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Where do you see the best application of data analytics/machine learning in private banking?
Tee Fong Seng, Pictet Wealth Management Asia
AI and machine learning are the technologies leading to an accelerating digital advance, which will dislocate the financial industry and our relationship with clients. As data becomes ever more valuable, data science that uses these technologies will transform the way investment information is gathered, analysed, employed and presented.
However, technology is dual-use: for financial institutions, cyber is the new systemic risk. Resistance to cyber-attacks that seek to undermine the most basic banking services will become a cardinal test of resilience, as will the security afforded by a robust balance sheet. Client concerns about data privacy will only intensify. In the future, financial institutions, already trusted as data collectors, may find a new role as data custodians.
Technology will ultimately make bankers and financial experts more effective, precise and targeted in the way they work. But it is key to keep the highly personal nature of wealth and asset management in mind. It takes extensive discussion and interaction person-to-person to develop the relationship and nuanced understanding necessary to tailor solutions to each client’s specific needs. Technology won’t be able to replace that.
François Monnet, Credit Suisse Private Banking Asia Pacific
We knew from very early on that technology is critical to our relevance in the future. As such, Credit Suisse was one of the early movers in embracing digital innovation and we remain committed to being at the forefront of digitalisation in the private banking sector.
With the support of technology and data analytics, we augment what our relationship managers can offer to our clients to deliver personalised and timely content suited to the investment appetite of each client.
Consumers in Asia tend to react very positively to digital innovations. Our clients here are also younger, more tech-savvy, and more demanding of digital innovations in banking services. We are simplifying access to the knowledge and resources of the bank, so our clients can communicate efficiently with their relationship managers, identify, and act on the information that is most important to them.
This reinforces our strategy of having a technologysupported relationship manager that is able to provide tailored and relevant advice to our clients. Credit Suisse’s digital strategy will continue to focus on providing tailored advice and self-servicing, seamless onboarding of clients and greater usage of analytics.
Technology at Credit Suisse is of paramount importance; we have a firm belief that technology will shape the future by defining the way clients consume financial services. Therefore, we will continue to harness technology to deliver a higher level of client service.
Cedric Lizin, Standard Chartered Bank
Investment advisory is one area where data analytics and machine learning can greatly improve the quality of our advice and client service.
For instance, data analytics and machine learning can provide personalised content, in the form of investment ideas or product ideas, based on clients’ risk profile, portfolio holdings, recent transactions, client investment personas and preferences, and on what other clients with similarities are interested in.
AI can also be used to identify the “next best action” for clients.
Anirudha Taparia, IIFL Wealth Management Ltd
One of the biggest benefits of data analytics is the ability to better understand client requirements and create customised solutions. In the private banking space, data analytics can be used in multiple ways. Some examples would be to identify different client personas and use (segmentation), actionable alerts on portfolios to clients and RMs (advice), product structuring-innovation, improved reporting & analytics for clients, risk control and firm governance measures.
In addition to client requirements, this will lead to better risk assessment. Further, artificial intelligence and machine learning (AI/ML) tools can be leveraged by wealth management companies to improve client engagements. For example, chat bots can be used to actively engage with clients and resolve basic clients queries in an efficient and seamless manner.
Andreas Zingg, Bank Julius Baer
We view data analytics and machine learning as one of the primary drivers of digital transformation in private banking. Therefore, we have launched a global programme with the goal to establish data & analytics as a core capability of Bank Julius Baer, enabled by a global data platform and a data science workbench.
This will enable data-driven insights for decision making on client service, product offering, content sharing and operational processing — thereby providing a more personalised client experience, while creating efficiencies and reducing risks.
The initial focus areas for our Bank are on creating more personalised insights & recommendations for clients, on mitigating risks during client onboarding and lifecycle management, and on analysing clients’ digital user journey and trading behaviour.
