Two big US banks have embarked on drives to build out their private wealth businesses in Asia following shifts in distribution strategy. Morgan Stanley is starting from a well-established position, while BNY Mellon last week emerged as a regional newcomer in this area.
Both have long had a presence in the region, so will be under no illusions as to how fiercely competitive and difficult a market this is to crack.
Morgan Stanley Private Wealth Management (MS PWM) plans to add 15-20 relationship managers to its existing 100-strong team in the Hong Kong and Singapore, and an unspecified number of operational staff in the next 12-18 months.
“Competition for private bankers is extremely intense, as global and local firms are expanding," acknowledged Vincent Chui, Asia head of MS PWM.
Asked what distinguishes his firm from its peers, he said it has access to ideas and products taken from across the group. "Given that Morgan Stanley is a global investment bank, this is a powerful differentiator," noted Chui. "In contrast, many traditional private banks are stand-alone entities."
MS PWM recently added a head of sales for Hong Kong and China. Vivien Webb joined on October 16 from Goldman Sachs Wealth Management, replacing Eva Chan, who has taken the newly created role of head of marketing and strategy for wealth management, as reported.
In June last year, Morgan Stanley integrated the firm’s Asian wealth business into its institutional platform, with a view to improving efficiencies and cross-selling opportunities across the divisions. This followed moves by other banks – such as Credit Suisse, Deutsche Bank and HSBC – to restructure their wealth businesses against a backdrop of increasingly strict regulations and cost pressures.
Chui said MS PWM's move has led to an increase in two-way business referrals between the PWM, investment banking and sales-and-trading businesses. For example, one-third of the capital market transactions with non-state-owned enterprises that the firm pursued in China in 2013 was sourced, directly or indirectly, by the firm’s private bankers.
The private bank's funds unit has access to products that are soft-closed to new investors and a pipeline of hedge fund principals who are potential clients for the wealth business, added Chui.
MS PWM remains focused on ultra-high-net-worth (UHNW) clients, defined as those with investable assets of at least $100 million, but it is increasing its focus on family offices. The latter segment currently represents a small fraction of the business, though Chui declined to give a figure.
“There have been a lot of new family offices in Hong Kong and Singapore," he said. "How to migrate from covering stand-alone customers to family offices is a major focus and challenge for us, because we are talking about institutionalising the business."
Chui added that the firm’s Chinese client segment is its fastest growing in Asia. “Our China wealth business adopts an offshore model and services Chinese clients’ offshore requirements. They are increasingly sophisticated and global in terms of product requirements.
“The US remains the destination of choice for equity, fixed income and real estate investment [among these clients],” noted Chui. “China high yield is also in demand.”
The firm has no plans to expand geographically or to partner with local Chinese banks to further tap the growing number of wealthy mainland Chinese, which the firm services through Hong Kong.
Morgan Stanley PWM had $65 billion in AUM sourced from Asia at the end of last year, according to London-based Private Banker International, but Chui declined comment on that figure. Globally, the firm’s WM business, which includes retail brokerage and private wealth management, had AUM of $2 trillion as of September 30.
Meanwhile, BNY Mellon Wealth Management last week launched discretionary investment wealth management services for HNWIs and family offices in Hong Kong. This comes after it received a licence to offer asset management services in the city in November last year.
This can be seen as an alternative strategy for boosting sales of BNY Mellon Investment Management’s funds in the region. BNY IM has seen several senior departures from its intermediaries division in Asia in the past year and is said to have lost appetite for building out local retail or wholesale businesses, as reported.
Wealth management is an offshore business, allowing the firm to sidestep many of the challenges and costs faced by running a local retail offering.
The firm is focusing its discretionary platform on Americans living in the region and nationals of Asian countries who are liable for US taxes or have a connection with the country.
Charles Long, head of Greater China at BNY Mellon WM, moved to Hong Kong from New York in July last year to build out the business. Over 60% of HNWIs in Hong Kong have $5 million or more, and BNY Mellon WM's starting threshold is $3 million, he noted. "It’s a big market."
BNY Mellon WM is starting out with 10 client-facing staff comprising portfolio and wealth directors and 50 staff providing operational support in Asia.
Of the operational staff, some work entirely for the WM business, while some – such as those in compliance and human resources – have responsibilities that overlap with other parts of the group.
The wealth directors source clients, and then portfolio managers take over the relationship.
Though the wealth management arm fits into BNY Mellon’s global investment management business, it is run as an individual unit because the IM business has a much wider range of clients.
Like Morgan Stanley, BNY Mellon sees its global range of wealth management services and products as a differentiator.
BNY Mellon WM managed $187 billion in assets globally as of the end of September this year.