CIMB striving to stand out from the Malaysian crowd

A holistic approach to wealth management, tailored financial planning services and a comprehensive range of investment solutions make CIMB Private Banking stand out in the Malaysian wealth management arena, according to Carolyn Leng, co-head at the private bank. The institution, which currently manages R6.2bn ($1.8bn) worth of assets, was the first “full service private bank” to be established in the country in 2002, having previously been a merchant bank. “There was a gap in the market; people were no longer satisfied with off the shelf products but wanted more tailored services and solutions, as individuals all have different needs,” explains Ms Leng. Unlike its domestic competitors, which tend to target the affluent client segment, CIMB Private Banking caters to the high net worth Malaysian individuals with more than $500,000 in assets. This segment is expected to increase by 30 per cent by 2012, according to bank’s in-house research. “By 2012, in Malaysia there will be about 50,000 households with more than $500,000 each in liquid assets for a total estimated value of about $73bn,” says Ms Leng. An investor has to have at least R5m to be considered “sophisticated” and be able to access innovative tailored investment solutions, often managed by offshore providers; the minimum investment amounts to R1m. “We operate on an open architecture basis. We don’t limit ourselves to a specific number of managers but we have limited resources internally so we have to be very focused from a macro perspective,” says Ms Leng, explaining that on a quarterly basis the bank’s investment committee assesses what products to concentrate on. Externally managed assets, mostly fund-based products, amount to R600m, which represent a large chunk of the bank’s total R780m fund assets. Three quarters of outsourced assets are structured specifically for the bank’s clients, tailored to their investment requirements, while the remaining 25 per cent are funds that feed into existing third-party funds. The bank’s partners or sub-advisers include the Allianz Group, which manages global fixed income and Asian equities, Opus Asset management for Malaysian fixed income, Hwang-DBS for domestic and regional equities, SJ Asset Management for regional equities and fixed income, Man Investments for managed futures and Value Partners for China equities. The private bank, which is a 100 per cent subsidiary of CIMB Investment Bank, also employs funds run by the group’s asset manager CIMB-Principal, the joint venture with Principal Global Investors. “We will always take CIMB-Principal in the first league to put them into the beauty context, but if they are not good, we will find someone else,” says Ms Leng. Currently, only 13 per cent of total private bank assets are funds, mainly money market products, while at the market peak in 2007 they accounted for 35 per cent. “There is still a strong growth potential for funds,” says Ms Leng, who also praises the benefits of exchange traded funds, although their weight in clients’ portfolios is still limited. Structured products, which are advocated by Ms Leng as a valid investment solution, are sourced from CIMB Investment Bank as well as third-parties, such as Deutsche Bank, Standard Chartered and BNP Paribas. Thanks to a strict domestic regulation, Malaysian banks were not affected at all by the Lehman collapse. “We only offer very simple plain vanilla products that clients can understand, such as capital guaranteed or 95 per cent capital protected and the risk is taken by CIMB,” she says. Unlike what happened during the 1997 Asian crisis, the recent financial crisis favoured local banks. Since the market peak in 2007, the bank’s assets under management have increased by more 40 per cent and its client basis has swollen by 38 per cent to 2,700. “A lot of clients took a step back and reviewed the financial institutions they were dealing with. But in the past it has been a very difficult process for us to get through the door, to high net worths.” But the picture is not all rosy. “Investors are a bit short-sighted, especially in Asia. They like fast returns in the shortest time possible, for some clients one year is long. We are really trying to educate them to go longer term.” Building recurring income, as well as improving the product platform in order to be able to face competition from offshore banks, is paramount. Hiring experienced private bankers and retaining advisers, often lured by the higher salaries and career prospects offered by global private banks, are the big challenges looking forward, and not easy ones to overcome.

Carolyn Leng, CIMB