi, partner at King & Wood Mallesons in Hong Kong told Asian Private Banker.

“Typically, force majeure clauses provide for a party to be excused from performance of its contractual obligations where there are circumstances beyond the reasonable control of a party.”

Demonstrating causality in common law “For common law jurisdictions like Hong Kong, Singapore and the UK, there is no general doctrine for force majeure, so this principle is only applicable when there is a specific force majeure clause in contracts,” Amanda Lees, partner at Simmons & Simmons JWS told Asian Private Banker.

“You have to demonstrate the causal link from the force majeure event in the clause to the reason why you couldn’t perform the obligation that you might have under the financial instrument.”

For example, the banning of short-selling by some EU governments or the closure of the exchange might be the force majeure event that prevents you from performing your obligation.

According to Jason Valoti, partner at Simmons & Simmons JWS, private banks should beware of the impact of force majeure events on the following three types of contracts — an ISDA Master Agreement (a standard document that is regularly used to govern over-thecounter derivatives transactions); a brokerage agreement made between private banks and clients; and repurchase agreement (repo) or stock lending documentation.

“There isn’t a blanket answer for whether the force majeure clause in derivative contracts will be triggered under the current circumstances,” Valoti told Asian Private Banker.

He cited the example where a market closure as the result of the COVID-19 pandemic would have a different impact on a simple currency swap and an equity derivative swap.

For a simple currency swap, there are two necessary elements to trade — the FX rate and the payment system to process the transaction. “Under the current situation, force majeure would unlikely arise as long as these two elements remain available,” he said.

“But for an equity derivative swap, closure of a stock exchange might affect the transaction, although market standard equity derivatives have specific provisions for dealing with situations like a market close down.”

In a brokerage agreement, Valoti explained, there are usually terms and conditions that are written very broadly and which free brokers from the obligation to make certain moves when it is impossible to do so.

“Conditions such as a market halt should already be considered in a contract and point towards more specific actions than a force majeure clause would do,” he said.

For repo and stock lending agreements, there usually isn’t a force majeure clause.

But Valoti pointed out that any force majeure event could have a less material

R E G U L AT I O N S

impact on the trade position of the parties, because when a force majeure event renders it impossible for a party to make the payment on time, only repo affected by market halt will be terminated.

This is different from a derivative contract, where all transaction outstanding will be terminated in the event of force majeure.

A grace period is also granted to any party which must compensate the other party as a result of the termination of that particular agreed transaction.

“At the moment we are not seeing termination of transaction documents. But whenever there is tremendous volatility, we would see margin calls and additional collateral lending requirements because the broker is reducing exposure on clients,” he added.

Very generally worded PRC certificates In view of the coronavirus outbreak, the China Council for the Promotion of International Trade, a quasi-governmental body, has issued thousands of force majeure certificates to local companies facing difficulties in delivering their goods or services because of the impact of quarantine policies.

However, Lees believes that the certificates are of limited use. “Force majeure certificates issued in the PRC are worded very generally and are not determinative on whether there is a force majeure event. It will depend on whether there is a force majeure clause written in the contract, on the wording of the force majeure clause and on how the specific restrictions prevented them from performing the obligations,” said Lees.

“Under PRC law, this might serve as evidence to trigger force majeure statutory rights or clauses in PRC contracts. But these certificates are of limited use for contracts governed by Hong Kong, Singapore and UK law.”

Mazzochi said a certificate will provide strong evidence of the existence of a force majeure event, but the effect of these certificates in any particular case will ultimately depend on the particular terms of the contract in question and the factual circumstances.

“The sufficiency of a certificate from CCPIT confirming force majeure has not yet been tested before the courts and CCPIT itself has stated that it is not taking the position that a certificate is sufficient to exempt liability,” he said. “Therefore, whether such certificates will generally assist parties to contracts is currently an open question.”

In view of the economic impact of the COVID-19 outbreak, governments have carried out measures to provide additional liquidity to the economy. The Hong Kong Monetary Authority announced on 17 March that it has reduced the countercyclical capital buffer (CCyB) by a percentage point from 2.0% to 1.0% with immediate effect and has adjusted the base rate down to 0.86%, following the rate cut by the US Federal Reserve.

The People’s Bank of China (PBoC) and other Chinese financial regulators have announced measures to ensure the resilience of the banking system including the lowering of the reserve requirement ratio (RRR) by 50-100 basis points, effective from 16 March, for banks that satisfied its 2019 inclusive financing assessment for bank lending to micro and small enterprises, and qualifying individuals.

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INDUSTRY

RBC Wealth Management’s Terence Chow: “My mission is to amplify our story and execute our growth plan” A swagger has returned to RBC Wealth Management in Asia. Armed with a clear value proposition and a dynamic new leader, the private bank is on a mission to show clients and the industry why it has a ‘right to win’ when it comes to ‘Asia’s global families’. Terence Chow, RBC Wealth Management’s Asia head sat down with Asian Private Banker to discuss the bank’s offering and vision in a region where some would say it was punching below its weight.

Terence, you have been in the region for just over a year, first as RBC Wealth Management’s Asia COO and then as Asia head. I can’t imagine a more challenging time to move to Hong Kong.

It has been an interesting start, to say the least, but Asia has always been a passion of mine. My parents grew up in Hong Kong and I have a lot of friends here, so to be able to come to this region — which is so dynamic, where the growth story is so impressive, and to do so with RBC — was an opportunity I couldn’t pass up.

How important was it for RBC to appoint a regional head with cultural ties to this market?

I’ve been in Hong Kong for a year now. Sharing cultural ties and being able to speak the language, whether Cantonese or Mandarin, goes a long way towards connecting with everyone — clients and colleagues — on a personal level. Not to mention the fact that I am Canadian which, combined, gives me a strong corporate and market cultural affinity.

Arguably, RBC’s Asia wealth management franchise has been punching below its weight in terms of market visibility and penetration relative to the bank’s standing in North America and to international peers in the region. Is this a fair observation?

I think in terms of visibility, that’s potentially the case, yes. But our strength, stability and everything the RBC brand represents has always been here and we have been consistently delivering for our clients in the region.

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Now, our next step is to start increasing that brand awareness in Asia by being more vocal about our capabilities, our services and offering, and critically, our culture. We have spent a lot of time challenging ourselves on articulating our value-add and where we have the right to win. And under Peter’s [Corry] leadership, we developed a much clearer view about our place in this market and our competitive edge.

My mission is to push this forward, amplify our story, and execute our growth strategy.

[Our] next step is to start increasing that brand awareness in Asia, by being more vocal about our capabilities, our services and offering, and critically, our culture What, in RBC WM Asia’s view, is its competitive edge and value add?

We are the bank for Asia’s global families (AGF). And it’s important to point out what this means. We are uniquely positioned to service families in Asia, Asian or otherwise, who have connectivity with Canada, the US, and the UK. We are, after all, the market leader in Canada, a top-five wealth manager in the US, and slowly becoming a meaningful commercial and retail bank on account of our acquisition

S T R A I G H T TA L K

of City National Bank in 2015. Our investment bank ranks in the top 10 globally and we have a sizeable trust business in the Channel Islands, as well as in Hong Kong and the US. So for clients that have connectivity to Canada, the US, and the UK, we are a viable and relevant partner. If a family has kids going to school in Canada, who then graduate and establish roots there, and then their first generation is thinking about transferring wealth and leaving a legacy, we understand and are configured to meet their needs. Similarly, if you are a US person, we understand what it means from a tax perspective.

We understand what it means if you are a resident non-dom in the UK. If you have business needs in these jurisdictions, whether to buy a business, to find a business partner, or to acquire a property, these are all areas where we have expertise.

The US client segment has been neglected by private banks in Asia, for fair reason.

I’d agree that has largely been the case, but it doesn’t have to be. The fact that we can onboard a US person is definitely a hidden gem of ours — we know that there are quite a few firms here that can’t do so. But what this boils down to is our capabilities and skills as a global bank.

Winning is in our DNA and our success is founded on the collaborative approach we take as an organisation to service clients with complex multi-jurisdictional needs at the family level as “One RBC”.

The fact that we can onboard a US person is definitely a hidden gem of ours As things stand today, how satisfied are you with your footprint and market penetration in the Asia region?

Our Wealth Management – Asia leadership team is structured as a single unit and we look at the region as a whole in terms of our strategy and focus. We have booking centres in Hong Kong and Singapore and place an equal weighting on both centres as each location offers something important. There are a large number of Canadian citizens residing in Hong Kong so we have a number of conversations happening there right now. At the same time, being in a country like Singapore with its robust infrastructure, transparent rules, and strong regulation, makes it easy to do business there. And, of course, clients in North Asia are increasingly looking to book out of Singapore.

But I would also point out that we focus on clients in eight strategic locations in Asia: Hong Kong, Mainland China, Taiwan, Singapore, Thailand, Indonesia, Malaysia, and Brunei. We’ve also added resources to our representative office in Beijing and, in collaboration with our retail arm there, we’re excited about the immense opportunities to potentially work with families who are sending their children to Canada for schooling. This is a very good pipeline for business and aligns perfectly with our AGF client strategy.

And how satisfied are you with the quality of your book?

The quality of our book is fantastic and sits comfortably within our risk appetite. We play to our strengths and focus on HNW/UHNW clients with needs that draw upon our local expertise and our global capabilities. If a client has substantial global needs that make use of our private bank and other divisions, we are perfectly suited.

There is a palpable sense that the business has been re-energised since you took over. How does this translate into hiring activities?

I was fortunate to join a team that was energised and eager to execute on a well-developed strategy. And this means that we are actively hiring. We don’t have a hard target, but I’m having more discussions with candidates than ever before. We are looking for bankers with a collaborative mindset who work well in an open and transparent environment. And this requirement is reflected in how we interview.

We typically ask a candidate to meet a number of different people representing different functions of the bank, to gauge their ability and to ensure that they will be a good cultural fit. This also ensures that everyone gets to know each other well so that there are no surprises and that new RMs can join us and do what they do best — which is to service their clients.

Do you intend to follow the path that some of your international peers have taken by making a clearer distinction between farmers and hunters?

We are an RM-led business, but with a very strong supporting cast of product and investment specialists. We have looked at drawing a stronger line between hunters and farmers, but I still fundamentally believe that private banking is a personal business. In this sense, managing a relationship from a single primary point of entry simplifies things.

Does this not place an enormous amount of pressure on the RMs themselves to navigate a large group and activate the ‘right’ parts of the business?

I think our approach to hiring and our culture is what enables our RMs to be successful. As mentioned earlier, before RMs join, they’re already introduced to a wide audience of partners that they would be interacting with on a daily basis. We also have leaders across Asia who have worked in many different geographies and business lines across the bank. This provides our RMs with a rich source of information and connectivity for them to be able to service their clients effectively. In addition, we also have a global team called the Enterprise Strategic Client Group that we can draw on to help connect dots across the entire organisation. This group is agnostic to any business line and is there to solely focus on complex needs of our largest clients.

Continued on next page →

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S T R A I G H T TA L K

For candidates, the quality of your product and solutions offering is a primary consideration when deciding whether to join. Do you believe RBC WM is sufficiently competitive on this front?