Sonjoy Phukan, Bank of Singapore
Data analytics and machine learning are already widely used for private banking processes such as client risk analyses, chatbots and client onboarding, which have helped to reap savings in both time and costs.
As private banks cater to the bespoke needs of high net worth individuals and families, it is important to look beyond the immediate transactions and focus on a customer’s surrounding journey, needs and aspirations. While data analytics can be optimised for investments, it can also be applied to improve client experiences through personalisation. Using data and insights to design products and services which specifically meet a client’s individual requirements based on their lifestyles and preferences can be a game-changer.
Steven Lo, Citi Private Bank Asia Pacific
For us we believe the value will come from being more data-driven, especially in how we look at our client base. The data will help us understand how we can improve the client experience journey by spotting trends and/ or situations more quickly and being able to react proactively and/or appropriately. In fact, we are undertaking a massive global project in a relationship management application. That is how important we feel data analytics will be to our business.
Terence Chow, RBC Wealth Management Asia
We see the most promising applications of data analytics/machine learning in the following areas of private banking:
Understanding client behaviours in order to improve client servicing, customised investment product
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offerings and investment product marketing
Making the most of the wealth of social media data available to deepen brand value
Improving investment risk management by utilising machine learning to predict market movements (e.g. asset pricing, volatility) and offer actionable insights that can enhance house views
Optimising portfolio management capabilities by using robo-advisory in asset allocation and portfolio monitoring / rebalancing, minimising the need for portfolio manager interventions. For example, in 2019, RBC Wealth Management incorporated sentiment analysis in portfolio management for our equity selection and ESG implementation. Following the inclusion of sentiment analysis from investors, portfolio allocators, brokers and economic influencers, we were able to position our tactical asset allocation through 2020 volatility.
Nitin Jain, Edelweiss Wealth Management
We think this is a critical capability which all banks will have to build as they try and differentiate themselves in the marketplace. There are two places where we use data analytics/machine learning in our business. 1) Investment management: our investment decisions are powered by a combinations of human intellect and judgement in addition to automated trading and algorithms led by AI/ML 2) Client analytics: for understanding the preferences of our customers based on their digital footprint and presenting them with the most appropriate and timely advice/solutions
Anupam Guha, ICICI Securities Limited
The application of data analytics and machine learning going forward will help us in the following areas: hyper-personalisation of the digital platform based on segmentation; customer transaction behaviour and risk profiling; product preference for designing a better product; and (sub)segmentation of clients through analysing client preferences and behaviour, and social media data points.
Lok Yim, Deutsche Bank
We are using Salesforce to create a one-stop data shop for RMs. This is the first step in the bank’s plan to use smarter data analytics to add value to services to our clients in Asia. Achieving this traditionally required RMs and Investment Managers (IMs) to juggle a number of legacy applications and pull datasets from a range of sources. We believe that efficient access to data is not enough. Therefore, we also have downstream systems hosting financial data, but not all data can be easily translated into sales enablement functions for RMs. So, it is important for the right data to be fed into the system and there is a need to understand what key data are most relevant to the RMs’ daily lives.
We are interviewing front-office employees and important stakeholders across APAC to build a data roadmap to enhance our data analytics. We think that value comes when we start integrating data and driving coherence across groups. We must provide more than static data. It is about the relationship between data elements. We need to understand what is doing well versus what’s not. Data can tell us that a certain stock has gone through the roof, for example, but the much more important question is ‘what should we do next?’. That is something our clients need to know.
Shang Xiao, CreditEase Wealth Management
CreditEase has been working in the fintech industry for a long time and continues to utilise technology to promote financial innovation and wealth management. It has innovatively transferred its experience on big data application in the domain of risk management to the domain of wealth management.
CreditEase independently developed the Big Data Client Scorecard, which utilises big data to identify target clients and to categorise client profiles. The results have been applied in precision marketing, empowering CreditEase to better meet client needs, improve business efficiency and to provide asset allocation recommendations and consulting services tailored to specific wealth management stages of different clients Benefiting from the digitalisation in the early stage, by labelling the interests and preferences of clients based on their browsing history and behaviour analysis, CreditEase can recommend the most relevant services and activities to each individual client.
