Advertisement
Advertisement

Super-wealthy demand more

Kennedy Lau

A swelling among the ranks of the nouveau riche in Asia in recent years has fuelled growth in the region's private banking sector, with many firms servicing their clients out of Hong Kong.

But with the new opportunities come new challenges for private banks to offer better services and to cultivate the necessary human resources to tap this growing wealth.

According to the Capgemini/Merrill Lynch World Wealth Report 2006, there are 2.4million high net-worth individuals with more than US$1million worth of financial assets in the Asia-Pacific, and their number is growing. With their wealth totalling nearly US$8trillion, this lucrative market offers huge opportunities for private banks.

The report showed that the number of high net-worth individuals in Hong Kong grew by 14.4 per cent in 2005 on the back of gross domestic product growth and stock market gains.

Multinational and investment banks are moving into the region to capitalise on these opportunities. Several international banks such as Citigroup Private Bank, Societe Generale, Credit Suisse, UBS, Rabobank and Sarasin have stepped up their commitments in the region.

According to Bear Stearns, wealth management is the fastest growing segment of the financial services industry, with potential fees three times higher than traditional investment banks.

Most of the rising number of high net-worth individuals are entrepreneurs from different industries and are specialists in their field. But when it comes to asset allocations strategy, loan facility arrangements, or even tax and estate planning for the family, advice on these matters from a private banker is always welcome.

Today's high net-worth individuals are more informed and sophisticated than before. To accommodate their needs, private banks are transforming their service platforms.

'The old version service platform, such as wealth preservation, passive investment management and discretionary managed portfolio, where the bankers are empowered to put together a portfolio designed to [suit] the client's risk-return profile, is moving into a much more dynamic, entrepreneurial-focused new era,' said Kaven Leung, managing director and Asia market region head of Citigroup Private Bank.

'Now, the client-banker relationship is building on how to expand the client's private wealth and, more importantly, add value to the client's business wealth,' Mr Leung said.

'The idea is to assist them in continuing to expand, to position, and to create a diversified portfolio or asset allocation strategy that fits their objective.'

A team approach is also taken to handle this client-banker relationship, and Mr Leung said on average there could be more than 10 bankers servicing the same client at the same time.

Getting to know the client better is another theme in the industry, and this involves consultations from different areas of expertise, ranging from investment to financing, trust planning, and corporate banking.

'Private bankers take a long-term approach in building up their relationship with clients. Armed with the right mindset of building trust, they seek to know their family well, get them to open up, let the client discuss their needs in detail with the bankers,' Mr Leung said.

Apart from offering objective advice in wealth structuring, Citigroup is leveraging the whole gamut of products and services from all its businesses.

Innovative and customised opportunities are being offered, including hedge funds, private equity real estate and structured products not available to retail or mass affluent customers.

To ensure that clients' interests are taken care of, and to introduce solutions to meet their needs, Citigroup has installed the 'open architecture', an institutional process to access best-in-class products from other providers.

'These solutions are not limited to private wealth; their interests in business wealth are well taken care of,' Mr Leung said.

'Bankers are your advisers in business expansion, liquidity events, public listing, or even in cross-jurisdiction linking the clients with overseas partners to grow their business.'

High net-worth individuals often spread their wealth across a number of private banks. Some do it to get the lowest charges in handling their transactions, while others simply do it for diversification purposes and to get alternative opinions.

Facing a highly competitive environment and more demanding clientele, banks are devising ways to groom their private bankers.

These days, bankers are trained to use traditional capital market tools and treasury for short-term financing needs, arrange lending facilities to fulfil the appropriate capital structure, and provide advice on trust and estate planning.

Talent alone is not sufficient to match the growth of clients' needs, and this is posing another major challenge for private banks. They are pulling in would-be private bankers from other banking fields such as treasury, investment banks and corporate banks, and putting them through two to three years of intensive training.

To retain the best in the industry, Mr Leung said Citigroup Private Bank empowered its bankers by allowing them to make the decisions and work with top-notch people, and by offering them room to grow and develop their techniques and things that excite them about being a private banker.

For those wanting to convert to private banking, Mr Leung said: 'Keep up to date with industry developments, and be able to absorb new techniques fast and to take a long-term approach for the total solution.'

Post