Before diving into any discussion on product, I would point out that we place tremendous emphasis on understanding our clients and their needs. Our commitment is to ‘lead with discovery’, not starting conversations from a product perspective. That said, and at a high level, we are strong on all aspects of investments and wealth planning solutions. Our discretionary and advisory solutions are innovative and ever evolving to meet clients’ needs, and in fact, I would argue that our various fee-based propositions are a real differentiator. We do have some ground to make up with respect to private equity and the alternatives space, but we are actively working on this. And finally, we can readily accommodate those clients who are more focused on transactions, across a wide array of asset classes.

Our discretionary and advisory solutions are innovative and ever evolving to meet clients' needs, and ... I would argue that our various fee-based propositions are a real differentiator What we are also seeing is that first-gen entrepreneurial clients want to keep their hands on the steering wheel, which is why advisory mandates are particularly important. The next generation, who seem to be more aligned with Western preferences, are more inclined to spend their time on passion interests than actively managing the family wealth.

They want to be stewards but are open to hiring professional managers.

Some of our new investment solutions cater directly to this trend. They are also more focused on ESG as a priority, so this is a key factor in our investment process. Then, there is the fact that fee-based solutions better align the interests of the bank and client, and makes for a far stickier long-term relationship.

Entrepreneurial clients in Asia also tend to be balance sheet intensive. Is RBC WM as competitive as it needs to be on the credit side?

We do extend balance sheet, for sure. While our relatively conservative risk appetite has kept us (and our clients) in safe harbour, we do want to be competitive and grow our credit book. When we are talking about servicing Asia’s global families with multi-jurisdictional needs, we have certain bespoke capabilities that other banks cannot offer.

I would also point to our strength in wealth planning, which is a critical element to serving Asia’s global families. We have wealth planners in Hong Kong, Beijing, and Singapore and we encourage all our RMs to involve a wealth planner to look at their clients’ needs holistically.

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Finally, what enhancements are you making on the operational side to support your growth agenda in Asia?

We are actively working with team heads, and our operations and technology teams to better understand concerns and priorities, and to increase our agility. We have introduced better workflow solutions — including deploying robotics process automation — and further streamlined the backend, which has had a positive impact on our client onboarding times.

When I first came to the region, a typical account might take around 45 days to onboard. We are now down to 20-25 days. We are working hard in terms of digitalising onboarding and on new functionalities such as e-signatures, which we recognise as an important part of the way we will do business.

Our goal is to be a digitally-enabled relationship bank, and we are focused on deploying technology to enhance the client experience, improve productivity, while building deeper relationships with our clients. The key here is to change the work we do and how we do it, all with the client experience as a central focal point. We’ve put some very specific employee training and development in place to re-skill our team members for future work and they are really embracing these changes.

Asian Private Banker first launched the China Wealth Awards to recognise the best-of-breed private wealth managers that have blossomed alongside China and its expanding wealth landscape.

Now in their second year, the China Wealth Awards continue to honour the firms that have gone aboveand-beyond to responsibly deliver compelling wealth management solutions and add value to China’s most moneyed individuals, families, and their businesses. Congratulations to all the winners. 《 亚洲私人银行家》推出“中国财富奖”的初衷是为了表彰与中国及其不断发展的财富格局一同成长的最佳私人 财富管理公司。 今年是“中国财富奖”推出的第二个年头，我们将继续表彰表现出众的各公司，其以负责任的方式提供令人信服的 财富管理解决方案，并为中国的高净值个人，家庭和他们的企业增加价值。 恭喜所有的获胜者。 中国最佳私人银行 国有银行组

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家族办公室客户服务

ULTRA HIGH NET WORTH SERVICES

FAMILY OFFICE SERVICES

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增值服务

ENTREPRENEUR SERVICES

CLIENT EDUCATION

VALUE-ADDED SERVICES

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ALTERNATIVE INVESTMENT ADVISORY

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投资顾问与研究 INVESTMENT ADVISORY & RESEARCH

INDUSTRY

ASIA 2019 AUM & RM HEADCOUNT LEAGUE TABLES

P

rivate banks can thank markets for strong across-the-board AUM growth in 2019. Net new money inflows, which tended to be uneven among banks and lumpy at times: not so much.

That’s because many investors, shellshocked from the dire end to 2018, were reluctant to jump back in, missed the early rally, and struggled to find an entry point thereafter.

UBS Global Wealth Management retained its top ranking with US$450.0 billion, up 26% YoY, followed by Credit Suisse at US$227.3 billion. A resurgent HSBC Private Banking, Morgan Stanley Private Wealth Management, and Julius Baer rounded out the top five.

As such, fixed income, cash management plays, and structured products drew the most interest, while private market assets, especially real estate, also garnered attention. Still, cash levels remained elevated for much of 2019, placing the onus on private banks to deliver compelling and relevant ideas to clients.

EFG, the largest mover in 2019, posted a massive 74% increase, bringing its total to US$32.5 billion, largely due to its acquisition of Australian investment and wealth management firm Shaw and Partners, while CIMB Private Banking, whose footprint covers Southeast Asia, saw a hefty 55% rise with a minimal increase in RM headcount.

Asian Private Banker’s Asia (ex-China onshore) AUM League Table clearly reflects 2019’s healthy market performance. According to our data, the Top 20 private banks saw their combined AUM jump over 20% YoY to nearly US$2 trillion.

When accounting for geographical and business model variables, international and Asia-headquartered banks fared similarly, with 21% and 19% rises respectively, while pure play private banks’ combined AUM grew 24% versus universal private banks’ 20%.

Top 20 total AUM (US$)

YoY AUM change by bank origin & model

2019

2018

1.96 1.63

trillion

VS

trillion

International PBs

Asian PBs

+20.6%

+19.0%

...of of which American American: -0.7% +23.4% ...of European: -5.6% of which European +17.0% ...of Swiss: -3.7% of which Swiss +21.5%

+20.6%

Universal: +19.8%

2018-19

Pure play: +23.9%

YoY change

...of which Retail-linked: +19.5%

13

INDUSTRY

Top 20 private banks in Asia (ex-China onshore): AUM (US$ billion) 2019 Asia

2018 Asia

YoY change

2015-19 CAGR

AUM incl. loans?

Minimum asset threshold*

2019 Global

UBS Global Wealth Management ¹

450.0

357.0

+26.1%

+13.2%

No

USD 2m

2,635.0

2

Credit Suisse AG ²

227.3

205.1

+10.8%

+10.8%

No

CHF 2m

834.5

3

HSBC Private Banking ³

151.0

124.0

+21.8%

+7.8%

No

USD 5m

361.0

4

Morgan Stanley Private Wealth Management ⁴

131.0

105.0

+24.8%

+16.1%

Yes

USD 35m

2,700.0

5

Julius Baer ⁵

130.2

111.9

+16.4%

+14.7%

No

No defined minimum

440.3

6

Bank of Singapore ⁶

117.0

102.0

+14.7%

+20.8%

No

USD 5m

117.0

7

J.P. Morgan Private Bank ⁷

112.5

87.8

+28.1%

+14.7%

N/A

USD 10m

672.0

8

BNP Paribas Wealth Management ⁸

98.3

89.4

+10.0%

+11.1%

No

USD 3m

441.2

9

Goldman Sachs Private Wealth Management

92.3

79.4

+16.2%

+14.3%

No

USD 100m

-

10

LGT 9

69.3

57.0

+21.6%

+28.5%

No

USD 2m

180.0

11

Deutsche Bank Wealth Management

63.7

56.1

+13.4%

-

No

EUR 2m (account balance)

239.1

12

Standard Chartered Private Bank 10

58.6

50.2

+16.7%

+6.8%

No

USD 2m

67.1

13

Pictet Wealth Management 11

43.9

35.0

+25.5%

+10.7%

No

USD 3m

242.0

14

CMB Private Banking 12

39.1

29.9

+30.8%

-

No

RMB 10m

319.8

15

UOB Private Bank

37.0

34.0

+8.8%

-

Yes

SGD 5m

37.0

16

Hang Seng Private Banking

35.6

30.2

+17.9%

+9.2%

N/A

HKD 10m

35.6

17

Bank of China (Hong Kong) Private Banking

32.7

27.3

+19.8%

-

N/A

USD 2m

32.7

18

EFG Bank 13

32.5

18.7

+73.9%

+12.9%

N/A

EUR 1m

158.9

19

CIMB Private Banking 14

21.8

14.1

+54.9%

+22.9%

No

SGD 2m

21.8

20

J. Safra Sarasin 15

20.8

17.8

+16.7%

+7.9%

N/A

EUR 1m

192.0

Top 20

1,964.6

1,628.8

+20.6%

21

UBP 16

19.1

15.3

+25.2%

+122.9%

N/A

USD 1m

111.5

22

Indosuez Wealth Management 17

15.0

14.0

+7.1%

-

N/A

USD 1m

148.3

23

Maybank Private 18

14.2

12.5

+13.6%

+22.8%

Yes

USD 1m (account balance)

14.2

Rank

Bank

1

All figures are APB estimates unless otherwise stated. Footnotes on page 16. Figures may not add up precisely due to rounding.

Constituents of the Top 20 totals may differ from year to year.

14

INDUSTRY

Top 20 private banks in Asia (ex-China onshore): RM Headcount Rank

Bank

2019 Asia

2018 Asia

YoY change

2015-19 CAGR

2019 Global

1

UBS Global Wealth Management 1

1,041

1,138

-8.5%

-1.2%

10,077

2

HSBC Private Banking 2

645

541

+19.2%

+10.0%

-

3

Credit Suisse AG 3

600

580

+3.4%

+0.4%

3,030

4

Julius Baer 5

427

430

-0.7%

+12.1%

1,467

5

Bank of Singapore

400

450

-11.1%

+6.2%

400

6

Morgan Stanley Private Wealth Management 4

332

315

+5.4%

+4.8%

15,468

7

EFG Bank 13

290

99

+192.9%

+24.7%

815

8

BNP Paribas Wealth Management 8

230

263

-12.5%

-1.9%

-

9

Deutsche Bank Wealth Management ***

222

204

+8.8%

-

-

10

Standard Chartered Private Bank

198

240

-17.5%

-9.9%

275

11

LGT 9

195

198

-1.5%

+23.1

-

12

J.P. Morgan Private Bank 7

168

160

+5.0%

+5.6%

2,890

13

CIMB Private Banking 14

141

-

-

-

-

14

Bank of China (Hong Kong) Private Banking

136

131

+3.8%

-

136

15

UOB Private Bank

120

138

-13.0%

-

120

16

UBP 16

117

85

-

+73.2%

328

17

J. Safra Sarasin 15

112

84

+33.3%

+14.6%

-

18

CMB Private Banking 12

107

105

+1.9%

-

1,017

19

Maybank Private 18

101

70

+44.3%

-

101

20

Goldman Sachs Private Wealth Management

100

90

+11.1%

+1.3%

-

5,682

5,555

+2.3%

6

Top 20

10

21

Indosuez Wealth Management 17

100

100

0.0%

-

-

22

Hang Seng Private Banking

68

67

+1.5%

+8.0%

68

23

Pictet Wealth Management

65

52

+25.0%

+6.8%

352

All figures are APB estimates unless otherwise stated. Footnotes on page 16. Figures may not add up precisely due to rounding.

Constituents of the Top 20 totals may differ from year to year.