Even more, CreditEase can assign the most fitting client manager to each client based on the analysis of objective characteristics and behaviour patterns of clients and client managers, which improves the order placement rate as well as the client satisfaction rate.
Arnaud Tellier, BNP Paribas Wealth Management
The beauty of digitalisation is the ability to take both structured and unstructured data sets, and leverage technology to convert them into a form that can be easily analysed. Transaction data is an example of a data set that can be examined. But call reports and logs are unstructured and we can leverage artificial intelligence for speech-to-text conversion, and layer machine learning tools to analyse our clients’ investment behaviour and propensity towards certain investment decisions. All these elements serve to produce findings that can help us improve the client experience.
With this data, we can do a multitude of things, from fraud monitoring and prevention for risk mitigation, to hyper-personalisation, where we present curated and relevant content and product offerings to our clients.
The possibilities are endless, only our minds can draw the boundaries of what we can achieve.
Omar Shokur, Indosuez Wealth Management
In terms of client onboarding it can be helpful in name screening and the general KYC process and on the advisory side it can help identifying investment proposals. Having said that, one of the main reasons for clients to make use of products and services offered to them by private banks is actually the human and relationship elements. We strongly believe that by combining these new applications and tools together with the human capabilities of our teams, we can build the best service and offer to our clients.
In no other area of banking is the human-to-human relationship as important as it is in private banking, and this is exactly what sets up apart as an industry. We firmly believe that this will remain the single most important element that sets us apart from other areas of banking.
Tan Siew Meng, HSBC Private Banking Asia
More than ever before, our clients are looking to us to help them manage their wealth and navigate markets. Having a digital platform that supports this goal is critical to this mission. We are looking at developing a hybrid engagement model where technology will handle all of the administrative client touchpoints, opportunity assessments, portfolio risk alerts and other important information touchpoints for our clients.
We see artificial intelligence as critical to our strategy, with a wide range of potential applications in flux across our private banking business. As we continue to digitise client journeys, we see benefits in the use of AI across these experiences — from the delivery of relevant and insight-driven content, to conversational interfaces, to portfolio and risk management. In all instances, using AI to track, detect and predict patterns across enormous amounts of complex data, in combination with our human experience and expertise – our human intelligence – is a key differentiator.
Wang Ya, Private Banking Centre of Bank of China
Big data analysis and machine learning have a great significance both internally (internal management) and externally (customer service) for us. On the one hand, big data analysis is helpful in terms of refining customer profiling and accurately understanding customer investment behaviours. On the other hand, big data analysis is widely used in the field of investment and trading. It can help formulate trading strategies, generate investment recommendations and optimise investment performance.
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How is your bank optimising the utility of the relevant digital tools to prepare frontline staff for client engagement in a post-pandemic environment?
Tee Fong Seng, Pictet Wealth Management Asia
The pandemic has already proven it: digital contact with clients is a reality. Even when the crisis passes, digital interaction (through video calls or digital banking tools) is here to stay. Private banks that cannot handle or upgrade those new communication channels will have a tough time in the future.
Most important for Pictet is to have the capacity to deliver the banks’ knowledge and expertise to clients in an efficient, tailored and easy to understand manner through technology, as we believe digital tools will not replace the face-to-face interactions that are key in private banking, but rather complement it.
François Monnet, Credit Suisse Private Banking Asia Pacific
Credit Suisse did not wait for 2020 to tell us that technology is critical. We have been leading in this field and we believe that the strategy we have deployed to market has three key benefits.
First, it is the empowerment of the client and of the relationship manager. Second, it is about connectivity – anytime, anywhere, the way clients want it. Third, it is about that notion of protecting — making Credit Suisse the ‘guardian angel’ of portfolio performance as well as of the risk parameters of the clients. We are augmenting the service ability of the relationship manager with the support of technology.
