The growth of high-net-worth individuals in Asia has outpaced the growth in the number of relationship managers who have the expertise to serve them. The industry is now taking a more long-term view in training private bankers who are able to address the differing needs of Asian clients and can account for the geographical differences within the region itself.
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The talent pool has been limited in part because of the rapid growth of the sector, and also because the wealth industry in Asia is relatively immature.
“There is definitely a skills shortage,” says Bernard Rennell, HSBC Private Bank's north Asia CEO. “Wealth has been growing rapidly in Asia, especially in the ultra-high-net-worth segment. There is significant and ongoing demand for people to provide quality advice and support to that market segment. It’s not just relationship managers – it’s across the board.”
According to the Global Wealth 2011 report by Boston Consulting Group, wealth will grow the fastest in Asia-Pacific (excluding Japan) at a compound annual rate of 11.4%. As a result, the region’s share of global wealth is expected to increase from 18% in 2010 to 23% in 2015.
Short-termist approach
When wealth management was a nascent industry in Asia, talent was borrowed from elsewhere. Kathryn Shih, CEO of wealth management in Asia-Pacific for UBS, says that one solution the industry relied on was to import expats from markets such as Switzerland. “We did that a lot, but there is a limit to how much you can do,” she says.
Justin Ong, a partner at PricewaterhouseCoopers, believes that importing talent no longer makes sense from a cost point of view. “Ten years ago the talent was imported from Europe, but Asia has developed and Asian clients want Asian services,” he adds.
Instead, the industry in recent years has relied on poaching staff from other banks. Philip Marcovici, a wealth management consultant, believes that the main problem has been an attitude of short-termism in the industry. “There has not really been any investment in the future business,” he says. “A lot of private banks have been recruiting people who can bring clients with them. It has been a carousel of people moving from bank to bank – this is a different issue from the talent pool and development. The root of the problem is that the banks think what they need are bankers who can bring in clients from other banks.”
He goes on to explain that the wealth management industry has only penetrated a small percentage of the wealth in the world, and argues that banks need to concentrate on finding new clients.
Staying put
Poaching as an option for hiring talent is beginning to reach its limit and the clients have stopped moving with the relationship managers. “The [game of] musical chairs has come to a halt. There are only so many times they can move until the clients stopped moving with them,” says Su Shan Tan, managing director of wealth management for DBS Bank.
“The poaching has become more expensive over the years,” says David Maude, an independent wealth management consultant. He explains that the focus is now more one of “build your own” and banks are developing their own talent, redeploying high performers from other divisions and also recruiting lateral hires who are mid-career professionals from other industries.
Mr Rennell at HSBC says that the private bank is always looking for good people. “They do not have to be private bankers – they could be specialists from other fields, such as law, accounting and investment banking – the key thing is that they are intelligent, good team players and willing to immerse themselves in this area,” he says.
Homegrown talent
Shayne Nelson, CEO of Standard Chartered Private Bank, explains that one advantage for his bank is that it is able to tap the talent pool from its Priority Banking service and bring them into the private bank. “We have been migrating our clients and relationship managers at the same time,” says Mr Nelson, adding that it is a “win-win” for the client as they keep the same relationship manager, who in turn gets the career enhancement through the progression through the bank. Ms Tan explains that DBS takes a similar approach of upgrading its existing talent pool in its premier banking segment.
While UBS also recruits talent from inside and outside the firm, the bank, like Credit Suisse, has invested in its own training centres. In 2007, for example, UBS opened the UBS Wealth Management Campus in Singapore, which trains wealth managers and has since been renamed UBS Business University APAC.
On the issue of whether there is a danger that UBS is simply investing in training private bankers for the rest of the industry, Ms Shih emphasises how the bank aims to retain its talent. “They have a career with us,” she says, adding that the private bankers have the opportunity to work across the bank’s platform in different segments of wealth management.
“We also have to continue to upgrade our private bankers,” she adds. This includes ensuring that staff members are trained to stay on top of the latest regulation and product development, and are well informed in areas of corporate banking and corporate finance. “This way they can have a meaningful discussion with their clients,” says Ms Shih. For example, if a client is a founder of a business and wants to arrange an initial public offering, they can bring in an investment banker from the other division of the bank, or if they want to issue bonds. “It is not just managing wealth, it is looking after the interests of the clients and their business,” she adds.
On the question of whether the benefits of this long-term training will stay in house, Mr Maude says: “Credit Suisse and UBS are subject to the risk that their staff are being poached following training in their own business schools. But that would be mitigated by the large scale they operate at.”
The greatest weakness with internal training programmes, argues Mr Marcovici, is that they are often dislocated from the strategic objectives of the bank’s CEO and senior management. “Once the business development objectives are understood, the training should be designed to deliver on that strategy and what the bank is trying to achieve.” Banks may choose to develop their own internal training programmes because they are concerned about sharing their ideas “but there is a danger in overdoing that”, says Mr Marcovici, who adds that there is a benefit in bankers being exposed to external training at an industry level.
