Multi-family offices are looking to pick up wealthy clients, with executives pointing to their own independence while questioning the approach of private banks to selling products and advising on portfolios.
“It has evolved to a point where [private banking] is very commoditised and the client base feels [the approach is] a bit impersonal,” suggests William Chan, CEO of Stamford Privée, a Singapore-based MFO he set up to run his family's money. “[Clients feel private banks] are product-based and they are just trying to sell them stuff.”
Mykolas Rambus, CEO of Wealth-X in Singapore, a data provider on ultra-high-net-worth individuals, agrees. “A lot of individuals would consider private banks as a necessity," he says, "but not necessarily as trusted partners, which is why so many individuals are multi-banked. They look at banks as transactional vehicles as opposed to advisers.”
That has long been an obstacle for wealth managers in Asia, although it may change over time and become closer to the business in Europe, for example, where private banks are viewed more as trusted advisers.
However, memories of mis-selling scandals involving the region’s private banks are still fresh on the minds of many wealthy clients. David Chan, a Hong Kong-based import/export entrepreneur, counts himself as one of the lucky ones.
“One of my friends lost HK$80 million ($10 million) by buying into Lehman minibonds on his private bank’s advice,” Chan says. “While it’s true that he earned a lot of money before the bankruptcy, the money he lost is far greater than what he earned previously.”
Others make similar points. “The real concept of a pure family office is that it is an independent adviser that isn’t there to push products to a client. [We] have a much bigger picture and longer view than the client’s collection of private banks,” says Ong Iu-Jin, founder and former head of Deauville Private Office, an MFO in Singapore.
However, private banks are getting most of the business, Ong admits, because clients do not fully know what their options are. “It is the job of a good family office to demonstrate that there are many ways to manage their wealth other than relying solely on private banks,” he adds.
FOs are also outgunned by the marketing prowess of the banks. With a sizeable budget to spend on brand, location and credentials – three of the most important factors for Asians choosing a bank – private banks often become the first port of call for those new to the industry, notes managing director Sebastian Dovey at Scorpio Partnership, the private banking research firm.
There are, of course, good reasons for this. Universal banks can give clients access to a wider geographical reach and range of asset classes and provide other services such as investment banking, which makes them a convenient one-stop shop for wealthy Asian entrepreneurs.
Diversification is a selling point that universal banks are eager to emphasise, especially as Asians look to broaden their investment strategies after having made concentrated bets in their domestic equity and property markets pre-1997, says Allen Lo, Hong Kong CEO of UBS Wealth Management.
Universal banks are keen to emphasise that they are not direct rivals to family offices, but rather can provide useful advice and services beyond the capabilities of an MFO.
They are also eager to shake-off their image as self-serving, with some adopting an open-architecture platform that allows clients to select third-party products outside their banks. Added to this is the fact that Asian clients are often multi-banked, pressuring providers to be more competitive and transparent, argues Lo.
Yet some remain suspicious. “How much can you be open architecture and buy products from other banks?” asks Stamford Privée's Chan. “It can work for a while, but shareholders are going to ask ‘where’s my performance?’”
* Features on Asia’s private banking and family office arenas have appeared in the current November and May issues of AsianInvestor magazine.