In terms of connectivity, client and relationship manager engagement on our various digital tools and platforms is high and it continues to grow exponentially.
Since February 2020, we have seen a significant increase in the use of our digital solutions by our clients and relationship managers. We have also seen an increase in client engagement on Credit Suisse Chat, which allows our clients to conveniently engage with our relationship managers via chat messaging, through which we recorded a threefold increase in the number of orders received in the first half of 2020, as compared to the second half of 2019.
Amid the height of the pandemic, we continued to provide thought leadership and guidance to our clients via about 200 digital engagements across Asia Pacific, enjoying a very positive response as the cumulative attendance for this new type of market engagement exceeded 45,000 participants.
Cedric Lizin, Standard Chartered Bank
We digitalised many of our processes in 2020, including the use of e-signatures and video conferencing.
We launched a video-based role-playing training programme for our relationship managers to help them practise and perfect their virtual client engagement skills.
We will continue to invest into digital in 2021 to modernise our platforms, enhance our digital offering and improve client experience and resiliency.
For instance, today, clients get a 12-month historical portfolio performance view and net positions via the online banking platform or SC Private Banking app. In 2021, clients will have access to investment income and expenses reporting, asset allocation and portfolio risk analytics.
We are working on automatically sending tailored investment and product ideas to clients based on their profile and preferences and on what others like them are doing.
We are experimenting with AI-based applications in the fields of identifying new HNW prospects or predicting client attrition, for example. These however remain in early stages.
In addition, as more engagement goes online, we are stepping up on cyber, fraud and operational risk management capabilities in order to continue providing a trusted and safe banking environment for our clients.
Anirudha Taparia, IIFL Wealth Management Ltd
Wealth management companies are now thinking like technology firms. In our case, what we had envisaged in the digital space for the coming few years is all happening within months. Post-COVID-19, IIFL Wealth has optimised tools for digital engagement with clients. With face to face interactions limited, our frontline teams have been using digital medium like MS Teams and Zoom effectively. With strong tech support and specific trainings, RMs have adapted to seamless digital engagements.
Along with this, the firm has ensured adequate support in terms of materials/reports that can used effectively during virtual meetings (new client meetings and client portfolio reviews among others). Alongside this, to keep interactions ongoing, there is a calendar of curated digital events organised across different themes to ensure that clients remain connected. We have subsequently enhanced the use of technology by creating workflows and dashboards for our front office teams, which helps improve their productivity and remain connected virtually.
Andreas Zingg, Bank Julius Baer
In light of COVID-19, Bank Julius Baer globally has accelerated its investments in digital capabilities, such as remote working infrastructure, video call capabilities, enhanced eBanking features, digital signature, going paperless where possible, chat applications for our clients, and more.
Many of these capabilities have been launched in Asia, with others to follow in the coming months. Adoption of such enhanced digital capabilities by our front office and clients has been rather seamless, with certain capabilities achieving the same adoption levels within weeks which in the past would have taken months. COVID-19 has proven the last sceptic that digital tools are of strategic importance, also in private banking, as they are an integral part of providing personalised client service by our relationship managers, while at the same time creating efficiencies for the front and back office teams.
Sonjoy Phukan, Bank of Singapore
Since the start of 2020, we have seen an increase in digital engagement with our clients. Currently, more than 75% of our client accounts have signed up for our digital services up from about 50% at the end of January 2020. This uptick in adoption is likely to outlast the pandemic as we expect to see a more digitally demanding client base globally in the new normal.
As they adapt to the new normal, our clients continue to look for seamless access to our products and services.