15

INDUSTRY

A word on methodology: while some banks publicly state their AUM totals, most do not. Therefore, the bulk of data presented here is shaped by our estimates. Also, we recognise that banks are inconsistent in the way they measure AUM. Some may include custodial assets or leverage, and totals may be distorted by double-counting. Where possible, our Top 20 League Table does account for the leverage variable. However, in the absence of enforced or agreed-upon standardisation and transparency, these inconsistencies will continue to undermine the direct comparability of individual banks’ AUM.

Furthermore, we have again decided to omit Citi and DBS from our Top 20 League Tables on the grounds that both banks include client assets from sub-private banking divisions in their respective totals. A large portion of those assets may be from HNWIs, and mass-affluent platforms invariably share some products and services with the private bank — the degree of overlap varies by bank. However, all banks have in place minimum requirements for clients that wish to be onboarded to a private banking service. Thus, to maintain the purity of our data, we only consider private banking-specific data and, where available, include minimum asset requirements.

Omissions** 2019 Asia

2018 Asia

YoY change

2015-19 CAGR

AUM incl. loans?

Minimum asset threshold*

2018 Global

Citi 18 (Citi Private Bank and Consumer Banking)

265.0

256.0

+3.5%

+0.1%

N/A

Priority HKD 500K; Citigold HKD 1.5m; Citigold Private Client HKD 8m; Citi PB USD 25m (all account balance)

-

DBS Wealth Management 19 (DBS Treasures, DBS Treasures Private Client, DBS Private Bank)

182.2

161.5

+12.8%

-

No

DBS Treasures SGD 350K or HKD 1m; DBS Treasures Private Client SGD 1.5m or HKD 8m; DBS PB SGD 5m or HKD 25m (all account balance)

182.2

Bank

** Exclusion of Citi from the League Table is due to reported figures being an aggregate of Citi's APAC consumer banking and private banking businesses Exclusion of DBS from the League Table is due to reported figures being an aggregate of DBS Treasures, DBS Treasures Private Client, and DBS Private Bank businesses

Footnotes Mid-market rates used as at 31 Dec for their respective years for non-USD reporting. For 2019: CHFUSD 1.03325; SGDUSD 0.74366; EURUSD 1.12270; CNYUSD 0.14334 N/A: not available * Minimum represents investable assets per client (unless otherwise stated) and equivalent in other currencies; minimum may change depending on location UBS Global Wealth Management: Global/Asia AUM/RM headcount: publicly reported figures.

2 Credit Suisse Private Banking: Global AUM/RM headcount consists of SUB Private Clients, IWM, and APAC and are publicly reported figures.

3 HSBC Private Banking: Global/Asia AUM: Publicly reported figures.

4 Morgan Stanley Private Wealth Management: Global AUM/RM headcount: Publicly reported figures; Global AUM is reported as client assets and Global RM is reported as wealth management representatives.

5 Julius Baer: Global AUM/RM headcount: Publicly reported figures.

6 Bank of Singapore: Global/Asia AUM: Publicly reported figures.

7 J.P. Morgan Private Bank: Global AUM/RM headcount: Publicly reported figures.

8 BNP Paribas Wealth Management: Global AUM: Publicly reported figures.

9 LGT: LGT's Asia figures include Middle East assets/RMs and assets/RMs post-ABN AMRO acquisition; AUM includes assets under custody/administration.

10 Standard Chartered Private Bank: Global AUM: Publicly reported figures; Asia AUM & Global/Asia RM headcount figures provided by bank.

1

16

Pictet Wealth Management: Global AUM and Global/Asia RM headcount provided by bank.

12 CMB Private Banking: Global AUM: Publicly reported figures.

13 EFG Bank: Global/Asia AUM/RM headcount: Publicly reported figures. EFG acquisition of Shaw & Partners in March 2019 added 39 APAC RMs and approximately CHF 11.6B to AUM. 14 CIMB Private Banking: Asia AUM/RM headcount provided by bank. Asia AUM inclusive of loans is US$25B. 15 J. Safra Sarasin: Global/Asia AUM: Publicly reported figures.

16 UBP: Global AUM: Publicly reported figures.

17 Indosuez Wealth Management: Global AUM: Publicly reported figures.

18 Maybank Private Bank: Global/Asia AUM/RM headcount provided by bank.

19 Citi: Asia AUM: Publicly reported figures.

20 DBS Wealth Management: Asia AUM: Publicly reported figures.

11

INDUSTRY

Top 20 private banks in Asia (ex-China onshore): 2019 AUM per RM Rank

Bank

AUM per RM (US$ million)

2019 AUM (US$ billion)

2019 RM headcount

AUM per RM YoY change

1

Goldman Sachs Private Wealth Management

923.0

92.3

100

+4.6%

2

Pictet Wealth Management

675.4

43.9

65

+0.4%

3

J.P. Morgan Private Bank

669.6

112.5

168

+22.0%

4

Hang Seng Private Banking

523.5

35.6

68

+16.2%

5

UBS Global Wealth Management

432.3

450.0

1041

+37.8%

6

BNP Paribas Wealth Management

427.4

98.3

230

+25.7%

7

Morgan Stanley Private Wealth Management

394.6

131.0

332

+18.4%

8

Credit Suisse AG

378.9

227.3

600

+7.1%

9

CMB Private Banking

365.6

39.1

107

+28.4%

10

LGT

355.4

69.3

195

+23.4%

11

UOB Private Bank

308.3

37.0

120

+25.1%

12

Julius Baer

304.9

130.2

427

+17.2%

13

Standard Chartered Private Bank

296.0

58.6

198

+41.5%

14

Bank of Singapore

292.5

117.0

400

+29.0%

15

Deutsche Bank Wealth Management

286.7

63.7

222

+4.2%

16

Bank of China (Hong Kong) Private Banking

240.4

32.7

136

+15.4%

17

HSBC Private Banking

234.1

151.0

645

+2.1%

18

J. Safra Sarasin

185.4

20.8

112

-12.5%

19

UBP

163.2

19.1

117

-9.1%

20

CIMB Private Banking

154.4

21.8

141

-

21

Indosuez Wealth Management

150.0

15.0

100

+7.1%

22

Maybank Private

140.6

14.2

101

-21.3%

23

EFG Bank

112.2

32.5

290

-40.6%

All figures are APB estimates unless otherwise stated. Figures may not add up precisely due to rounding.

17

INDUSTRY

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columbiathreadneedle.sg/fixedincome *Source: Columbia Threadneedle Investments, Morningstar ratings as of 31 December 2019. Past performance does not guarantee future results. Not all funds are available in all jurisdictions, to all investors, or through all firms. © 2019 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

For Professional and/or Qualified Investors only (not to be used with or passed on to retail clients). This publication is for information only and does not constitute an offer or solicitation of an order to buy or sell any securities or other financial instruments to anyone in any jurisdiction in which such offer is not authorised, or to provide investment advice or services. Offerings may be made only on the basis of the information disclosed in the relevant offering documents and the terms and conditions under the relevant application forms. Investment involves risk. Past performance is not a guide to future performance. The value of investments and any income is not guaranteed and can go down as well as up and may be affected by exchange rate fluctuations. The analysis included in this publication have been produced by Columbia Threadneedle Investments for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. Any opinions expressed are made as at the date of publication but are subject to change without notice and should not be seen as investment advice. Information obtained from external sources is believed to be reliable, but its accuracy or completeness cannot be guaranteed. This document is not investment, legal, tax, or accounting advice. Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This 18advertisement has not been reviewed by the Monetary Authority of Singapore. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

04.20 | J30529 | 2920358

INVESTMENTS

BNP Paribas WM launches AMC-based mandate with reduced ticket size

I

n a bid to reach a wider range of clients with its discretionary offering, BNP Paribas Wealth Management has launched an actively managed certificate-based equity mandate with a minimum ticket size that is substantially less than that of a ‘standard’ discretionary equity portfolio.

A typical minimum ticket size for an equity mandate stands at around US$1 million and for fixed income, as high as US$5 million — a large commitment for those clients that have yet to delegate and therefore are looking to dip their toes in the water. Yet, by implementing the strategy via AMCs, the ticket size can be brought down to as low as US$150,000, thereby rendering DPM more accessible to a greater number of clients.

Gabriel Chan head of investment services, Hong Kong, BNP Paribas WM

“Quite a number of clients in Asia are very concentrated in certain asset classes, and even within one asset class, they’re holding only a few positions,” Gabriel Chan, head of investment services, Hong Kong, BNP Paribas Wealth Management told Asian Private Banker, adding that a key benefit for clients is they get easy access to DPM expertise and professional managers who look after their portfolio on a real-time basis.

AMCs in the context of DPM is by no means a new phenomenon in Asian private banking. Beyond easy accessibility and implementation, fee transparency is a major selling point for AMCs. Very similar to investing in an ETF, AMC mandates charge an upfront subscription fee plus a management fee, with the latter being equivalent to the expense ratio of an ETF.

AMC bond mandate in pipeline Having launched an AMC-based equity mandate, BNP Paribas WM is now working on a fixed income mandate that also utilises AMCs. Chan said he expects the bond portfolio to resonate even stronger with clients in the region.

“The demand for the fixed income mandate is expected to be even stronger because it is an asset class with higher minimum investment threshold, not to mention critical to building a well-diversified portfolio,” Chan added.

“For example, it’s very difficult for a bond mandate investor to sell each of the bonds in equal proportion, as the liquidity of each bond may not be the same. But with AMCs, as investors invest by units, they can easily reduce or increase the size in a flexible manner.”

On the administrative side, it is also far easier for clients to subscribe to the portfolio, Chan added, pointing out that for a standard DPM portfolio, it takes a relatively longer time to open a new account.

BNP Paribas WM’s latest launch comes at a time when private banks are exploring new ways to encourage client delegation, whether by introducing low-fee instruments including AMCs and ETFs, rolling out thematic portfolios, or increasing customisation options.

“Additionally, because of daily liquidity without a lockup period, once clients subscribe to this AMC mandate, they can increase or decrease their holdings anytime they want,” he added.

In early April, Deutsche Bank Wealth Management launched an ETF-based asset allocation mandate, and late last year, Indosuez Wealth Management reduced the minimum inception size for a number of mandates.

19

INVESTMENTS

Surge in demand for Open Trading in traditional bond market as liquidity tightens

R

In the bond market, private banks and their clients suffer as dealers are much less willing or able to provide liquidity for tickets that are rather small compared to institutional clients while some end clients are urgently seeking to cut their losses, or are forced to sell, due to margin calls from banks.

“I’ve spoken to many of my ex-colleagues at the trading desks recently,” Erik Tham, head of private banking, for Benelux and Switzerland at MarketAxess told Asian Private Banker. “And some of them who experienced [the global financial crisis of] 2008 are reminded of the situation then, although with obviously quite a different economic background.” (Tham used to be head of fixed income & equities e-trading, execution automation and data driven insight at UBS Wealth Management.)

“Many orders, no bids. Even for products that are normally super liquid, price levels are all around the place. There are lots of phone calls too from concerned clients or relationship managers. So there is a massive, massive workload for these execution desks,” Tham remarked.

