Delegates at the 21st
Private Banker International Wealth Summit in Singapore
heard that success in global private banking depends on clearly
deciding which clients to target, focusing on sustainable growth
and delivering client centricity. Ronan McCaughey sums up the key
talking points.
Go deeper with GlobalData
Numerous challenges currently face
the global private banking and wealth management industry – from
regulatory obstacles and declining industry profitability, to
attracting talented staff.
However, providers can tap into
plentiful opportunities in the sector, and particularly in Asia, if
they adapt to the changing global wealth landscape and execute a
clear client segmentation strategy.
That was the over-arching
recommendation by a series of top-class speakers from major banks
at the Private Banker International Wealth Summit, held at
Raffles Hotel in Singapore, on 13 October.
Several of the speakers also
underlined the core importance of technology. Attendees heard that
efficient IT systems would help drive down the costs of running
private banking businesses but new technologies would also help
banks engage with the next generation of HNW investors.
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By GlobalDataRemaining relevant to this
increasingly younger, and tech-savvy, segment is a key concern for
private banking heads in the next 5-10 years as the industry enters
a major era of wealth transfer.
Focus on scale
With market fragmentation minimising
the opportunities for wealth managers to create critical mass, RBS
Coutts Asia CEO Nick Pollard said building critical mass was a core
building block for a “winning strategy” in global private
banking.
“Our strength has been to
understand where we can have critical mass and we have become much
more focused on sustainable growth,” said Pollard.
Pollard noted that several factors
contribute to a successful private banking business.
These include:
- A differentiated service
model - Focus on markets with scale
opportunities - Innovation at the client
interface - Eliminate areas of economic
loss - A strong brand
A consistent message from Pollard
was that wealth managers need to focus on building scale where it
is achievable.
He said: “Make sure you are
relevant in that space and grow the sweet spot.”
Segment
carefully
Private banks and wealth managers are
dealing with declining industry profitability, regulatory obstacles
and an increasing focus on transparency of fees and costings.
Given these brakes on
profitability, Shayne Nelson, Standard Chartered’s global head for
high value client coverage and Private Bank CEO, emphasised the
need to clearly target client groups, such as entrepreneurs.
“There is no silver bullet for
private banking. Decide which clients to target [because] using a
scattergun approach is not a strategy that is going to work going
forward,” Nelson said.
Like Pollard, Nelson said it was
imperative to have scale in order to be a viable private banking
business.
He also urged the sector to be more
disciplined about productivity management.
“We look for our relationship
managers to return their costs in the first year,” said Nelson.
Asked what would be the optimal
cost/income ratio for the private banking sector to advance, Nelson
said: “Around 65% in Asia would be a pretty good number. To get to
that number you need scale.”
Attracting and retaining talented
staff remains a significant problem facing the global private
banking and one that was echoed throughout the summit.
Nelson added: “The whole
merry-go-round of staff is not helping the private bank or
clients.”
Retain talent
Pollard said that, although it is
important to reward staff with competitive packages, there is also
a need for organisations to make staff feel part of the
business.
Nelson said branding also plays a
role when it comes to attracting talent.
“The brand is very important for
relationship managers,” said Nelson. “It is not just important to
develop relationship managers, but also team leaders that can
provide training [for other staff].”
Barend Janssens, head of Royal Bank
of Canada’s wealth management emerging markets business,
contextualised the changing global wealth landscape by explaining
that it is impacting all private banking and wealth management
operating models.
Janssens said: “Let’s get real;
this is a business that has difficulty making money now.”
Attention:
culture
He also cautioned industry players
considering expanding into foreign markets to be aware of cultural
and potential language barriers when operating in a new market.
This was backed up by responses to
an interactive poll run at the summit (see results on page
11). Almost two-thirds of respondents agreed that some Western
banks in Asia will have to close down or start to consolidate
themselves as a result of rising costs.
Stephanie Lair, head of investment
services Asia at BNP Paribas Wealth Management, used the fact that
41% of high net worth individuals (HNWIs) are aged 45 or younger to
illustrate the changing demographic profile.