Our digital services provide clients with the benefit of accessing what they need, anytime and anywhere, with minimal physical contact or the need to travel. They can securely communicate and share documents with their relationship managers, view our research reports and provide online instructions for remittances and payments. Our services are equipped with audio and chat functions which can be accessed via desktop, mobile and tablets and eliminate the need for physical signatures, paper-based processes and multiple call backs. Clients in Singapore, Malaysia and Greater China markets have embraced our digital services faster than other markets.
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We have converted physical client engagements to virtual ones and extended digital onboarding to prospective clients. The aim is to ensure that our products and services remain accessible with minimal physical contact.
In terms of preparing our employees for evolving work demands, we have enhanced our online learning and development initiatives to include professional development, leadership and product training. Our employees have full access to our suite of personal and professional development online courses on platforms such as Coursera, LinkedIn Learning and Learn@IBF programmes, where they are able to attain certifications in areas such as Python programming, agile methodology and design thinking.
Steven Lo, Citi Private Bank Asia Pacific
Our plan has always been to invest heavily in technology as our client base transitions to a younger generation who prefer a high level of digital engagement. We view our approach to technology as a means of enhancing the client experience in this regard.
We have the advantage of looking across our extensive franchise and being able to take advantage of what has been developed in other parts of the bank. In fact our Consumer Bank has been recognised by the industry for their winning apps and our close collaboration with them will allow us to tap on what could also work for our client base.
Also, having had almost a year long experience in utilising digital tools, we now have the insight into the gaps — or what you might call "the less-thanperfect situations" — and what we need to improve upon with our future tech dollars.
Terence Chow, RBC Wealth Management Asia
RBC Wealth Management Asia’s digital strategy is centred around delivering an unrivalled client experience, optimising our core technology and delivering world class business development.
Instead of viewing client touch points as discrete interactions with the bank, we believe that all frontto-back touch points combine to create an unrivalled client experience.
We have been modernising our technology over the past few years. Unlike some of our competitors — with complex legacy platforms which get in the way of a sustainable digital transformation — we have a simplified and nimble core system. This system sets the foundation for the next stage of our digital transformation, which is to embrace software-as-a-service to create an integrated financial services ecosystem.
Wealthtech and fintech are innovating at a rate that was previously unimaginable, and we want to capitalise on the innovation and speed-to-market they enable. For example, we are establishing social messaging channels to serve our clients and to market our offerings. We are developing strategic partnerships with select vendors who will support us to accelerate our front-to-back digitisation ambition.
Nitin Jain, Edelweiss Wealth Management
The world has evolved to a situation where our RMs now have their entire “office in their laptop”. Everything they need, starting from portfolio advisory capability, to understanding details of a product, to interacting with the team members sitting across the country, to dealing with customers, to tracking performance of their portfolios, and getting new ideas, is now digitally enabled for our advisors. Ths is core to our business and the idea is to empower them in such a way that it allows them to add more value for the customer and be more productive, without having to spend as much time in the office.
Shang Xiao, CreditEase Wealth Management
CreditEase Wealth Management has developed the Financial Planner App for financial planners, which enables financial planners to share articles, opinions, and WeChat posts of strategy managers to target clients smartly and easily.
Our intelligent robot client service offers automatic Q&As, resulting in a drastic improvement of the efficiency of feedback, and a reduction in the workload of supporting staff.
The Mobile Dashboard to Managers on our Financial Planner App allows managers to easily track on one page key financial indicators, such as team activity, staff daily performance, pipeline of the month etc. All of the above can make management more efficient and standardised.
Our online 1+N professional team service model means that one account manager serves as the contact point for the professional service team and various product/service experts. As our customers became more and more used to online service models, we have found some of them are more willing to interact through online video chats rather than going to a particular office offline. This also means that our experts can serve more HNW clients and are not limited to a specific geographical location.
Arnaud Tellier, BNP Paribas Wealth Management
There are two huge opportunities for us to move forward on this.