Because private banking clients have more of a “follow the crowd” behaviour than institutional clients, trading requests for private banks have hiked in these distressed times, he pointed out. However, dealers typically concentrate on the larger, tier-one clients, and care less about the smaller clients and smaller retail-size tickets, which typically flow from retail and private banks.

“As a consequence of the liquidity situation, smaller PBs that may not have a tier-one standing and have perhaps only a few broker and dealer lines open, feel being left out. They are losing access to dealer liquidity — and if dealer liquidity is the only source of liquidity in these times, then they are in a bit of trouble,” he added.

Open Trading provides sought-after liquidity “What we see under these conditions where the dealer liquidity is really, really going down, is that the Open Trading liquidity has turned into the predominant source of liquidity for some private banks and some price takers.”

20

Open Trading™ is a centralised electronic trading platform for fixed-income securities, operated by MarketAxess. It enables market participants to trade with each other anonymously in the MarketAxess community.

apidly changing market conditions due to the COVID-19 pandemic has stirred up investors’ trading demand and put pressure on asset classes with less liquidity and transparency.

According to Craig McLeod, head of emerging markets at MarketAxess, there has been rapid growth in the use of Open Trading function recorded by Trax, a database owned by MarketAxess which contains data derived from the MarketAxess post-trade matching and regulatory reporting engines that process approximately 12 million fixed income transactions annually.

Erik Tham head of private banking, Benelux and Switzerland, MarketAxess

“If we look at the emerging markets business, right now 40% of transactions go through our Open Trading network. This means that four out of ten trades are done in MarketAxess’ anonymous liquidity pool, where a buyside firm can trade with another buyside firm,” explained McLeod.

He claimed that the Open Trading platform was becoming the more dominant dealer for clients and that MarketAxess was turning into an essential liquidity source for this community.

One of the reasons for the increased use of the Open Trading platform is that it channels alternative buyside liquidity into the market. According to McLeod, there has been a 39% increase in buyside liquidity provision on the trading platform due to the wear and tear on the bank’s balance sheet. “The market volatility is forcing the community to come together to provide more efficient liquidity,” he pointed out.

While trading through voice or other non-electronic means is still the mainstream for trading desks in private banks in Asia, Tham has told Asian Private Banker that trading desks in the region are “operating at capacity” which directly results in increasing demand for e-trading capabilities.

With the increased popularity of e-trading, Tham said that the liquidity in the electronic bond market Asia is reaching a critical mass where it could become an efficient market for transactions.

INVESTMENTS

DB’s Tan Wei Mei: ETF mandates wise way for investors to stay invested at this juncture

W

ith quite a number of investors sitting on the sidelines amid the ongoing market volatility, low-cost ETF-based mandates can be a wise way for clients to stay invested and capture the market beta, Tan Wei Mei, global co-head of advisory and investment solutions at Deutsche Bank Wealth Management, told Asian Private Banker.

The bank launched a series of so-called “strategic asset allocation (SAA)” ETFbased funds in Germany, Luxembourg, and Switzerland in mid-April. They will be rolled out in Asia later this quarter.

“We think, at this juncture, in order to advise clients to stay invested, it would Tan Wei Mei make sense for investors to capture market global co-head of advisory and investment solutions, returns by using a more well-balanced Deutsche Bank WM portfolio made up of low-cost ETFs as well as a hedging tool to do the downside protection in case of a declining market,” Tan said.

Interestingly, cited by Tan as the “most interesting part” is the new mandate’s risk return engineering overlay which will help protect investors on the downside.

“There is actually a hedging strategy using derivatives. So there will be one version without the hedging and then another version with hedging,” Tan said, adding that the bank uses futures and options in terms of derivatives to implement the protection.

Managed by the bank’s in-house DPM team, the three mandates will be using pure ETFs. Yet, it is in a fund format instead of a segregated discretionary mandate.

“It’s quite flexible and efficient, considering that it uses a fund format,” she said.

Providing discipline Fee pressure has continued to weigh on Asia’s private banking industry.

ETFs, as one of the most cost-efficient and transparent have been largely used by the industry, especially within bank’s DPM businesses. Julius Baer and Indosuez Wealth Management are typical examples.

Yet, given the simplicity of the ETFs, clients sometimes question the necessity of delegating their assets to a professional investor, Tan said. “I always receive questions, such as whether clients can buy ETF themselves,” she said.

“Yes, they can, but I think it’s a question of whether they are really following their SAA in a disciplined way? Are they reviewing and rebalancing on a regularly basis? So I think those are the important areas for us to play a role in and it’s also the value add for us to provide.”

Protection from volatility In a press release, Claudio de Sanctis, global head of Deutsche Bank Wealth Management said that the timing of the launch of the strategy “could not be more appropriate”.

“Wealth management clients are looking for robust and efficient ways to protect themselves and their families from the kind of volatility we have seen recently because of the coronavirus,” he said.

“We have a particular vantage point as the leading bank in Europe’s largest economy to anticipate what might come next and help our clients prepare.”

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ADVERTORIAL

Citi Serves Up a Best-of-Both-Worlds Recipe for an Uncertain Investment Universe At a time of unpredictable returns, Citi offers investors a new solution that has the technical advantages of structured products, while utilising the model portfolio capabilities of the world’s largest asset manager BlackRock.

F

inding a recipe for investment success has never been more challenging. In a new age of low interest rates, declining returns, US-China trade conflict, and an increasingly volatile global geopolitical situation, coupled with unpredictable situations, such as the new coronavirus outbreak, it requires vision, ability to break new ground and reactivity to adapt to constantly changing market environments.

The Multi-Asset Active Allocation Index by Citi (known as MA3), allocated by BlackRock, provides investors with a solution that is adapted to today’s financial environment, according to Citi’s head of Retail Solution Structuring APAC Mederic Gehl.

The index, rebalanced dynamically according to input from BlackRock, benefits on top from optimised design with cost efficient unfunded instruments, daily control of the volatility and leveraging Citi’s execution capabilities.

Navigating a conservative landscape

The inspiration for the novel MA3 concept was born Citi has risen to that challenge by from a fast-changing global financial situation which shaking up the traditional investment has seen investors become increasingly conservative, Mederic Gehl ingredients to offer a unique solution with a leaning towards the greater security of multiHead of Retail Solution Structuring APAC that combines the advantages of asset portfolios and an inclination to hold tight to Citi structured products with dynamic existing holdings. multi-asset allocation. This is done through an index, designed and created by Citi, and utilising BlackRock’s model portfolio allocation “Everyone is conscious that the bull market is not going to continue advisory service. and somehow we are reaching a late-cycle environment,” Mederic

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ADVERTORIAL explained. “At the same time, there are increasing geopolitical tensions which are making clients more careful about the investments they will make this year.”

“Interest rates remain extremely low which means they cannot stay in cash so money needs to be put at work in other investments. One of the key requirements is for principal protection.”

Those same instincts have driven demand for momentum quantitative strategies in recent years, but investors are beginning to cool on those strategies which have failed to keep pace with global financial developments.

Investors pursuing the momentum approach have more recently found themselves mired in long-term strategies that lack flexibility and responsiveness, said Jennifer Wong, Citi’s Head of Private Bank Distribution for the Asia Pacific region.

MA3’s combination of systematic portfolio optimisation and discretionary views addresses that shortcoming in a new and disruptive way. “The distinctive asset allocation methodology offered

by BlackRock embeds a key discretionary aspect from the portfolio manager, who has the flexibility to rebalance the portfolio four to twelve times a year, thereby being responsive to unexpected domestic and geopolitical events. This, in combination with Citi’s structuring expertise, makes it a cutting-edge value proposition for clients,” Mederic said.

A solution built on solid foundations MA3 has been engineered using BlackRock’s Model Portfolio allocation advisory service. The index refers to a globally diversified portfolio with granular building blocks and a conservative risk budget of 3-6%.

Investors can get exposure to the index via a Citi note, benefiting from 100% capital back at maturity (subject to creditworthiness of the note issuer) and receiving an annual income.

The MA³ index is provided by its administrator Citigroup Global Markets Limited, and allocated by BlackRock Asset Management North Asia Limited. The index is purely notional, and the combination of the index and its wrapper does not amount to a fund; there is no actual portfolio of assets or management of a portfolio of assets. This article does not constitute advice of any type (including investment advice), or an investment recommendation, or a solicitation or offer to sell or to purchase any securities or other financial product. Any decision to make an investment should only be taken with reference to the formal terms and conditions, and offering materials, of the relevant financial product.

Robert Ronneberger, Asia Lead Strategist for Model Portfolios at BlackRock, explained that the firm was managing close to US$60 billion in such model portfolios at the end of 2019, which benefit from a distinctive allocation methodology, by combining systematic optimisation with discretionary views.

This allocation methodology “combines quantitative management (adaptive set of signals ranging from traditional valuationbased signals to innovative sentiment-based signals) with active management. Model Portfolios are therefore adaptive to a changing environment,” Robert explained.

The index and the arrangement aim to provide a relatively conservative yet progressive and highly innovative way for clients to navigate a complex and evolving investment landscape and provide the multiasset diversification and principle protection that they seek.

“It is a strategy for a new investment environment that is creating appetising prospects for clients”, Jennifer said.

Promising market trends Those prospects have been reflected by a strong momentum for flowstructured products at the start of 2020, according to Jennifer who said Citi had seen volume and revenue double compared with the same period last year.

Five key properties were being sought by customers, she added: Principle protection (full of partial) with clients seeking limited downside; income-paying/yield-searching in a persistently low-rate environment where millions of FMPs are still being sold; multi-asset (asset allocation/diversification needed with late cycle for equities market); third-party index strategic (custom index or systematic); and outperformance structure (either sector play or dispersion among single stocks).

For more information, please contact Citi Cross Asset Solutions pbsales@citi.com Jennifer Wong jennifer.ws.wong@citi.com Mederic Gehl mederic.gehl@citi.com

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S T R A I G H T TA L K

Avaloq’s Asia head: We’ve moved away from ‘monolithic core engines’ to open technology, customisation, personalisation

Imad Abou Haidar was named head of Asia for Avaloq in August 2019. The firm needs no introduction, but even so, it is taking concerted steps to remain one step ahead of a competitive field of firms that provide core digital solutions to private banks and wealth managers. As such, the Avaloq of yesteryear is very different from the Avaloq of today and tomorrow — albeit with the same mission to futureproof its clients. Haidar, in his first media interview since joining Avaloq, discusses with Asian Private Banker the firm’s strategic focus in Asia, key developments in its solutions suite, and the role the region will play in the Avaloq’s future.

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S T R A I G H T TA L K

Imad, congratulations on your recent appointment.

What attracted you to Avaloq and the business of providing core solutions to private banking and wealth management firms?

Relevance, as you suggest, is key. To that end — and beyond BPaaS and SaaS — what are some of the more important investments Avaloq has made to remain ahead of the curve?

The first important factor was Avaloq’s focus on quality, on the product, and the long term. When I started talking with Avaloq, this really came through in every conversation we had. The second was Avaloq’s focus on the region. The company may be Swiss, but it has maintained a presence in Asia for over 10 years and is eager to expand in the region. We can be considered ‘local’ in many countries in the region, but we want to become even more ‘present’ in Asian geographies.

