There is a direct correlation between relationship manager training and increased use of funds, according to senior private bankers based in Asia.
Speaking at a roundtable on fund penetration*, Marc van de Walle, global head of products at Bank of Singapore, argued that convincing relationship managers of the benefits of funds lay at the heart of a shift in clients’ perspectives.
“Our relationship managers are becoming more receptive to funds, partly because we have put a lot of effort into explaining the details and benefits of the various funds we recommend,” said Van de Walle.
Dany Dupasquier, head of group funds for Standard Chartered, agreed, noting that the bank had specialists in its investment advisory team in Hong Kong, Singapore and London whose job it is to train relationship managers.
“We have seen the fruit of that,” he suggested. “The structure that has been put in place to promote funds has been quite successful.”
Asked why private banks had increased training for relationship managers, Adrian Schatzmann, recently promoted to global head of investment fund sales and distribution at UBS Wealth Management, said the global financial crisis was a key starting point, but that had been superseded by a portfolio concept.
“Why do we do training? Because we are very clear on what we want to show our clients: an asset allocation framework. We want to discuss products in a portfolio context,” said Schatzmann.
He noted that wealthy clients in Asia had a strong home bias, but argued this would be reduced if they could be persuaded of the benefits of a global asset allocation framework. “The more successful we are with the portfolio concept, the higher the [funds] penetration rate should be,” he added.
On the question of whether relationship managers at private banks are trained to understand how products work or simply to sell, Schatzmann said the training offered at UBS Wealth Management was holistic, including an 18-month wealth management diploma for client advisers.
He stressed that the bank wanted to make sure there was no mis-selling and that the client adviser understood what the risks of a particular product were.
“Understanding products starts during the on-boarding process,” he added. “We want to make sure not only that we understand the investments, but also that we look at the marketing material, because that is probably where the biggest risk of mis-selling lies.”
He cited the example of high-income funds where risks are unstated, such as financing a fund’s distribution out of capital. “In some cases we go back to fund providers and ask them to change the marketing material, otherwise we won’t put the products on our shelf.”
Marc Lansonneur, regional head of investment and market solutions at Société Générale, suggested its investment specialists often took over from relationship managers in advising clients about funds.
“In the past relationship managers sold funds, but not any more,” he said. “Training is important. We also try to limit the fund solutions for each strategy or asset class to two or three funds maximum. Clients have a limited capacity to digest a wide range of products.”
Van de Walle noted that there was nothing wrong with selling per se, but that it was important to sell the right product in the first place.
“Funds enter the equation at a later stage in the advisory process,” he stated. “We start by understanding a client’s risk tolerance, followed by recommending a portfolio approach and explaining our house view.”
He agreed that the role of a relationship manager had evolved, and that they only entered the fund engagement process after the bank had carried out a due diligence process.
“Their [relationship managers’] role now is to understand clients and propose the right asset allocation,” he said. “Only then do they propose products, funds being one of them.”
He added that relationship managers needed to understand a product and be confident about recommending it.
“This understanding can be deepened by exposure to fund managers for visibility to what the fund manager is doing. Ultimately this helps to build trust between a private bank and its clients,” he added.
AsianInvestor is due to host its first ever Fund Selection Forum Asia at the JW Marriott Hotel in Hong Kong on November 12. You can find out more details by clicking on this link.
To read a full transcript of the private banking roundtable sponsored by Aberdeen Asset Management, see the forthcoming (September) edition of AsianInvestor magazine.