Successful business models cater to local tastes
Private banks aiming to make it big in Asia are adopting a variety of approaches, but like their fund management counterparts, many are failing to come to terms with fundamental truths in local culture when they build their models.
Potential clients in Asia, and China in particular, are typically business owners who need to manage corporate as well as family wealth, believes Stephen Richards Evans, until recently head of private banking for North Asia at Standard Chartered, but about to take responsibility for India and the Middle East from Dubai.
“A bank which can combine these two aspects is likely to be a winner,” he suggests, citing figures that 16 per cent of China’s population is involved in entrepreneurship, with the average “new millionaire” aged just 33. “A bank which only wants to focus on investments is not what clients want. That’s why only 20 per cent of Asian wealthy investors deal with private banks, because the model is all wrong.”
Few Western banks have yet to grasp the dynamic of these young investors and how to communicate with them. “We need to be using Facebook or the Chinese equivalent to interact with customers,” says Mr Richards-Evans. “Most of us are still dinosaurs.”
While JP Morgan insists on importing its US-designed global business and asset allocation model into its Hong Kong and Singapore offices, under the new private banking boss for Asia, Andrew Cohen, there are at least some concessions to local tastes, particularly in sourcing more regional private equity and hedge fund managers for Asian clients. JP Morgan’s clients are typically steered towards a multi asset class discretionary service called the Global Access Portfolio, which combines both mutual funds and single stocks.
“In the ultra high net worth business, clients are looking for global equities in asset allocation and an integrated model of expertise,” says Mr Cohen.
Despite the preponderance of this “integrated model” among private banks, how closely different departments actually work together in practice can determine the eventual success or failure of their business, says Joy Lim, a director at recruitment consultancy Fox Partnership in Singapore.
“If a bank is very ambitious, it needs to get capital markets and investment banking fully behind the private bank. Different divisions need to find the time and desire to collaborate – they need to ask ‘how are we going to work together and what is the incentive for us to do this?’”
The concept of ‘one bank’ behind the private bank is “in theory” a very good idea, believes Ms Lim. “But it is very hard to execute in reality. The private bank which finds this Holy Grail will make big bucks in Asia.”
