Credit Suisse Private Banking is looking to enter China through partnerships with local wealth managers, insurers, banks or internet companies, with a digital strategy part of the plan.
Francois Monnet, head of Greater China, told AsianInvestor that the firm had embarked on pilot programmes to this end but did not know how long it would take for them to bear fruit. He declined to provide more detail.
“There’s an enormous business to serve below the very rich,” he noted, and Credit Suisse is eyeing technology as the ideal way to acquire clients quickly and cost-effectively in that segment.
Mainland internet firms – Alibaba, Baidu and Tencent being among the most obvious examples – have enviable distribution potential, as shown by the runaway success of the landmark Yu’e Bao money-market fund in 2013.
Monnet said using a digital platform for client acquisition seemed an inevitable strategy in China, as it would take a long time to build a client base by relying purely on private bankers.
Investing in relationship managers in China would require a lot of education and effort and is a slow process, said Monnet. “Ten years on, if you’re successful you’ll have 10,000 clients,” he added, but in that time mainland players would have caught up international private banks’ offerings, thereby diluting global firms’ competitive advantage.
The Chinese high-net-worth market has been one of the fastest growing in terms of assets and number of HNWIs. Indeed, in 2015 the Asia-Pacific region overtook North America in terms of both HNWI wealth and population, according to Capgemini’s World Wealth Report 2016, released last week. China and Japan stood out as regional dynamos, driving almost 60% of global HNWI population growth in 2015.
Credit Suisse already has an asset management joint-venture firm in China, but no wealth management tie-ups. Beijing does not allow international firms to operate private banking businesses onshore, so mainland high-net-worth investors are serviced out of Hong Kong or Singapore.
Monnet said Credit Suisse would not rule out acquisitions for accessing the mainland, but he argued that the key was to have “some skin in the game”. That would be demonstrated through an equity commitment as part of a partnership deal, he noted, so acquisitions are not essential.
Credit Suisse is clearly not alone in eyeing the Chinese HNWI market, with some rivals acquiring stakes in mainland firms and others forming local partnerships. At the start of this year Swiss bank Julius Baer bought 5% of Shanghai-based Jupai Holdings.
Two other Swiss private banks have taken the partnership route. UBP inked an agreement with Noah Holdings, while Bordier in late 2014 sealing a tie-up with Credit China, a peer-to-peer lending platform and budding wealth manager.
Meanwhile, Credit Suisse is expanding its digital offering elsewhere in Asia. The firm launched an enhanced version of its private banking Asia-Pacific app in Hong Kong yesterday.
This has come some eight months after the global launch of the product in Singapore last year, noted Monnet, because the bank had to adapt some of its functionality to Hong Kong, build a Chinese-language version of the app, conduct testing and obtain authorisation from the Hong Kong Monetary Authority.
However, the new app will not include Credit Suisse’s “pay-for-advice” service – which operates on an asset-based pricing model rather than a transaction-based one. This will be introduced in January next year and will offer different service offerings and fee levels for various segments.