We like to think in terms of bringing ‘simplicity in a new era’. What does that mean? On one hand, we aim to remove the complexity of running industrial processes that, at times, must run on a 24/7 basis with 100% availability. This is while providing our customers with the right tools, whether web or mobile, to build the right services for their own clients. One example is Avaloq Engage which, as the name suggests, enables RMs to engage with their clients via instant messaging, which is again a differentiator because we are endeavouring to help RMs interact as they would in the field.

Avaloq’s business ‘wins’ in Asia over the past 18 months have tended to involve domestic onshore banks in the ASEAN markets that have growing — but not yet mature — wealth management offerings. Is this indicative of Avaloq’s business strategy in this region?

Of course, you will still see the focus on the large offshore markets at the global level, but more and more, we are seeing growth in onshore wealth management markets, driven in part by regulators seeking to retain wealth in their economies. Accordingly, many regional wealth management players in Asia are equipping themselves with worldclass technology and services for HNW and mass-affluent clients. That explains why, in the last six months, we have won new clients in two new geographies in Asia.

Just how different are the initial conversations Avaloq has with regional onshore banks that have little experience in wealth management, compared to those with large, global private banking players?

These banks are typically leaders in their domestic spaces on account of their strong retail or corporate banking businesses, so they already have a solid customer base. And it is true that private banking or wealth management may be something that is relatively new to them.

But they do tend to be extremely ambitious and, by virtue of having a clean slate to work from — from a technology standpoint — they are often in a position to leapfrog others quite quickly. Furthermore, having not much in the way of legacy technology means that our BPaaS and SaaS offerings are extremely relevant to these banks and, in fact, a key differentiator for Avaloq in Asia.

[Regional banks] tend to be extremely ambitious and … from a technology standpoint, they are often in a position to leapfrog others quite quickly

At the same time, we have been investing heavily in APIs and microservices so that our customers can connect technology that they or their partners develop. We are, in a sense, an enabler for our customers to benefit much faster from fintech innovation. In fact, we have moved away from those monolithic core engines — where, whenever you want innovation, you would need to do an upgrade that could take up to 12 months — to a situation where we have this open technology and a matter of weeks or even days for end-clients to benefit from the innovation, or for a bank to launch a new product or portal, or to upgrade a portal with new capabilities.

How important is this speed-to-market and agility from the end-client’s perspective?

The average end-client today is extremely savvy in terms of technology and therefore has high expectations. Look at the way we all use smartphones and how we expect regular upgrades, new features, and new functionalities. We want things to be real-time fast, we want information on-demand. We don’t want to be searching in menus. So all of these expectations can be addressed through APIs and microservices.

What we are doing is enabling our customers to make the most of our innovation, their innovation, and third-party innovation.

Are personalisation and customisation items that Avaloq’s new banking customers in Asia are eager to explore from the outset, or do they tend to prefer the off-the-shelf solution and explore options further down the line?

It is extremely important to have an off-the-shelf solution, but the valueadd and the customer journey differs from one bank to another. So the ability to make sure that the solution provided is aligned with the bank’s own client journey framework is key. And at the same time, this should not take one or two years to deliver — especially considering the investments they have made in the solution. Our customers are anxious to start using the platform in the shortest time and want the fastest return on their investment, so this degree of flexibility we bring is highly valued.

Continued on next page →

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S T R A I G H T TA L K

The wealth management industry is going through a significant transformation, particularly in the way clients are engaged in terms of life goals and stages, client product preferences, and regulatory tightening. How do these changes inform Avaloq’s approach?

We have to remain extremely close to our customers to make sure that they are at the forefront of the innovation and at the forefront of those new trends. You mention investment preferences: alternative assets, sustainable products, even digital assets. These are all key topics that we support.

But with this type of technology, what we see today is the result of investments that happened 12 or 24 months ago. We have a global team within our product organisation that remains in close contact with our customers across the world.

And I must admit that a lot of our innovation originated in Asia. So our product team in Asia is the channel to influence our innovation roadmap. In many cases, a customer’s requirements depend on the market or geography they are in. If we look at ASEAN, there is a lot of first-generation wealth and business owners who are tech-savvy and, perhaps, more interested in taking on higher risks or investing in alternative and digital assets. We need to ensure that the innovation we are generating is aligned with regionally-specific needs.

So it is no longer a case of ‘one size fits all’, or that R&D solely based in, say, Europe. In fact, Avaloq Engage, the product we are launching right now — which includes a mobile app that enables an RM to interact with the client via WhatsApp in a secure and compliant manner — originated out of an idea from Asia. It’s fair to say we are moving towards a situation where we get our ideas from everywhere we work and then develop globally.

The importance that Avaloq places on being an enabler for its customers to design their own experience and client journey, and the role that third-party providers could play in this sense, is partially addressed by the Avaloq.one marketplace. But just as we have been speaking about innovation coming out of Asia, Avaloq.one is still dominated by Swiss and European fintechs.

Can we expect to see more Asian firms coming on board?

This is one of our areas of focus. Yes, we will have more Asia fintechs joining the Avaloq.one Ecosystem. I would also point out that over the past five or so years, we have increased our software development team in the region. In Manila today, we have around 300 colleagues, mainly working on software development within our chief product and chief technology organisations.

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While not directly related to private banking, both Singapore and Hong Kong are issuing digital banking licences. What does this mean for Avaloq’s business opportunities?

We are closely following these developments and we are in discussions with a number of these consortiums from a perspective of wealth management and mass-affluent banking. The focus on this market segment is an essential aspect of our strategy for the region. As long as they are operating within an area where we provide the best solutions and services, we will explore this opportunity.

Finally, what can we expect to see from Avaloq in Asia in the near-term under your leadership?

We have a large number of projects happening at this moment, so the first focus is on supporting our existing customers and bringing them up-to-speed. The second focus is on increasing market share within the region. We have a presence in Singapore, Thailand, Malaysia, Hong Kong, the Philippines, and this is growing. And we will continue to add new geographies. We are launching initiatives in mainland China and Japan in the next 12 to 24 months. These are significant investments and demonstrate how we operate with a long-term mindset. It is a mindset that prioritises building a solid base and deep relationships.

We are launching initiatives in mainland China and Japan in the next 12 to 24 months On that last point, given that your business demands considerable investments in time, resource, and capital, how difficult is it for you to ‘flip’ an established relationship between a major competitor and customer?

These kinds of investments by banks need to be made from a long-term point of view and must be future-proof. The partner that a bank chooses to work with must be investing in the technology and the people in order to remain in a position to offer the right products and services. We have spoken about our ability to accommodate digital assets, alternatives, sustainable investments, advanced derivative products, we made an acquisition of Derivative Partners — all of these things are correlated and we wouldn’t be able to offer the solutions we do if we hadn’t invested 20, 24, sometimes 36 months before even seeing the first customer or the first dollar. So this is a business based on long-term trust and facts.

We have very long relationships in this region with customers who trust us and we reinforce that trust with our delivery. But when an institution enters into a relationship and then five or ten years later, that partner decides to do something different, this is when we can flip a relationship.

TECHNOLOGY

Braving the storm: PBs share success in digital advisory during pandemic Where some countries in Asia have imposed mandatory work from home (WFH) conditions during the COVID-19 pandemic, digital tools have become essential.

Private banks with sophisticated client-facing technologies are flexing their capabilities with even more frequent client interactions and ongoing enhancements.

Asian Private Banker spoke to operational leaders at four private banks who all agreed that early investment in digital transformation pays off with a significant uptake of client engagement during tough times.

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TECHNOLOGY

CREDIT SUISSE PB: Being digitally ready has prepared us for all conditions

Werner Schlossmacher managing director, head of platform management APAC, Credit Suisse PB

Credit Suisse Private Banking has been working on its digital transformation since 2015 with the launch of Digital Private Banking platform (DPB platform) in Singapore. The bank continued its digital journey with the launch of CS Chat, and CS Invest. In November last year, the bank was rolling out self-service capabilities across its tech platforms made available to APAC clients.

“The continued investments into the digital journey over the years and throughout different phases has prepared us well over the last few months,” Werner Schlossmacher, managing director, APAC platform management, Credit Suisse told Asian Private Banker.

The transaction volume on the DPB platform has increased by a factor of 2.5, as clients have been able to transact anytime. Client engagement through CS Chat has increased by more than 50%. The DPB platform currently has a 65% adoption rate among eligible clients and client engagement by the platform has increased by over 20% in recent months.

The WFH situation has increased clients’ interest in having an overview of their investment portfolio, which is reflected in a ‘significant increase’ in usage through new sign-ups for Canopy’s account aggregation tool available on CS’ digital platform.

“We have seen significant take-up of usage compared to Q4 last year.

Canopy acts as a courier and allows clients to have a more holistic view of their portfolios across different banks,” said Schlossmacher. Clients can use Canopy’s tools to analyse the information about their portfolios across different banks.

Better client engagement in times of trouble To move further and facilitate clients to invest on the strength of this information, the bank has changed the approach in client engagement by reaching out more frequently via multiple communication channels.

For instance, CIO and other experts appeared more frequently in client calls over the last two months to provide up-to-date investment insights.

“We have weekly calls instead of monthly calls and made them more interactive. We have created webinars for our clients to make sure that they can use the holistic information they receive from the bankers, from Credit Suisse Invest, Canopy and other channels.”

Schlossmacher added that CS’ digital strategy has been built for long term development purposes and the direction proved to be the right way, considering that client interactions have been occurring effectively over the past three months even in locations outside the office.

“We didn’t prepare for this specific scenario with our digital journey, but as a digitally ready bank, we had prepared for all scenarios: we have the ability to provide banking services from various places, enabling our bankers to offer advice, and allowing clients to execute their desired choices,” he said.

UBS WM: Transactions on e-trading platform quadrupled in the past three months “This COVID outbreak does not make our business 'become digital', it simply has accelerated our plans and helped to make some decisions faster,” Wiwi Gutmannsbauer, COO of UBS Asia Pacific and operating head APAC, UBS Global Wealth Management told Asian Private Banker.

Wiwi Gutmannsbauer COO, UBS APAC & operating head APAC, UBS GWM

“We have witnessed this acceleration in steep climbs of our client engagement rates in several of our digital offerings.

For instance, in the last three months, our E-banking platform’s client login rates have almost doubled, client usage has soared and the number of transactions on the E-trading platform has multiplied by a factor of four.”

Remote workspace launch ahead of schedule To satisfy the requirement of WFH in various countries, the bank launched UBS Workspace months before its original launch date. UBS Workspace is a platform that enhances employees’ productivity and mobility while meeting all regulatory needs. Close to 4,000 APAC employees were migrated onto UBS Workspace in April and about 90% of the bank’s employees across APAC are currently WFH.

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“We are equally attentive to our employees’ work experience and ensure that collaboration can continue, virtually,” said Gutmannsbauer. “For example, we rolled out digital signatures to evidence internal review and approvals, strengthening efficiency of over 20 processes. This digital solution is a first for UBS GWM globally.”

This heavy reliance on platforms such as UBS E-banking, E-trading, UBS Advisor Messaging (WeChat and WhatsApp) has been put to the test during the current pandemic. Yet, Gutmannsbauer claimed that these platforms continued to run smoothly as usual, thus allowing clients to keep up with information curated to their investment needs.