One being the increasing use of myWealth, our onestop digital banking platform for clients to have immediate access to their portfolios and trade online. Our frontline staff are able to co-browse with our clients, so that we can see exactly what they see – this helps us to advise our clients better, and put the power back into their hands.
The second avenue is integrating into our clients’ existing ecosystems. In this post-pandemic environment, we see communication evolve so rapidly. Our RMs and clients have moved from a world where meeting face-to-face is the norm, seamlessly into online and social platforms where clients are already on. This has cemented the bank’s belief in earlier digital investments and accelerated our digital roadmap. BNP Paribas Wealth Management’s strong digital offering has put it at the forefront of the private banking community. Technology and advice has never been this easy and together with their private bankers, investors would be better positioned to maximise long-term returns.
Omar Shokur, Indosuez Wealth Management
We have a clear digital strategy in place supported by sufficient resources to improve digitalisation of our client onboarding processes and to continuously improve the selling process of the front line. The pandemic has underlined the importance of a high degree of digitalisation when staff are working remotely and when face-to-face contact with clients is not an option.
In addition, we are strengthening our efforts to introduce transactional capabilities in our e-banking environment and we will enhance our mobile banking capabilities as part of the 'MyIndosuez' suite of products. Although most contact with clients takes place by phone, we are reviewing the addition of video capabilities as a means of communication.
In a post-pandemic environment, we will be working more with external fintech technology providers in specialised functional areas through the completion of our API infrastructure around the core banking system.
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Finally, it is important to note that in 2020, we increased the number of virtual events with our clients. The purpose of these events was to share our views on the markets, as well as on other topics such as private equity markets, the post-COVID world, etc.
These initiatives were very well received by our clients and we will therefore continue to propose this in the future.
August Hatecke, UBS Global Wealth Management
Ever since our digitalisation journey in APAC began, the way we work and interact with our clients has transformed. This season has put our platforms such as UBS e-banking, e-trading, UBS Advisor Messaging to the test. We are proud of how they have been arming our client advisors with stability and sustained growth during 2020.
Some examples of our accelerations include:
We bring the scale of our digital platforms into play to ensure our business continues as per usual under the “new normal”. Currently, about 90% of our employees across APAC can work from home with remote access. In light of the pandemic and the need for a more comprehensive remote access platform, we accelerated our plans and launched UBS Workspace, a new platform that enhances our productivity and mobility, months before its original launch date. So far, we have enabled majority of all staff across APAC region to UBS Workspace (including Wealth Management and Investment Bank), to enhance both employee and client experience while meeting all regulatory needs.
UBS Workspace is the new end user platform which allows our staff to access their desktop from any devices, wherever they are. It allows flexible working and improves performance and stability.
Our employees are equipped to meet all regulatory needs through provisioning of UBS Workspace capabilities as part of our Bring Your Own Device (BYOD) strategy. In the matter of a few weeks, UBS Group Technology worked round the clock to migrate an additional 10,000 employees onto UBS Workspace, an enhanced platform that changes the way we work together equipped with new tools for communication, productivity and mobility. In addition to these technical capabilities, these tools address mobility needs and enable social distancing across our divisions.
We rolled out digital signatures to evidence internal review and approvals, strengthening efficiency to over 20 processes. This digital signature is a first for UBS GWM globally.
We launched Direct Investment Insights (DII), a new capability in our Digital Banking which offer one of the best client experiences with the latest insights, curated from our CIO House views and latest overnight developments, linked to actionable ideas.
We have more upcoming digital accelerations planned and in the works that will enhance our employee experience as we work around the postpandemic environment.
Wang Ya, Private Banking Centre of Bank of China
In the post-pandemic era, we will fully embrace the employment of emerging channels and the use of digital tools to reduce operational risks, increase efficiency and optimise service experience.
The first step would be improving of our CRM system with an optimised integration of trading systems, marketing systems, and “portfolio performance diagnosis functions”.
At the same time, we are committed to establishing an online platform to disseminate efficiently our investment strategies to empower our RMs and ICs with timely solutions and digital tools so as to provide customers with professional and customised services.