Lair explained that the major
concerns for HNWIs today are: capital preservation; effective
portfolio management and receiving specialised advice.
To offer value-added features for
HNWIs, she argued that private bankers and wealth managers should
leverage investment banking tools and technologies.
“Give access [to HNWIs] to various
types of tangible assets through external or internal cooperation,”
said Lair
All eyes on
Asia
The opportunity in Asia for private
banks and wealth managers was a major theme explored during the
summit, and particularly by Bank of Singapore CEO Renato de
Guzman.
Credit Suisse’s Global Wealth
Report 2011 puts many of these opportunities into context by
stating that Singapore’s total wealth grew by $307bn from January
2010 to June 2011 – making it among the top 20 contributors of
global wealth growth during the period.
The report also noted that total
household wealth in Asia-Pacific rose by 23% from $61trn in January
2010 to $75trn in June 2011. This contrasted with 9.2% and 4.8%
total wealth growth in North America and Europe over the same
period respectively
Standard Chartered’s Nelson
highlighted that although European market sentiment is centred on
wealth preservation, in Asia, the focus is on wealth
generation.
Nelson said it is therefore
important for private banks to tailor their products accordingly to
the needs of clients in Asia-Pacific.
“Asians like Asians products,” said
Nelson.
Asia wants own private
banks
De Guzman made a key point at the
summit when he emphasised the growing demand for private banks with
“Asian roots”.
He said Asian clients have diverse
private banking and wealth management needs, but there are also
some commonalities. For example, many are self-made and are
categorised as “new wealth”.
Discussing the evolution of Asia’s
wealth management market and clients’ behaviour, De Guzman noted
that while first-generation clients actively manage their wealth,
second-generation wealthy individuals “are more open to
discretionary solutions”.
De Guzman’s comments came after an
interactive poll conducted during the summit found that the
majority of delegates strongly agreed that it would take between
two and five years for Asian-based domestic banks to break into the
top-10 wealth managers globally.
Picking up on the poll result,
Nelson felt two to five years could be too soon for Asian-based
domestic banks.
Citing the example of China, he
said: “Onshore Chinese banks are not great at wealth management,
but they will pick it up fast. The Chinese banks are hungry and
they will get their act together.”
Client
centricity
A breakdown in trust between clients
and advisers has been one of the major characteristics of the
post-crisis period.
Bruce Weatherill, CEO and founder
of Bruce Weatherill Executive Consulting, stressed the need for a
return to client centricity in private banking and wealth
management.
“Client-centric organisations will
be the most successful since they nurture and encourage a trusted
adviser relationship,” noted Weatherill.
According to Weatherill, wealth
management clients are demanding a new business model from industry
providers.
“Clients have to be at the centre
of what we are doing under which they get what they want and how
[they what it] delivered,” said Weatherill.
Weatherill argued that a huge
proportion of banks do not reward private bankers in terms of key
performance indicators and called for a better understanding of the
drivers of trust, saying this would increase profitability.
In his view, one way for private
banks to gain a better understanding of the “drivers of trust”
would be measure the client experience.
Social media’s
role
An insightful analysis during the
summit came from Caroline Garnham, founder of Family Bhive, an
online community for HNW investors and the organisations that serve
them.
In the first instance, she said it
was important for private banks to build brand awareness and
deliver effective marketing, an area where social media can also
play a role.
Garnham explained that businesses
serving the HNW community are concerned that social media
platforms, such as Twitter, Facebook and YouTube are too amorphous
and undifferentiated, but said a easy-to-use website catering to
the UHNW community has several advantages.
When engaging with HNW clients,
Garnham said: “Social media is about transparency, speed and
service.”
Prize is still up for
grabs
Overall, Pollard succinctly summed up
the state of the global private banking and wealth management
industry, and the opportunities and challenges within it.
“The prize is enormous, but nobody
has won anything yet,” he said.
To view interactive poll results
from the PBI Wealth Summit, click here
See also:
Banker KPIs need to be focused on
client
