Southeast Asian banks, particularly non-Singaporean firms, face a common hurdle: how to lure rich clients who tend to use global players’ offshore private banking services.
Wealth management heads at AmInvestment Bank, CIMB, DBS and Maybank gathered recently* with AsianInvestor and BNY Mellon to discuss their strategies and the obstacles they face on this front.
Malaysia’s CIMB, for instance, has undergone something of a shift in its approach in the past year or two. “We used to only target onshore money going to Singapore; today we want to stop the onshore money from going to Singapore in the first place,” says Carolyn Leng, head of private banking at CIMB in Kuala Lumpur.
(Whether the newly agreed merger of CIMB, RHB and MBSB – if it goes through – will have any effect on this strategy is another matter.)
CIMB – seen as Malaysia’s most advanced in terms of its private bank offering – does not expect to challenge the likes of UBS head-on, adds Leng, noting that the two offer very different platforms.
But she cites CIMB’s strength locally as an advantage, arguing that it will potentially provide a better and more high-touch service than a global player because it may be more familiar with the local client’s business and requirements.
“And while I can’t send a client’s son to Switzerland on a placement with a bank,” says Leng, “I can put him with an investment team for six month and teach him hands-on how to manage his own portfolio. Sometimes you can’t compete on some of the offerings, but there are things you can do well.”
Another big Malaysian firm, Maybank, has this year been focused on building up its private wealth capabilities in Singapore.
Alvin Lee, Singapore-based managing director of wealth management, says: “At Maybank, we always had the client base and the products in various silos. So the relaunch of private banking is aimed at bringing everything under one roof, and that happened late last year.”
Having a sufficient offering of products and services can be a challenge for local players. “You have to have generic wealth management products or you can’t even go to market,” says Lee. “Then you start looking at the discretionary solutions, cross-border financing and so on.”
Yet while local Asian players do not have the access to the sort of global internal suite of products and services that a large international bank does, that can in some ways be a benefit, argues Lee.
“In a way the regional banks have the benefit of being smaller and later in the game,” he notes. “We don’t have the institutional pressure to use internal capabilities over best-of-breed solutions available in the market; we have the opportunity to source capabilities externally.”
Others make a similar point. Open architecture means banks can “get more or less anything out there” in terms of products, regulations permitting, says Kee Kin-Onn, head of private banking at AmInvestment Bank in Kuala Lumpur. “So the issue is making sure that internally you can develop the platform to execute these products.”
Firms such as BNY Mellon are offering separately managed account (SMA) platforms to offer a choice of strategies in tailored mandates at a lower minimum entry point than SMAs are usually available for. It is useful for Asian wealth managers as it allows them to offer institutional-level service to their clients, says AJ Harper, BNY Mellon's president and chief executive of managed investments for Asia Pacific.
Yet what Kee sees as a bigger challenge is brand, “as the globals have been around a lot longer”. In addition, the big guys can spread their costs better in terms of custody and IT spend, he notes.
“The thing to focus on is the branding side and working with someone that allows you to do your business in a cost-effective way in terms of IT and custody,” adds Kee.
Chris Faddy, Asia-Pacific head of distribution for managed investments at BNY Mellon, agrees that brand is important and says that he feels Asian banks have progressed on this front in recent years.
“My perception is that the Asian banks came out of the crisis in a way that allowed them to improve their relative brand standing,” he notes. “For example, look at CIMB now and the presence they have in various parts of Asia – if you go back 10 years, it was unthinkable.”
Moreover, Kee and Lee feel Asian banks can benefit from global players pulling back somewhat from the onshore segment.
“The issue with cross-border is of course there are regulatory issues, and that may be the reason why some of the foreign banks are reviewing their options and letting the onshore banks take a bigger role,” says Kee.
Lee makes a similar point. “We see some European banks reducing their footprint in Asia in terms of private banking and we have Asian powerhouses coming up. I think the gap between European and Asian banks is closing, so some [Asian banks] are in a position to acquire.”
One recent example is DBS’s acquisition of Societe Generale’s Asian private banking unit. “SocGen has a fair bit of business in Hong Kong, which we will work hard to integrate into our North Asia business,” says Lawrence Lua, head of South and Southeast Asia at DBS Private Bank. “The rest of the SocGen staff will be integrated into our Singapore operation.”
*The full article appeared in the latest (July) issue of AsianInvestor magazine.