Relationship managers in Asia would still much rather work for Western private banks, despite a major new study extoling the virtues of Asian-owned firms.
Leading Asian private banks enjoy cost-income ratios of 60% to 80%, while rising compensation and infrastructure expenses mean many global banks in Asia operate above 90%, according to the Global Wealth Management report by Oliver Wyman and Deutsche Bank.
The report points out several other problems faced by international firms in Asia such as their struggle to gain market share outside of Singapore and Hong Kong – they manage less than 3% of onshore assets in China, for example.
“The traditional offshore model used by global wealth managers, with booking centres in Singapore and Hong Kong, has its limits, given it provides access to less than 10% of expected net new money growth. Moreover, Asia (ex-Japan) offshore centres are getting increasingly crowded,” the report says.
Are relationship managers (RMs) flocking to join Asian private banks as a result? Well, no.
“That’s because actually there is no clear advantage for Asian banks except they have lower cost-income ratios,” says Pathik Gupta, an associate partner at consultancy McLagan in Singapore. “Even that comparison isn’t entirely accurate because they often use their cheaper consumer-bank infrastructure to serve private banking clients.”
Gupta adds: “And on an absolute basis, the revenue of the big global private banks is many times higher than regional private banks’. So their ability to invest absolute dollar amounts is higher.”
This helps explain why the best RMs in Asia typically want to work for established European and US players such as UBS, Citi, Credit Suisse, HSBC and Julius Baer, the five largest wealth managers in Asia by assets.
“Western private banks in Asia can leverage on their global platforms, which is a significant hurdle for local banks,” says Gupta. “RMs want to work in a place where the platform is able to fulfil their client demands. And Asian clients are looking for global opportunities.”
Meanwhile, RMs overwhelmingly prefer to be based in the offshore hubs of Singapore and Hong Kong – they are not being enticed by the dominance of onshore banks in local markets, say headhunters.
“RMs don’t want to leave global banks in Singapore and Hong Kong to join Asian banks in markets like China, no matter how strong they may be there,” says former Merrill Lynch private banker Rahul Sen, now head of wealth management at search firm The Omerta Group.
“In fact, the reverse is true – the prospect of moving offshore to Hong Kong is very appealing if you’re in China – global banks in HK attract the cream of the crop,” adds Sen. “Most onshore Asian banks offer mainly vanilla insurance and equities products, which isn’t very exciting from a job perspective. That’s why RMs who want to deal with a wider product range – fixed income, currencies etc – need to be based in Singapore or Hong Kong.”
Not all Asian private banks are unappealing to the region’s best RMs. DBS and Bank of Singapore are in 6th and 11th places respectively in terms of Asian AUM, two of only three regional firms to feature in the top 20 (the other is Hang Seng).
“Bank of Singapore, in particular, has a highly sophisticated investment management platform,” says Sen. “It leverages off OCBC’s balance sheet, but enjoys a good degree of management independence from its parent. Plus it was built on the ING Asia platform, which it acquired in 2009, so it offers stable Asian ownership but with a European-style service that suits many clients in Asia.”