As expat packages shrink, private bankers are going back home
As immigration departments are getting tougher in approving work visas and many private banks are “doing away” with expat packages, private bankers are thinking of returning to their home regions.
Restructuring at a number of banks and a pandemic-induced urge to rethink life priorities have led expat private bankers — both Westerners working in Asia and foreign-educated Asians working in Europe or the US — to consider moving back to their native countries.
Andrew Zee, team lead, principal consultant, private banking and wealth management at Selby Jennings Singapore, told Asian Private Banker that his team has helped to redeploy to Singapore a number of Singaporean bankers who used to work at banks in Europe.
“For both groups mentioned above, there was either a restructuring of their roles, or they decided that because of the pandemic, it made more sense to return home and be with their family or loved ones. In some instances, the candidates preferred to return home and have a career change,” explained Zee.
A preference for home-grown staff
An experienced private banking headhunter — who preferred not to be named — added that Singapore banks over the last few years have been
cutting expat bankers’ benefits, to the point that most banks are now “doing away” with expat packages.
Asian Private Banker has received feedback from various sources over the past few months that working visa applications in both Hong Kong and Singapore have been delayed, and the authorities have become stricter inapproving foreign hires.
Due to the need to preserve local job opportunities in an economy weakened by the pandemic, the Ministry of Manpower (MoM) in Singapore recently lengthened the mandatory job posting on the Singapore government career website from 14 days to 28 days, before an employer can apply to fill the vacancy with an employee with either an Employment Pass (applicable to job roles offering a monthly salaries of S$4,500 or above) or an S Pass (monthly salaries of S$2,500 or above).
Zee said there is a preference for Singaporeans or Singapore permanent residents to fill mid-level roles demanding a monthly salary of S$15k or below, and the MoM may ask the bank to reconsider, if the recruitment required an Employment Pass for a role paying a monthly salary below S$20k.
“If the company, at a minimum, has a staff of more than ten, usually there shouldn’t be any issues to take on one EP, provided the company follows the MoM guidelines regarding the number of Employment Pass holders in the company,” Zee said. “There isn’t an exact limit right now, but what we have always looked at is a ratio of 7:3 or 8:2 for local to non-local employees.”
Longer visa application process
Besides officially lengthening the time required to post a job advertisement, the visa application process has become longer on account of remote working situations and the reflux of applications as the pandemic situation stabilises in Singapore.
“Due to the pandemic, the time needed to obtain an Employment Pass has been extended to probably a month or two — compared to around two weeks previously. But this is just a delay due to the lockdown; there aren’t a lot of pushbacks,” he said.
The trend of Western private bankers leaving Asia’s financial hubs has been observed in Hong Kong as well. An increasing focus on mainland China business has made the private banking industry less appealing to expats.
A headhunter told Asian Private Banker that a decade ago, only 45-50% of employers had a slight preference for bankers able to speak Mandarin. Now, 80-90% of employers consider the ability to communicate in Mandarin a must.
And in addition to the language requirement, what is most coveted by private bank employers in Hong Kong is a mainland Chinese clients network that the new hire can bring along.
Demand for factor investing increases “materially” in Asian HNWIs
The appetite for systematic factor investing has kept growing over the past few years, especially within the DPM business in Asia’s private banking industry.
“We have seen interest in factor investing increase materially in Asia in recent years, as market providers have demonstrated the virtue of smart beta strategies for cost-conscious investors,” Jean Chia, head of portfolio management and research office, Bank of Singapore told Asian Private Banker.
She highlighted that although Asian factor investing strategies are coming off lower bases, growth rates in the regions are typically outpacing other regions.
That has been true in particular within the DPM portfolios of PB clients, because most factor investment tends to be quantitative in nature, technical and difficult to understand. “As such, partnering with an informed investor (such as through DPM teams in PBs) has been a natural route for clients,” she said. “We expect the ongoing trend toward DPM will be a key growth driver of factor investing.”