“During this outbreak, our digital platforms facilitated our investment advisory the same way it does all along. Our hybrid client service model from high-tech to high-touch ensures that there is no compromise to our best-in-class service,” he continued. New offerings to clients during recent months include weekly live interactive webinars hosted by the APAC CIO team, remote strategic portfolio reviews with their client advisors (CAs) and the option for CAs to provide proposals through portfolio health check alerts. APAC has been the first region in UBS GWM to launch Skype Audio and Video Conferencing for CAs and clients.

“Digital is innate and automatic in our business. This is why we do not see our CAs needing to re-learn and adapt to going digital during this outbreak. They are readily equipped in being agile and working flexibly to meet our clients’ needs anytime and anywhere,” said Gutmannsbauer.

TECHNOLOGY

DBS PB: Pandemic drives clients and RMs to embrace digitalisation Digitalisation is a priority for DBS since the bank’s COO aspires for DBS to become the ‘D’ in GANDALF — the other letters representing Google, Amazon, Netflix, Apple, LinkedIn, and Facebook.

The Singaporean bank has 76% adoption rate for iWealth — the application created Joseph Poon group head, for managing the wealth of clients, ranging DBS Private Bank from mass affluent to private clients, providing direct execution capabilities in investments according to clients’ risk appetite. The popularity of this application has become a great channel of client interaction at a time of lockdowns.

Client engagement up 30% on iWealth “Volatility has amplified the need for clients to be kept abreast of what’s going on in the market – to this end, we make the most of DBS iWealth to keep them posted on the market and provide timely, relevant insights from our Chief Investment Office,” Joseph Poon, group head of DBS Private Bank told Asian Private Banker.

“Since the start of the year, we have seen a spike in DBS iWealth usage with average log-ins per client rising by over 30%.”

While clients can execute stocks, funds and FX trades with leverage on iWealth, they are advised to turn to their RMs for assistance in trading complex products such as OTC fixed income products, structured notes and bancassurance. RMs are equipped with RM Mobility, which is a tablet solution that serves as an extension of their workstation, allowing

RMs to effectively track clients’ portfolios, perform reviews, provide advisory and place investment orders, all whilst working remotely.

According to Poon, as the pandemic has kept most of the population at home, RMs have engaged with clients a lot more using telecommuting tools such as audio or video conferences — be it for conducting trades or to keep them updated about the markets.

“In fact, we are having more strategic discussions with clients these days, as they now have time for comprehensive portfolio reviews,” he said.

“We are having more conversations too about wealth and succession planning, as the virus has prompted a deeper focus on ensuring that one’s family, assets and legacy stay in good hands for the long-term regardless of external shocks.”

Pandemic spurs digital openness Poon added that the pandemic has sparked a shift, with more clients and RMs coming to embrace digital solutions, and the openness to embrace digital solutions would be a new norm that stays with the industry even after the COVID-19 situation normalises.

“Clients are now more familiar and empowered to take a do-it-yourself approach on DBS iWealth for certain transactions, leaving conversations with RMs for more strategic purposes,” he said.

Because of the pandemic, RMs engaging clients have the opportunity to encourage greater use of telecommuting and other digital tools “thereby driving a collective shift towards acceptance of digital channels and flexible working.”

BNP PARIBAS WM: Stronger client interest in digital advisory app

Long Doan COO, APAC, BNP Paribas WM

“In time of extreme market volatility, the quality of advice and the speed of execution are of paramount importance in order to protect our clients’ wealth and at the same time allowing them to seize opportunities,” Long Doan, APAC chief operating officer, BNP Paribas Wealth Management told Asian Private Banker.

“We see a much stronger interest from clients to use our new digital advisory apps (MyAdvisory), and a continuous increase in the traffic on our integrated e-banking platform (MyWealth).”

Since the virus outbreak, the bank has actively organised “non-traditional market updates” using webinars and audio conferences, so that clients can directly interact with the bank’s CIO and market experts.

BNP Paribas WM rolled out its digital tool kit, including MyAdvisory, in Asia in 2017. Doan said the digitalisation efforts come at the right time for building greater employee and client engagement.

“Thanks to the excellent support from our IT team and their ability to upgrade our infrastructure in record time, we have been able to support our people to effectively WFH, and not at all stay at home,” he said.

“This is all the more remarkable because all RMs who WFH are able to access their IT tools with full functionality and without any negative productivity impact, in a context of buoyant financial markets and surging trading volumes in the last months. We have been providing effective and easy-to-use communication tools for our employees, and I can say that this is probably the part that people appreciate the most.”

Doan added that the COVID-19 outbreak provides an opportunity to test the agility and efficiency of these solutions, and with timely support from the IT team, the bank has been able to maintain business as usual in markets such as Singapore and India, where more than 85% of staff need to WFH. Looking ahead, he said social distancing and split teams will become the new normal, even after the pandemic. In particular, the bank has been broadening its application of electronic signatures and remote approval function.

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INVESTMENTS

BNP Paribas WM’s Royston Low: Signs point to bumper PE vintage

T

he coronavirus pandemic and the economic and financial havoc it has wreaked present a rare opportunity for investors to participate in a potentially bumper vintage year for private equity (PE), according to Royston Low, regional head of private investments at BNP Paribas Wealth Management APAC. “The data clearly show that vintages that start in the year of, or the year after, a crisis tend to do much better than those that start in a more ‘regular’ environment,” Low told Asian Private Banker, citing the performance of PE programmes at 21 US state pension plans over a 16-year period (ending in June 2017), during which PE outperformed public equities across market conditions.

Good in good times, even better in bad times

Royston Low regional head of private investments, BNP Paribas WM APAC

During that period, PE outperformed public equities by an average of 660bps during weaker economic spells, according to data from investment advisory firm Cliffwater, with the strongest returns recorded in the recession years of 2001, 2002, and 2009.

The resilience of PE can be explained by a number of factors, said Low, including a fund’s “ability to plan and stay invested over a long term, to select and invest in businesses that are more resilient with more capital at their disposal, greater portfolio diversity, and a more systematic and operationally focused approach to value creation”.

“PE firms are also in a better position to take a buy-and-build approach to consolidate a sector by using dry powder to make add-on acquisitions, at a time when purchase price multiples are low, to alleviate a company’s financing concerns and to help renegotiate loan terms and debt obligations if necessary,” he continued.

Moreover, a 2017 study by the US-based National Bureau of Economic Research (NBER) found that PE-backed companies were more resilient during the 2008 global financial crisis, increasing their investments by almost 6% and market share by 8% relative to non-PE-backed companies.

As a result, PE-backed companies were 30% more likely to be acquired in the period post-crisis, with a greater potential for a profitable exit.

“The data is compelling, and so the message we are trying to convey to our clients is that PE may be good in good times, but even better in bad times,” said Low.

Opportunities in distressed assets and private debt BNP Paribas WM splits its PE offering into two buckets — a core and satellite allocation. The core offering is evergreen in nature, focusing on mid-market and large-cap buyout opportunities which tend to be more stable and perform through the market cycle.

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Recently, the private bank launched a fund, managed by what Low described as a “top decile manager”, focusing on European mid-to-large-cap buyouts with a small allocation to North America. As an example of the satellite allocation, Low said the bank is looking to capitalise on opportunities that have emerged from the coronavirus crisis, including a distressed fund that is in a position to scoop up companies at a low price-point.

“It is something that we had been mulling for the last few years — the trouble was that we were waiting for the ‘right timing’ to pull the trigger because it’s a difficult strategy to market to HNWIs when there aren’t obvious signs of distress,” he explained.

“However these specialised funds that are in a position to take advantage of this current distressed environment — to invest in companies disrupted by the crisis, at compelling prices and drag it out over a three to four year period — are very well placed,” Low continued.

Low also sees an opportunity for private debt — a market that accounts for over US$800 billion in AUM, according to Preqin — to fill the vacuum left by banks reticent to provide credit to newer or struggling SMEs, just as it did after the 2008 GFC, when financial authorities tightened credit and capital requirements for banks.

“If you parallel [today with] 2008, when banks were unwilling to lend, this created an opportunity for private debt funds to step in — and they did very well,” he observed. “In the last crisis, what you could get was a 10% cash coupon with a 3-5% payment in kind, back-ended. So if you are reaching returns of 14-15%, that’s close to what PE would get you, but with a lower risk debt instrument.”

The ‘denominator effect’ Elsewhere, Low has a mild interest in private market secondaries which could become an attractive thematic, but that is contingent on how public markets perform here on out and, crucially, whether institutional investors are compelled to liquidate positions — a situation known as the ‘denominator effect’. A recent global survey of members of the US-based Institutional Limited Partners Association (ILPA) found that 63% of limited partners were either concerned (52%) or extremely concerned (11%) about their policy target band to PE. “I don’t expect this to happen immediately. The situation will become clearer in May and August around financial reporting, which could trigger some forced selling into the secondaries market,” said Low. “But a lot of institutions have at least a quarter to adjust, and if public markets continue to rebound, the denominator effect is unlikely to be a major factor.”

Nevertheless, Low said BNP Paribas WM may look to offer a secondary fund further down the line, on the grounds that it would be buying at larger discounts due to forced sellers and possibly with a shorter holding period compared to a more normal environment. If so, that would mark the first such offering from the private bank since 2011.

R E G U L AT I O N S

PB paper trails under scrutiny as clients confront losses

A

s margin calls mount, lawyers are warning PBs to keep their paper work in order should clients question the suitability of investment recommendations they received.

Major stock indices may have recovered slightly, but the COVID-19 pandemic continues to hurt the real economy worldwide. One private bank has warned that “no sector is entirely safe” in the current situation.

“At the moment, private banking seems to be the most resilient segment, but the question is for how long,” Paul McSheaffrey, partner, head of banking & capital markets, Hong Kong, KPMG China told Asian Private Banker.

Paul McSheaffrey partner, head of banking & capital markets, Hong Kong, KPMG China

Compared with other banking segments, private banking clients tend to have a larger buffer against the damage to the real economy.

McSheaffrey argued that it is “still too soon” to see the impact of the economy placing significant stress on HNWIs’ companies.

He also pointed out that since 2019 — well before the coronavirus outbreak — private clients have had a lower risk appetite due to global and local uncertainties and as a result are able to survive a market downturn much better than before the 2008 global financial crisis.

Both due to market sentiment and new regulations in place, banks too are generally lending against collaterals of higher standards.

A perception of unsuitability After the 2008 global financial crisis, there have been many cases where PBs were sued for mis-selling — when staff had advised clients to invest in products beyond their risk appetite. In view of these disputes, regulations have been introduced to tighten up the industry.

These include the new Professional Investor Regime implemented by the Hong Kong Securities and Futures Commission in March 2016. A key objective of this reform was ensuring that all professional investors would be covered by important protections in the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission — specifically, that all individual clients of intermediaries are protected, regardless of their financial resources.

The cornerstone of this investor protection is the Suitability Requirement which is integral to the distribution and provision of advice on investment products by licensed and registered persons.

Banks have been required to enter into a written client agreement with clients (confirming that any financial product recommended to the client must be reasonably suitable for the client) and provide risk disclosure statements.

“The new regime certainly imposes greater duties and obligations on banks towards clients. However, the question of whether a product is suitable for an individual depends very much on the circumstances of each case and whether their clients perceive that they have been misled into making the wrong investments,” said Keoy. “Hence, there is no guarantee that similar disputes are less likely under the new regime.”

