Boutique wealth managers face struggle for share of market

Is Asia ready for an explosion of boutique wealth managers? Europe has seen a new trend of staff leaving major private banks and setting up family office-style operations, based on giving real advice to clients rather than operating a product generating factory, with associated distribution outlets. There is some evidence of such a trend also taking root in Asia.

Take India, where ASK Wealth Advisors has been rapidly growing its organisation since 2007. The idea is that a pure wealth management organisation, with a true open architecture philosophy, can be brought to the Indian market, particularly to service family offices and owners of SMEs and listed companies. All of this comes without the costs or pressure to sell products associated with a proprietary branch network.

A fee-based advisory approach is also supposed to remove any perceived conflicts between the interest of the private client and the size of any remuneration due to a relationship manager.

The business plan involves high growth of operating income and client acquisition, although naturally from a very low base. Long-term asset allocations for private clients are regularly rebalanced to take advantage of tactical opportunities, with an in-house fund selection process used to populate the portfolios.

ASK is not the only such firm which hires disgruntled refugees from global banks such as HSBC and Credit Suisse and local players such as Kotak and ICICI. Ambit Capital, until recently an investment manager and brokerage, launched a dedicated wealth management division, overseen by a former ABN Amro private banking boss. Avendus Capital, another financial services operator, has started to offer wealth management under the supervision of an industry veteran, previously at Deutsche Bank.

The same is true in Hong Kong, where employee-owned UK-based firm London & Capital has opened a regional office to service high net worth Asian families. The Far Eastern operation is staffed by four partners, three of them with 25 years’ each experience in private banking, gained at institutions such as BNP Paribas, ABN Amro and Rabobank.

But how will the new kids in town stack up against established giants, both local and global? Firstly, the importance of brand is not to be underestimated, particularly in Asia. Indian houses such as ICICI, Kotak and HDFC have a strong presence in the cities through retail banking networks. HSBC literally towers over Hong Kong, whereas both Standard Chartered and DBS have a huge following in Singapore, with keen ambitions for pan-regional superiority.

Secondly, the integrated model is being exploited to great effect by the likes of HSBC, Credit Suisse, UBS and Deutsche Bank. As a business concept, it is difficult to beat, bringing asset management, investment banking and corporate dealmaking facilities to the immediate attention of private clients. Whether Asian regulators will eventually turn their attention to the ethics of cross-selling within such an approach is yet to be seen.

But there is room for expansion among the newcomers. Smaller Swiss banks such as Sarasin appear to be building a credible business in Hong Kong, staffed with escapees from the global players.

Now London & Capital and ASK have every intention to follow that model. Their selling point is that large clients can and should diversify their assets across a variety of providers, making room for the smaller, family-focused players. For many prospective clients, their propositions are yet to be tried and tested and remain too good to be true.

The key question remains of how they will manage scale, growth and selection of opportunities.