One of the key topics to emerge at the recent CFA Private Wealth Management conference in Singapore was the unsustainable cost-to-income ratio of private banks, particularly in Asia.
This ratio is careering upwards again for many firms largely because of the ever-swelling ranks – and compensation – of relationship managers in the region.
Attending the conference, both Douglas Wurth, Hong Kong-based chief executive of JP Morgan Private Bank's non-US business, and Carlo Grigioni, Singapore-based vice-chairman of global wealth management at UBS, voiced their concerns on the matter in a panel discussion.
Grigioni sees the mass poaching of private bankers as an acute problem in Asia, and suggests that ethical standards in this regard need to be improved. “The clients at the end of the day are going to suffer and pay for it and will be increasingly questioning our promises and the partnership between the institution and the client,” he points out.
“There is a war for talent, everyone wants to build a business, but poaching people is not good for the financial sector, and we should take action to avoid too much of it,” he adds. “And it’s for the leadership among all these players to mitigate that risk as much as we can.”
Such sentiments are all well and good, but it leaves one wondering whether firms are prepared to walk the talk, as Wurth points out.
“I’m not so sure firms are doing anything about this issue,” he notes. “Clients are telling us ‘we are tired of the merry-go-round’, but when a headhunter shows up, they say ‘go with this person because they can bring 30 others with them’.
“Do we see that as a good thing or do we say ‘You know what, I don’t want to hear that. I want to talk about this one person – I’m not planning to poach 30 other people from this bank’."
One approach might be to integrate people better within an organisation to make it more difficult to 'lift out' a whole team, adds Wurth, "to avoid putting a team in place and telling them ‘you’ve got that side of the floor, we’ll leave you alone and you can be your own kingdom’."
The new group head of Singapore’s DBS Private Bank, Tan Su-Shan – a Morgan Stanley veteran who was not on the panel but attended the event – made a similar point.
There will come a time when clients will stop moving with relationship managers, says Tan, who began her own role in late June. “Eventually they will stick with the right bank. If an RM moves too much, clients will fall off,” she adds. “Whoever catches the tail-end of that will have the most to lose, and that's not my game.”
With its new management team now settled in, the Singaporean bank has both profited and suffered from the continuing recruitment spree in the city-state.
“Instead of saying we'll hire 600 RMs, we'll work on improving the quality and standards of our RMs, making them add more value to the clients they serve,” says Tan, adding that her main focus has been on training.
“We have started to carry out 4,000 man-hours of training [that will happen] between August and December this year, on products and markets and so on,” she says. “We tell our RMs 'your clients are going to love you even more after we're done with you'.”