Many international private
banks piled into Asia during the boom years but had to make rapid
adjustments during the economic slowdown. An executive of one
boutique player that entered the market just a year and a half ago
talks of some of the strategic issues facing the industry in the
region. Elena Torrijos reports.

Liechtenstein’s VP Bank expanded into
Asia by setting up a subsidiary in Singapore in June 2008, a few
months before the global financial crisis really hit hard. Looking
back, the timing was both good and bad.

In an interview in the fourth quarter of last
year, Reto Isenring, managing director and CEO for VP Bank in
Singapore, said that business immediately slowed down after
the crisis broke. The boutique private bank, however,
positioned to cater to those clients that started becoming wary of
the big players in the market.

“Clients realised that big is no longer
beautiful. Having a very good reputation in Europe, having a very
good operating model and tools, we were at a very optimal position
to cash in on those qualities. As a conservative bank, we managed
to acquire a number of clients,” Isenring said.

When VP Bank began its operations in the
city-state, it had a headcount of 15, including people from the
operations side.

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As of October, it had 21, including five
relationship managers. Now that business has been picking up, the
bank is looking to double the number of relationship managers, but
will be selective about hiring. “We are looking for experienced
senior relationship managers,” Isenring told Private Banker
International. There are no plans to acquire a whole team the way
some institutions have, however. In October, it was reported that
70 employees of RBS Coutts in Singapore had resigned, or 28 percent
of the total operation in the country, with most of them moving to
BSI, a Switzerland-based private bank owned by the Generali
insurance group.

“There are pros and cons [to mass poaching]. I
always say that the people need to fit the whole team. Culture has
to be right. I don’t want to start individual banks within our
organisation because that would not benefit our overall strategy of
being a bank which puts a lot of emphasis on continuity and
stability. I do not necessarily see [why we should] engage in this
hiring war in terms of paying exorbitant amounts,” Isenring
said.

“Like in any other industry or sector you have
the right to be properly reimbursed according to the market.
However, is it right that you pay above the market just for the
sake of having the headcount in and then forcing that particular
relationship manager to squeeze out the last bit of money from the
client? That’s the other question. It needs to be a partnership, a
proper partnership between client, bank and relationship
manager.”

He also said that banks must be careful not to
make the mistake, prevalent before the financial crisis, when they
hired very expensive relationship managers that they eventually had
to push into making high returns – resulting in some
mis-selling.

“Product suitability and appropriate risk
profiling of the client, together with education of the client, are
very important measures which all banks have to follow this year
and going forward,” Isenring said. “On our side, we try to [manage] this with a different approach of selecting our relationship
managers. We emphasise more on the long-term on the relationship
management side.”

A proper wealth manager?

Talking about the local market in
particular, he stated: “The Asian client needs to start learning,
to realise what they actually want. Do they want a broker, a trader
where they can buy and sell and not necessarily get advice or do
they want a proper wealth manager?” he said, acknowledging that
many rich Asian clients like to be actively involved in trading
decisions.

When the crisis broke, private banking clients
began requesting more straightforward structures, or ‘vanilla’
products. It was a back-to-basics trend, but this is starting to
wane as an appetite for higher returns comes back as liquidity
continues to be flush.

“The problem is the minute they see their
neighbour making more money on some kind of accumulator-type
product then they are back to the structured product universe,”
Isenring said.

He observes that the challenge in Singapore
and in other parts of the world is the development of true wealth
managers.

“It’s much easier to get a salesman than
somebody with really a long-term view in favour of the client and
not just his own benefit. So that’s going to be the challenge. Get
the right talents, grow the right wealth management,” he said.

For VP Bank, Singapore is the platform for
growth in the region. Southeast Asia will still be its focus, but
it does have an eye on northeast Asia as well, and getting senior
relationship managers with strong books in markets such as China
will be a priority.

According to the 2009 Asia Pacific Wealth
Report from Capgemini and Merrill Lynch, most wealth management
firms are investing in Japan, China, India and Australia, where the
geographic scale and distribution of wealth require an extensive
presence to cater effectively to high net worth individual clients
(HNWI).

The Singapore subsidiary, Isenring said, is
not going to be a booking centre for European assets but is going
to primarily serve Asian clients: “We will merge know-how which we
receive from our head office with our know-how on the ground.”

Isenring declined to disclose the current
level of assets under management, but he says it is not just a few
million.

“It is a larger, substantial amount already.
It’s big enough so that I can comfortably say the bank is happy
with Singapore,” he asserted.

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