Avoid temptations of bad habits

There is no doubt that Asia is leading the world recovery and it will continue to be the engine of global growth. The strong outperformance of the Asian markets is indicated by the market capitalization of MSCI Emerging markets Asia index which, since the lowest point in March, surged by 87 per cent to the end of August, versus the 59 per cent increase of the MSCI World index, which represents developed markets. Wealth is growing rapidly wealth in the region. According to the recently released Merrill Lynch World Wealth Report, high net worth wealth in Asia Pacific is forecast to reach $13,500bn by 2013, outstripping North America which will grow at a much slower rate to $12,700bn. But market losses were massive last year, especially for the those who leveraged their investments. Individuals may have learned the hard way the importance of portfolio diversification; private bankers, used to easy returns in the bull market, may have learned the importance of being firmer with clients, rather than accommodating their desires. But the onus is ultimately on the leaders to shift their business model towards a more advice-based approach, to make the advisers’ remuneration system more in line with clients’ interests, train relationship managers to higher standards and teach them how to liaise with clients, even in a downturn. Indeed, it is very difficult to identify a good private banker when the market is booming. Ironically, some consultants in the industry believe that today the main hazard for private banking in Asia is markets picking up too fast. The risk is that private banks, which in the past months may have started questioning the effectiveness of their modus operandi, forget all the lessons learned and go back to pushing products. Senior bankers say they have gone back to the basics of understanding clients’ needs, making sure they comprehend product risk and solutions sold are suitable to them. One wonders whether the concept of “basics in private banking” assumes a different meaning depending on market winds. Even if the rampant poaching of advisers has slightly receded, the shortage of experienced advisers remains a big concern. One “quick-fix” put forward by Simeon Fowler, CEO of executive search firm Fox Partnership, is to bring key advisers from private banks in Europe, London and New York to become “centres of influence and mentors for people on the ground”. The grey-haired or the old guard who have perhaps been dismissed because they were not so fast in generating new income, as they have not taken on huge risk in the bull market, or have retired, having no desire to work in a turbulent market place should be called back “to stabilise the ship and to work on a consultancy basis,” says Mr Fowler. “Many private bankers just saw the boom of the past five years and teaming them with some of the older guard would reassure clients.” Longer-term the solution is different, and having good development programmes and succession planning will be a key differentiating factor.