A banker almost anywhere in Asia could say the same, due to the explosion of new millionnaires and billionaires in region in the past decade.
The newly wealthy elite, just like America’s early settlers, tend to be fearless enterprising types, ready to risk everything in a bid to grab an even bigger fortune.
This gung-ho style contrasts fairly starkly with the traditional agenda of the private banker, which is to steer clients towards investment strategies aimed at wealth preservation and longer term, moderate but steady growth. Neither are such trail-blazing clients particularly receptive to the concept of discretionary investment services, where the bank takes a more active role while the client takes a back seat and which are of course more profitable for the bank.
Further complicating the picture is the fact wealth management services have only been battling in this tough region for about 10 years, as opposed to the long-established operations in Europe and the US. So how well are banks in Asia managing to match client’s requirements with the right products and services?
Frontier spirit
“The large Asian community of entrepreneurs, the ‘first generation wealth’, who started from scratch and made a few concentrated investment decisions which brought in good returns, usually favour short term trading and take a hands on approach,” says Marc Van de Walle, head of product management at Bank of Singapore
The logic is easy to see. Firstly, if you’ve built a fortune making your own decisions, why change that approach? Secondly, Asia offers a mouthwatering menu of tempting IPOs and fast-growing companies. And thirdly, the vibrant market means entrepreneurs are able to mortgage shares in their own companies in order to trade in others. Plus, they often have in-depth information about these companies, since high levels of stock are concentrated in the hands of a relatively small number of families – around 200, according to HSBC’s Mr Mahendran – who tend to know each other.
With share trading remaining so attractive, Mr Van de Walle says that an average of just 10 per cent of clients in Asia are using discretionary services. Meanwhile, 50 per cent are opting for advisory services – where the bank executes the client’s investment decisions – and a further 40 per cent prefer to trade their own assets directly. “There are still people who call their banker several times a day,” he says. This presents quite a challenge for wealth managers seeking to meet clients’ requirements in the traditional way.
Changing trends
However, the situation is changing. Bank of Singapore, for example, is seeing its discretionary book of business grow. Mr Van de Walle says that in the past three years its assets under management have risen by 15 to 20 per cent but assets in discretionary portfolios have grown by 50 per cent over the period.
“Another generation of clients is emerging, which is more receptive to discretionary,” explains Allen Lo, deputy chief executive of UBS Asia Pacific Wealth Management.
This second generation could be the offspring of entrepreneurs who do not share their parents’ appetite for getting their hands dirty, although Mr Lo says that many younger investors are keen to be involved heavily in investment decisions.
The new generation favouring discretionary management also comprises investors who are based offshore and therefore do not feel they are close enough to the market to make decisions.
Then there are those who have been spooked by the global financial crisis. “Since 1997 we have been seeing a willingness to diversify – increasingly through the multi manager route,” says Mr Lo.
Clients also want more advice on how to balance their portfolios. HSBC’s Mr Mahendran, an asset allocation specialist, says he has never been so busy. “Clients are demanding much more of my time.” They are also wary of structured products, he says. “They are much more interested in asset allocation and research.”
Clients are diversifying in terms of currencies too, shifting from focusing on the US dollar to a mix of currencies closer to home, including the Singapore dollar, the Australian dollar and China’s newly internationalised RMB.
Many clients have lost the stomach for taking larger risks too. Mr Van de Walle says: “Before the 2008-2009 crisis, there was much more appetite for leveraged investments but the financial crisis has taught clients that maximum leverage is not always the best thing. So there is more moderation in leverage.” The bank addresses this by advising clients to borrow against cash-flow producing assets – typically bonds – in order to service the interest payments of the loan.
