Switzerland’s wealth management industry is leading the charge to the east, now that assets of wealthy individuals from the Asia-Pacific region are surging ahead of those held in Europe.
Rich Asians hold $10,800bn in assets, compared to Europe’s $10,200bn, according to the Capgemini and Merrill Lynch World Wealth Report 2011. Asia Pacific assets are growing at 12 per cent annually, against Europe’s 7 per cent.
Drawing up their battle plans to conquer these fast-growing private wealth markets, universal banks like UBS and Credit Suisse and boutique brands like Pictet and Sarasin all need asset diversification, deeper client relationships and must fight to keep experienced relationship managers.
UBS Wealth Management, which manages Sfr170bn ($219bn) in Asia, has tried to extend what is often an arm’s length relationship with clients by introducing a Research Based Advisory process to identify global themes.
Previously, it was proving difficult for the investment teams to persuade relationship managers to diversify clients’ portfolios effectively.
Credit Suisse, which reckons 40 per cent of the world’s richest people are based in Asia, aims to extract more revenue from this target clientele by leveraging its asset management and investment banking units, in effect stepping up product distribution to wealthy private clients. The sale of structured products will be a particularly important tool with durations of up to three months seen as the “sweet spot”.
“We are talking about doubling transactions from clients through the ‘one bank’ platform on an annual basis, not just increasing them 20 to 30 per cent a year,” says Stefan Mueller, Singapore-based head of advisory & sales for private banking Asia-Pacific at Credit Suisse.
“Banks that can bring three divisions to meet client needs have the chance to grab a bigger share of the wealth presented to them,” he says. Credit Suisse hired 60 new relationship managers in Asia in 2010, taking the total to 350 running assets worth SFr82bn.
The Asia-Pacific business has been among the fastest growing of all wealth management lines at Credit Suisse. The bank has seen around 20 per cent growth in net new assets annually over the past three years, amounting to SFr36bn since 2008.
But this integrated, one-bank approach is the opposite of what some of the Swiss boutique players are trying to achieve. At Sarasin, for example, many in the higher echelons of the bank, in both Europe and Asia are refugees from larger organisations such as Credit Suisse.
Enid Yip, Sarasin’s Asian chief executive, focuses on “cherry-picking” senior bankers, many of whom became dissatisfied with life in larger institutions. “When I joined Credit Suisse in the 1990s, the bank was very prestigious and Swiss-centric,” says Ms Yip.
“People in Hong Kong were nervous about the Chinese handover, so the Swiss brand really did stick out, particularly in terms of client confidentiality.
“But then they made the group decision to merge the investment bank with asset management and private banking in 2004, so the client could enjoy a one-stop service and they could capture all the opportunities in one group. Other banks did it too. Increasingly, I felt the Swiss were becoming like Americans.”
Pictet is also targeting the highest segment of wealth, but trying to promote discretionary, mandate-centred offerings rather than the tactical trades favoured by many Asian clients.
The bank claims its percentage of discretionary clients is much higher than the 5 per cent average for most private banks in the region. Allocations among all private clients are increasingly biased to Asian investments, believes Bhaskar Laxminarayan, chief investment officer for Pictet’s Asian wealth management operation in
Converting the advisory client to a more loyal discretionary customer remains one of the key aims of Pictet and its competitors. “Even with the advisory client, it’s good to show them what we have in terms of asset allocation, though they don’t necessarily agree with it,” says Mr Laxminarayan.
“But this is all part of the educational process. We believe that as an investment house, a good asset allocation can replace a lot of smart calls. It might be dull and boring, but it can be better. History is on our side.”
Before 2005, there was a lot more orientation to
dollar-denominated assets, as the US dollar was the strongest and most favoured currency for Asian clients. “As long as you got the currency right, the asset class was less relevant,” says Mr Laxminarayan. “But with the growth of the Asian powerhouse economies, there is a much greater demand for a stronger Asian mix.” This involves a particular bias to the northern economies of China, Hong Kong, Korea and Taiwan.
One problem for Mr Laxminarayan is the lack of depth in regional capital markets, particularly when it comes to fixed-income investments. “What will develop in an Asian sense is the bond markets, which are much too narrow,” he says.
Asia is a savings part of the world, it is not highly leveraged.
“People don’t want to borrow too much, even in the corporate world, which makes bond markets difficult to grow”, he said. “Over the next five years, we expect more action in fixed income markets, but equities to remain the mainstay in the portfolio mix.”
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