Even though both clients and banks are less exposed to risks compared to before 2008, there are margin calls and additional collateral lending requirements from private banks due to a drastic decrease in value of collaterals.

“Typically, margin is called and additional collateral is requested when the value of securities held in the margin account has been reduced to below a certain level and/or additional funds are lent to the borrower,” Keoy Soo Khim, partner at Withers told Asian Private Banker.

Keoy Soo Khim partner, Withers

“To reduce the bank’s exposure, it is important for the compliance team of a private bank to remind relationship managers to ensure their clients comply with the terms of the relevant agreement either by calling margin or by requesting additional collateral, as and when required.”

Angela Law special counsel, Withers

To prepare for the potential of litigation, Angela Law, special counsel at Withers advises that private banks ensure that there are well-established policies and guidelines in place in KYC, client risk profiling and suitability assessment. Private banks must see to it that these policies and guidelines are strictly adhered to by all relevant employees.

For discretionary accounts, bankers must document the reasons for their investment decisions and keep the client updated regularly.

“Keeping a good paper trail is vital to the success of any defence. It may therefore be a good time for private banks to organise a compliance course during this time to remind staff to be vigilant when dealing with clients,” said Law.

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R E G U L AT I O N S

MAS shows signs of moving towards Hong Kong standard of suitability: Synpulse

I

n its latest information paper guiding private banks on sales and advisory practices, the Monetary Authority of Singapore (MAS) tends to converge with the client suitability standards set by the Hong Kong Monetary Authority (HKMA), according to Synpulse.

MAS released its Information Paper on Private Banking Sales and Advisory Practices this February, reviewing the standards of governance, investment suitability, pricing controls and disclosures, and culture and conduct in private banks.

Prasanna Venkatesan, partner at Synpulse, told Asian Private Banker that many of the best practices cited in the MAS information paper are already HKMA regulatory requirements.

Prasanna Venkatesan partner, Synpulse

“There is a fundamental shift that the MAS paper has brought about. MAS now starts to speak a similar language, proposing things that are more or less the regulatory norm in Hong Kong,” said Venkatesan.

“Under the more aligned regulatory standards, private bankers that serve clients across two booking centres would find synergies and better client experience on the advisory and suitability side. Sales practices could potentially now come together.”

Currently, private banks tend to separate Singapore and Hong Kong businesses “categorically” with different processes and teams. But as a regional convergence on regulations is emerging, Venkatesan suggested that private banks could consider creating a cross booking model where RMs are able to look through different booking centres and even deploy a single process (with exceptions where needed) for accounts booked in Hong Kong and Singapore.

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“We foresee possible optimisation on the operating costs of compliance as banks will now focus on aligning their processes and control frameworks across Hong Kong and Singapore,” he said.

For banks that only have a Singapore booking centre, the new standards promoted by the information paper means that they will have to invest and adapt their processes and systems, potentially putting in more controls, in line with the more prescriptive list of best practices.

“The ever increasing control needs are currently challenging banks on the cost of compliance, and it is apparent that banks need to look into technologies to automate communication surveillance in order to optimise their cost and achieve scalability,” said Venkatesan.

Hong Kong leads in suitability requirements The Hong Kong regulators have made major changes on regulations around client suitability over the past few years. In 2018, the Securities and Futures Commission (SFC) introduced the categorisation of complex and non-complex products despite reluctance from the industry and put in place a new set of suitability requirements for complex products.

The HKMA aligns with the SFC’s standards but encourages private banks to take full advantage of HKMA’s flexibility by adopting a portfolio suitability approach so that PBs can evaluate clients’ suitability base on the entire portfolio instead of each transaction.

While the best practices suggested in the information paper are not legally binding, MAS originally expected private banks to report their progress of improvements according to the information paper in September. But in the wake of the COVID-19 pandemic, MAS has urged financial institutions to first focus on contingency arrangements related to the pandemic.

In other words, progress towards the new regulatory standards is likely to be delayed, alongside other regulatory reforms put forward by the Singapore regulator.

TECHNOLOGY

COVID-19 piles pressure on PBs to digitalise — without losing human touch

P

rivate banks in Asia should look beyond the marketing hype generated by digitalisation and artificial intelligence (AI), and instead focus on how technology can magnify their existing capabilities, shared Will Lawton, head of QUO, the cloud-based ‘softwareas-a-service’ investment management platform of TradingScreen, a USbased order and execution management systems provider.

“In private banking, digitalisation predominantly happens behind the scenes around the workflows,” Lawton told Asian Private Banker, adding that his firm focuses on improving workflow efficiency for private banks, with a focus on the real-time trading environment.

Will Lawton head of QUO, TradingScreen

“Meanwhile, the relationship managers need a far more supportive experience than they currently have, […] but historically, it has been the wrong way around.”

Lawton identified the underlying conundrum that private banks face on their road to digitalisation: “Private banks have lacked the aggregation capabilities to communicate the expert advice they are giving clients. The answer […] is striking the right balance between increasing aggregated automated advice, and adopting digitalisation without losing the value-add of people.”

“The right balance”, according to Lawton, starts with private banks pinpointing areas of business where technology can “assist, rather than replace, existing business models”.

COVID-19 a catalyst for PBs’ digitalisation The global pandemic has toppled over many traditional approaches to working, as keeping face-to-face interactions is already difficult, if not impossible. Many PBs grapple with both hardware and software issues that prevent them from staying “fully operational”.

“In this interesting period for the wealth industry, there are not only challenges posed by robo-advisory, onboarding, FX transactions, etc., but also the current COVID-19 crisis is pushing banks forward in digitalisation,” Lawton commented. “The old days of contingencies and a backup environment are no longer valid in this moment of crisis.”

While in the past, it was easier for private banks to avoid digitalisation in some cases and only deal with all the IT changes it really had to,

such as compliance-type issues. “But I think now many no longer have that option not to make a decision and carry on with the status quo, or with a very manual type of approach. That has changed within the private banks quite significantly.”

Lawton noted from his conversations with private banks the disparate ways that different banks have been behaving recently: “There are many that try to adjust their approach and improve their workflows, so that they can manage clients remotely and improve the efficiency of their own processes as well.”

Some banks even admitted having been very active in onboarding clients with the digital tools that they have, he said.

When asked if such changes are here to stay when the crisis is eventually brought under control, Lawton was sanguine about the long-lasting impact on the status quo in private banks: “These organisations need to protect their customers and be able to deal efficiently with them in the future, no matter if they are working from home or going to the office. I think that this will be a catalyst.”

More pressure on Asian PBs to digitalise Lawton observed that Asian banks are more advanced on the retail side when compared to their Swiss and European peers, but on the private banking side, they are lagging behind, especially against the larger players in Switzerland and Europe.

“In general, whereas some private banks have been pulled to certain areas of digitalisation, they have not been embracing a more online relationship with their clients for understandable reasons,” he elaborated, “It is strange, because Asian clients are often more transactional than their European counterparts, so one would expect Asian banks to be embracing digitalisation and online trading platforms more.”

Lawton said reasons for this phenomenon differ among banks, but one thing is for certain: in Asia, where nimble challengers such as virtual banks and online brokers are already encroaching on the territory of traditional wealth managers, private banks are expected to act soon.

“Most of the virtual banks have grown quickly, and they are also starting to broaden their service range. They will look at innovating private banking and at delivering service products into the HNW segment as well,” Lawton said, adding that although PBs are still currently offering a complete array of services that virtual banks cannot compare to, the challengers will catch up in the near future.

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TECHNOLOGY

“We are creating a marketplace for FIs to accelerate their business”: Symphony

P

alo-Alto based communications and technology firm Symphony aims to provide wealth managers with “a trusted network” for communication and product-selling, as it partners up with instant messaging platforms.

David Gurle founder and CEO, Symphony

David Gurle, founder and CEO of Symphony Communication Services, told Asian Private Banker that the firm’s first such partnership with Tencent’s WeChat has achieved “seamless connection” between wealth managers and their clients, in addition to helping these companies navigate compliance and security risks.

The company has identified an acute need of financial services companies, especially private wealth managers, to be more agile in connecting with their clients, while meeting all the regulatory requirements and staying compliant.

“In the past two years, some of the most popular personal messaging systems have extended to the professional world of financial services, creating compliance risks as their own security designs prevent these companies from monitoring the communications, both within themselves and with their clients. That led us to this partnership with Tencent,” Gurle said.

The partnership, announced by Symphony in November 2019, has since enabled relationship managers to use the Symphony platform to communicate with their clients on WeChat. The “seamless connection” means that both the RMs and the clients can stick to their familiar interface when talking across platforms.

Gurle explained how compliance risks are addressed in the process: “Our compliance framework makes it possible for us to record and monitor the conversations natively. That is to say, the messages captured and monitored will be automatically ingested into Symphony’s system.” He added, assuringly: “Our clients do not take any risks to have access to users on the WeChat platform as the compliance framework we have in place works out of the box.”

But although Symphony’s platform will record and save all the online communications for its clients, the responsibility of extracting and archiving them according to regulatory terms still lies with the clients.

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More than messaging In recent years, many of Asia’s major private banks have launched their own chat apps and communication platforms — but COOs told Asian Private Banker that this did not prevent RMs returning to popular instant messaging platforms out of “sheer convenience”, which created major compliance concerns.

Gurle saw the problem as innate to the organisations: “[these companies] had multiple silos and items of communication systems, which prevented them from talking to each other, even within their organisations […] and the costs of security were prohibitive.”

He argued that Symphony’s solution focuses on building up the infrastructure for its clients to help accelerate the digital transformation process and automate the workflow. For instance, it provides the clients with tools to customise the platform to align with internal company policies, such as creating information barriers within their organisations to monitor who can talk to whom and in what way.

“Imagine it as a shopping mall: we build the marketplace for financial companies to market their business and sell their products in individual shops. They do not need to build the malls themselves, but can focus on the products.”

The partnership with WeChat creates a network where Symphony users can have secure and compliant access to the 1 billion user network on WeChat and meanwhile, Symphony offers the infrastructure its users can rely on, said Gurle.

Symphony was founded by 2014 by 15 global financial institutions including Goldman Sachs, as a messaging and collaboration platform for financial services companies. Some have even seen it as a challenger to Thomson Reuters and the Bloomberg Terminal.

Currently, the firm has around half a million licensed users on its platform — very much focused on the financial services industry. It has been growing at an annual rate of 40% since inception. And 30% of its user base comes from Asia, while the remaining hails from the US and Europe.

TECHNOLOGY

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TECHNOLOGY

Launched in 2015, the Asian Private Banker Technology Awards recognise financial technology solutions providers that service Asia’s private banks for excellence in innovation, execution, and business performance.

Many congratulations to the winners of the Technology Awards 2019, who each demonstrated a keen awareness of the needs of private banks and wealth managers in Asia, evidence of genuine value-added and solution-based innovation, and a track record of solid business performance.

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INDUSTRY

Coronavirus outbreak exposes gaps in business continuity plans at private banks Social distancing orders by governments around the globe are making it “almost impossible” for private banks to be fully operational remotely using current technology.