Training hub
This is exactly what the Wealth Management Institute aims to achieve. Founded in Singapore in 2003 and funded by the country’s sovereign wealth funds, the centre aims to create a hub for the industry.
Mr Marcovici, who teaches at the Wealth Management Institute, says that the investment in wealth management training in other financial centres, such as Switzerland, has been “pitiful”.
Sebastian Dovey, managing partner at wealth management consultancy Scorpio Partnership, goes as far as to say that Singapore is not the new Switzerland, it is the other way around. “Switzerland is the Singapore of the West,” he says, arguing that Singapore is the epicentre of wealth demographics and Switzerland will soon be trailing Singapore, which Mr Dovey argues has set the gold standard for training in wealth management.
Age concerns
The newly qualified generation of private bankers will be younger than the traditional private bankers of the US and Europe, and their demographic profile will be more in line with that of the growing class of wealthy Asians. Mr Dovey says that typically in wealth management, a client has been lined up with an adviser of a similar generation. Wealthy Asian clients are typically younger – between 35 and 55 years old – and there are very few advisers of that age with appropriate experience.
However, Mr Marcovici argues that clients would prefer a team of advisors of different ages. “I would not focus on the age of the client, and more on the needs of the client,” he says, and points out that it would not be wise for a client to make succession and inheritance plans with an advisor who has the same life expectancy as them. The client would expect many people at the bank to have knowledge of the family’s financial plans.
Mr Nelson at Standard Chartered says that clients expect their private bankers to have a few – but not necessarily a full head of – grey hairs. He explains that he would expect a relationship manager to have at least 10 years of banking experience before they deal with such clients, so it would be feasible that a relationship manager could be in their 30s.
“In Asia, the average relationship manager is younger and that is also in line with the clients,” says Ms Tan at DBS Bank. She explains that she balances the younger relationship managers with senior management and country managers who are typically in their 50s. “They have seen a lot of cycles and they can go into a meeting and command a lot of respect.” By pairing the younger relationship managers with the country managers, she says, the relationship managers can learn by example. “When they see new clients the meetings are usually led by the more senior manager.”
Location matters
Such client relationships do not just depend on assessing the needs that are specific to wealthy Asians, but also specifically to the markets themselves. “The needs of clients are greatly affected by where they live and where they invest,” says Mr Marcovici. Mr Maude echoes this point. “Asia is incredibly diverse. People in these countries have different levels of maturity, different client requirements and different issues,” he says.
Often when it comes to addressing regional differences, says Mr Dovey, there has been a reliance on stereotypes. He argues that when experienced managers outline the trends in certain markets, they may actually be describing their own clients and their own books. This results in what Mr Dovey describes as "training by anecdote", rather than based on business intelligence and an examination of what the clients' needs actually are in the various markets.
The Futurepriority report by Scorpio Partnership points to some of the differences between clients in the various Asian countries. For example, South Koreans had the highest average income but were less likely to have specific financial goals. When it comes to purchasing a car, for instance, South Koreans were more likely to spend their money on something flash. This is compared with Indonesia, where high-end savers would opt for a well-built car and they were also more likely to be discreet about their charitable activities. Indians are more likely than people from other Asian countries to want to be seen as leaders and innovators and the description of ‘status enhancers’ is the dominant profile for that market, while Thailand is dominated by ‘convenience seekers’.
A common language
“[Clients] want someone who speaks their language, someone who is connected, someone they can trust, someone with integrity, and someone with experience who can give them good advice,” says Ms Shih. “There are not many people like that.”
“The one important differentiator is language skills,” says Ms Tan. “If you cannot communicate in the client’s first language, you cannot create trust.” She adds that cultural sensitivity is also key. “Understanding the nuances of different Asian cultures puts you way ahead of the game.”
On this point, Mr Nelson says Standard Chartered’s relationship managers are attuned to this. “The relationship managers in [South] Korea are Korean, in China the relationship managers are Chinese, in Hong Kong [they are] usually from Hong Kong,” he says.
Mr Rennell believes banks need to be skilled in dealing with the different challenges they face within the Asia-Pacific region. “You increasingly need people to specialise. While a relationship manager may be a generalist, it will be necessary to bring in specialists because of the requirements of different jurisdictions,” he says. “We tend to focus on markets – for each jurisdiction we service, there are teams of relationship managers and product specialists who are familiar with that market and the regulatory and tax requirements.”
Regulation is just one area that banks need to stay on top in dealing with Asian clients. And as the wealth management industry in Asia copes with a boom in wealth but a shortage in talent, it will continue to focus on long-term solutions to training relationship managers to handle the specific needs of wealthy Asian clients.