Diversified and balanced portfolios
Stephen Quance, global director, factor investing at asset manager Invesco, agreed that there will be a growing demand for factor investing within wealth management in the long run.
Commenting on client appetite, he highlighted that it’s “much more” common for an institutional investor to develop in-house factor capability than for wholesale investors.
“Most institutions utilise a multi-factor approach with strategic objectives. This is common with wholesalers as well, but single-factor strategies and tactical positioning are rather more common,” he added. William Ma, CIO for Noah Holdings, added that quantitative strategies are complementary to active fundamental ones for investors who construct a diversified and balanced portfolio, especially as in
recent years, active hedge fund managers have been using a more concentrated approach.
Currently, the top 10 holdings of a typical hedge fund accounts for 75% of its total AUM compared to less than 50% five years ago, he pointed out. By contrast, quantitative strategies’ allocation tends to be more diversified as a typical one has over 200 stocks in holdings.
“From our analysis, domestic Chinese HNWI’s demand for low volatility stable return products has increased in past few years, in particular after the recent higher market volatility,” Ma said. “This demand driven trend has benefited the emergence of factor investing quantitative hedge funds in the domestic China A-share market, in particular the high frequency market neutral China A-share strategy.”
ESG as a factor gaining traction
As ESG is a rising trend for the industry, factor adoption and ESG adoption often occur in parallel, Quance said. “We believe this makes sense since both utilise data and characteristics to build diversified portfolios,” he added.
Adrian Zuercher, head global asset allocation, UBS Global Wealth Management CIO office, shares this sentiment, saying that ESG is a major topic, even lthough the bank does not specify ESG as a classical style factor.
“Our key focus is on ESG and sustainable investing (SI), where we launched 100% SI-compliant mandate solutions for our WM clients three years ago,” he said. “We continue to grow our SI shelf in the field of private markets as well.” Bank of Singapore has seen factor rotation among clients throughout the past 18 months. Chia said that 2019 and 1Q20 saw strong demand for ‘momentum’ and ‘emerging market’ factors.
In March 2020, once the impact was being felt of the global pandemic, investors began seeking investment opportunities in factors such as value, ESG, quality, and minimum volatility. “This allowed for exposure to affected markets and asset classes while limiting volatility and keeping risk manageable,” she added.
However, she said that the momentum factor has resonated well among clients during the pandemic as investorscontinue to allocate capital to the “stay-at-home” and digitalisation themes.
On the ESG factor, Chia echoed Zuercher and Quance’s views, saying that the bank has seen record inflows into ESG strategies year to date. “We expect this trend to continue as investors will keep on emphasising ESG factors alongside traditional financial metrics,” she said.
Concerns remain
While a number of PBs have started to onboard quantitative funds on their product platform, either through third party partnership or inhouse development, some players are adopting a wait and see attitude. Wealth manager Noah is one of them.
Steve Zeng, Steve Zeng. CEO of Noah International (Hong Kong), told Asian Private Banker that single factors can be cyclical, and thus investors are advised to combine these into multi-factor portfolios. “However, even a well diversified long/short multi-factor portfolio can have significant drawdowns or muted returns over time, which can be unnerving for our investors who are not as familiar as PB investors with quantitative investment methods,” he said.
In addition, for some HNWIs, it can be difficult to separate compensated and uncompensated risks in a real-world implementation. “As it stands now, you can’t just buy value factor or quality or momentum without other risks in the same package,” he said.
From the client demand’s perspective, clients rather invest in quality companies with clear risk disclosure than those which have targetspecific risks that cannot be separated from other risks. “That’s why our product development has been tilted towards alpha strategies,” he said. “But as our clients become more sophisticated, with our educational efforts, regarding these products, we believe these kinds of products will be made available on our product shelve in the future.”