W

ith the rapid spread of the COVID-19 pandemic over the last few months, private banks have been under pressure to devise operational guidelines for staff working from home (WFH) or from back-offices. At its most basic, there are hardware issues.

More fundamental is ensuring that client data confidentiality is not compromised in a WFH environment. Yet the biggest lesson that the industry has learnt from the current pandemic is the importance of business continuity planning.

Lacking hardware “I wouldn’t speculate what would happen, but every private bank is trying hard to figure out home office arrangements now,” Ricardo Wenzel, director, wealth & asset management, advisory, KPMG China told Asian Private Banker.

“This is obviously anecdotal, but I have heard a private bank doesn’t have enough laptops for their employees to WFH, so they are experimenting with third-party solution providers to support employees in accessing 37

INDUSTRY

the bank’s system through their own laptop.

Some aspects of work require access to core banking systems. Other involve regulatory requirements for the execution of trades.

Together, this makes it almost impossible to completely WFH.” Ricardo Wenzel director, wealth & asset management, advisory, KPMG China

From an operational perspective, WFH may entail inconvenience. A member of staff at a boutique private bank agrees with the observation that there aren’t enough laptops for staff to WFH.

“I don’t mind heading back to the office as I could work in the office more efficiently anyway, but if we are all required to WFH, I prefer using a company laptop instead of my own device, so I can clearly separate my personal documents with those of the company,” the source told Asian Private Banker. “The bank is in the process of purchasing more laptops just in case the current situation continues.”

She added that because some of her colleagues WFH and others work in the backup office, they need to cope with a slower internet connection and a working environment that is less well equipped for normal operations. This can create communication delays and occasionally misunderstandings that wouldn’t have occurred in regular work settings.

Client data confidentiality Paul McSheaffrey, partner, head of banking & capital markets, Hong Kong, KPMG China told Asian Private Banker that the WFH arrangement for RMs has affected routine surveillance and record-keeping.

“Under the surveillance aspect, you need to have a certain level of supervision, for example, how to keep a record of conversations between the RM and clients when WFH. How does management exercise supervision to ensure that there are proper internal controls? This problem is universal for private banks across all markets,” said McSheaffrey.

Paul McSheaffrey partner, head of banking & capital markets, Hong Kong, KPMG China

Russell Lamb, consultant at Simmons & Simmons told Asian Private Banker in an earlier interview that client confidentiality is more likely to be compromised where employees working remotely access company systems from coffee shops or other public spaces, where confidential client data could be viewed by unauthorised third parties looking at employee screens or extracting information from unsecured public Wi-Fi. Also, staff may be accessing data through their own devices that might not have sufficient cybersecurity measures in place.

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Lamb suggested employers provide relevant staff training on security and privacy risks while working from home and implement a framework detailing how to keep data confidential and secure on any electronic devices used for work.

A recent article published by the US consulting firm McKinsey & Company echoes concerns about the increased risk of cyberattacks in a WFH environment. “Even a single successful phishing attack seriously risks clients’ data and could result in significant legal and reputational costs,” it warns.

To ensure client data confidentiality while WFH, it recommends that private banks “conduct online training for employees and third parties on best practices related to WFH arrangements — including cyberrisk guidelines to ensure data confidentiality”. For example, a virtual desktop can be set up that restricts all sensitive data downloads to a centralised server. And access to client information can be provided on a need-to-know basis only.

Business continuity planning “I do think people need to do scenario-type business continuity planning,” noted McSheaffrey. “Financially, what the business will look like and how it can remain profitable in the longer term are key questions that need to be answered if the current situation continues.”

Wenzel believed that no “quick fix” solution in developing the infrastructure can be sustainable in the long term. “The lesson that has been learned by the industry from this outbreak is the importance of business continuity planning and agility in working arrangements,” he said.

The McKinsey & Company article similarly draws attention to the increased operational risks related to business continuity: “Firms must be prepared for worst-case scenarios in which key personnel are unavailable because of illness or quarantine. This is especially critical for RMs at private banks.

It warns that a lack of contingency procedures for addressing client needs — which are likely greater in times of market volatility — and insufficient clarity on decision rights may result in “bad service, client dissatisfaction, and even attrition”.

In the face of the need for social distancing, the article recommends that RMs “emphasise digital channels to reliably continue regular engagement” that can “secure trust and build rapport with clients”.

It suggests that firms and RMs that have been slow in adopting and promoting digital communication could find themselves “at a clear disadvantage”.

INDUSTRY

EFG zeroes in on Hong Kong IAM segment with new team and “expert-to-expert” support model

E

FG has unveiled a new IAM-dedicated team in Hong Kong helmed by two ex-UBS specialists, in what is the private bank’s clearest signal yet that it intends to compete toe-to-toe for the business of a growing Greater China intermediaries segment.

The team is led by Kitty Chou as head of independent asset managers, North Asia, and Kenneth Chan as deputy head, reporting to Chou. Both hail from UBS, where Chou was Hong Kong Hub head for Global Financial Intermediary Markets and Chan, head of business development for Global Financial Intermediary Markets.

They are joined by Karen Ho, Amanda Kitty Chou Fong, and Alice Chan, who report to head of IAMs, North Asia, EFG Bank Kenneth Chan. The team will work alongside Kelvin Tan, a senior banker and team leader in Hong Kong who reports directly to Chou. For her part, Chou will report to Richard Straus, EFG’s Hong Kong head of private banking.

The additions follow EFG’s release of its 2019-2022 strategic plan last year, which singles out the IAM segment as a global priority, including in Asia, where it is targeting those in the CHF 300-500 million in AUM range. But EFG is also keen on working with new IAMs to help them set up and grow their businesses with a long-term partnership in mind.

No stranger to the region’s IAM space, EFG — by virtue of its acquisition of BSI — already operates a fully-fledged intermediaries service in Singapore overseen by Gino Ragazzini, head of independent asset managers for the bank’s Singapore branch.

Tapping new Chinese wealth But the addition of a Greater China-focused team opens the door for EFG to deepen its coverage of Chinese HNWIs, many of whom have long-standing and substantive relationships with independent firms in Hong Kong. And that is especially true of ‘newer wealth’, which tends to trust individuals over institutions, according to Angela Bow, EFG’s deputy head of APAC, who told Asian Private Banker that many IAMs hold relationships with clients who do not deal directly with private banks out of choice.

Continued on next page → 39

INDUSTRY

Angela Bow, deputy head of Asia Pacific region, EFG Bank

“This is an important reason why we believe working with IAMs is an efficient and effective way to tap into new wealth and lesser-known segments,” Bow said. The other is the opportunity to tap into a pool of investors that has turned to independent setups, fatigued from being sold to by private banks.

“Private banking is built on trust and transparency, but the reality is many of our competitors have diminished the ability to be a trusted advisor,” continued Bow. “Many firms provide a new idea or product every month. However, this is a piecemeal approach that isn’t conducive to holistic wealth management.”

Competitive pricing, best execution Accordingly, EFG is leaning heavily on its open architecture approach — something Bow said many are happy to talk about but few genuinely ‘live’.

“In the age of transparency, living rather than talking about open architecture is key. For this reason, EFG is able to ‘go external’ to source the best pricing, the best execution, and the best solutions for the individual client,” Bow said, emphasising the bank’s capabilities around AMCs and private label funds — investment vehicles favoured by IAMs in Asia.

That pitch will be key to EFG making inroads in the intermediaries space. While the segment is expanding in terms of the number of setups and its share of AUM, EFG is entering a competitive market where peers are pouring resources into their digital services and product suites.

However, few have configured their IAM businesses in the front-toback manner that EFG has, according to North Asia IAM head Chou,

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who said the fragmented approach adopted by a number of players is less effective in serving IAMs and growing alongside them.

“Expert-to-expert” support “What we have put in place is an expert-to-expert support model, with Client Relationship Officers responsible for the global relationships supported by the counsellors, this will not only ensure efficiency and innovation but provide our clients with a high level of comfort when dealing with us,” Chou told Asian Private Banker.

“Our IAM partners will not interact with one individual but with a team of specialists, and we have ensured that every aspect of our IAM offering is pivoted towards making this business as smooth as possible for our partners.”

Indeed, EFG said that it had reorganised its IAM structure in Asia to “achieve greater efficiency and scalability”, naming Singapore-based Chung Lay Ang as business manager tasked with streamlining the product offering, reporting to Oliver Balmelli, deputy CEO and head of private banking at EFG Singapore branch, and regional head of IAM. “EFG is making a strong statement of commitment to Asia by hiring strategic teams,” Bow added.

Meanwhile, EFG is preparing to roll out its multi-custody platform, IAMconnect, in Asia. The solution, developed alongside Expersoft Systems subsidiary AM-One, was launched in Europe late last year “with a high level of success” according to Bow, who said EFG had committed resources to tailor it to the unique regulatory needs of Asia’s IAMs.

PEOPLE

Movers & Shakers Asian Private Banker maps recent industry moves.

For the bigger picture, click on People Moves at www.asianprivatebanker.com

H

aving weathered COVID-19 and its ramifications, several market slumps (and rebounds), the region’s private banks at the end of April were increasingly hopeful that hiring activities would return to normal, with Hong Kong likely to take the lead.

In Hong Kong — where no new COVID-19 cases were detected for five consecutive days at the end of April — recruiters are beginning to see a resurgence of hiring activities. “Since mid-April, activities around hiring have started to pick up in Hong Kong, with people regaining confidence in moving forward,” Katie Brunt, director APAC recruitment at Fowler Fox & Co, told Asian Private Banker.

Asked if private banking wages have seen major swings in the past few months, Brunt remarked: “We haven’t seen any change in compensation yet. This will likely only be reflected later in the year, or next year.”

More broadly speaking, this April was much quieter than the same period last year. Nothing much was happening on the private bank hiring front: the hiring process had been pushed back by at least a full quarter, due to social distancing measures that had curbed face-to-face meetings and working at the office, observed an industry executive search professional, who spoke to Asian Private Banker on the condition of anonymity.

The prolonged hiring process must not be mistaken for a hiring freeze in private banking in 1Q20, a recruiter pointed out. On the contrary, conversations around hiring are still going on, but recruiters and private bankers themselves will not push to make the move until office work is normalised.

In addition, most private banks have not changed their headcount target that was set in January, expecting that these targets will be met towards the middle or the end of the year.

An ideal time for boutique players Whereas large universal banks tend to stick to their core strategies in times of crises, some niche and boutique players have stepped up their hiring game to take on talents despite market uncertainties, according to recruiters. More chunky moves can be expected in the second and third quarters.

According to data from Asian Private Banker‘s Asia 2019 RM Headcount League Table, boutique banks such as EFG (+192.9% YoY), and J. Safra Sarasin (+33.3% YoY) already showed strong headcount growth in 2019.

In April, Swiss pure-play UBP made several senior hires for its Asia business, boosting its Asia headcount by 30% year-on-year.

Greater China still a core market There is a consensus among recruiters that COVID-19 will not turn private banks’ attention away from the Greater China market, a traditionally important and largely resilient core market for banks with a presence in APAC. Many of such banks have been eyeing growth opportunities in the UHNW client segment in China.

Others note that in Asia, the setup of the onshore model has gained more traction compared to a year ago, especially in some of the relatively untapped secondary markets in the region, such as Thailand and the Philippines.

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PEOPLE

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