Asian private banks struggle to bridge talent gap

The availability of qualified, knowledgeable private bankers remains the number one concern of most wealth managers in Greater China and south-east Asia.

For many banks, especially the medium and smaller players, the size and nature of the client base is typically determined by the contacts which these in-demand bankers are able to build.

“If it is a local relationship manager (RM), you are likely to have more local assets in the client’s portfolio,” says Daryl Liew, head of portfolio management in Singapore for Reyl private bank, a family-owned Swiss institution.

Many clients of Swiss banks in the region have been riding the tech tiger, he says, loading up on stocks of innovative Asian companies. In this way, the demands of the clients are guided by bankers with knowledge of local stocks. 

“We have taken on some recent new clients who love tech and wanted exposure to the strong rally. Some of them had plenty of exposure and one wanted us to ramp it up to 80 per cent,” says Mr Liew, who likes to give clients a bespoke, tailored solution, rather than the “manufactured product portfolio” proffered by some larger rivals.

“Being able to recruit RMs is our foremost challenge in Asian private banking,” he says. “It is very competitive, even for big outfits, who have their brand names.”

Self starters

Those bankers electing to work for a smaller or boutique wealth manager need a self-starting, entrepreneurial approach and must be prepared to do more groundwork on pinpointing available assets, he says.

“We tried getting in a couple of RMs from the bigger banks, but they had a different mindset altogether,” he reveals. 

“They were expecting morning briefings, a daily overview of markets and a list of which products to sell,” says a smiling Mr Liew. 

“I told them: ‘We are a small bank; I am able to have a chat with you and offer some guidance, but I am not going to spoon-feed you with ideas.’ Our investment professionals and research people will always offer them advice about markets, but they need to come up with their own ideas of which products to sell.”

This shortfall of top drawer RMs in Asia, compared with the much higher quality in Switzerland, also leads to marked salary differentials.

“They expect more money here,” he says, despite their lack of quality. “There are good RMs in Singapore, but their number of years of experience falls far short of what you see in Europe. Banks are trying to step up their levels of service here, but they still need to upgrade the quality of recruits.”

This upgrading involves teaching bankers, not just about the difference between first and second generation approaches to wealth, and how to oversee succession planning, but also outlining the key components of a corporate advisory approach, including private debt, private equity and other alternative strategies, in addition to traditional portfolio building techniques.

Shifting focus

This requirement for a hike in private banking capabilities mirrors the needs of wealthy Asian families. “Professional investment management is starting to appear within family offices,” says Mr Liew. 

“You need qualified people if you are moving into traditional portfolio management, away from just investing in property,” which was previously the way most Asian families worked, he says. “Families are realising they need to look at alternative investments, especially when the property market overheats.”

While most players are resigned to teams of private bankers moving between competing institutions, wealth managers are taking steps to make client assets more sticky.

“Fifteen years ago, when a banker moved from a well-known bank to a non-household name, 80 to 90 per cent of their portfolio would follow. Today, it’s more like 20 per cent,” as clients look to what a bank can add for them in terms of its investment process and returns, says Vincent Magnenat, CEO of Asia at Swiss bank Lombard Odier.

Brand power

Although, on the face of it, the larger banks do have the brands, research teams and product ranges to attract the top relationship managers in the market, they too are not immune from recruitment pressures. This is why their business model and client offer is becoming of increasing importance.

During the last five years, Credit Suisse, which manages $190bn across the region, has added 200 RMs in Asia Pacific, enabling them to garner $16bn of net new money in 2017.

“This is a highly competitive environment,” says Benjamin Cavalli, Singapore-based head of south-east Asia for Credit Suisse’s private banking division. “But we are not willing to run this race by paying extravagant premiums. We have a very attractive value proposition in place at Credit Suisse.”

The ongoing consolidation of smaller banks will make the Credit Suisse name more attractive to those seeking a long and stable career, he believes, with an ‘Analyst Programme’ designed to train recruits from Asian universities with bespoke programmes. After several years in this global training programme as an assistant RM, young bankers typically earn their spurs to make it as a fully-fledged RM, responsible for their own clients.

Whereas Credit Suisse employs 600 advisers in Asia, compared to more than a 1000 at UBS, Mr Cavalli says his team are growing the bank’s Asian-sourced assets by 33 per cent each year, around three times the rate of their larger rival. 

“Our focus is on penetrating the entrepreneurial clientele,” he says. “Our role at Credit Suisse is to help entrepreneurs to aggressively grow their business while monetising assets and helping them with succession planning solutions.”

The bank claims to have grown assets from Asian clients at “a much faster pace” during the last two years, due to its “integrated platform” combining both private and investment banking solutions. “The combination of these two offers makes us an extremely persuasive organisation,” claims Mr Cavalli, particularly in Asia, where private and corporate wealth are often difficult to separate and can be “quasi-conglomerated”.

Not only do clients expect a return on invested assets managed in their portfolios, but they also expect their banks to help add value to the family business, he says, with 85 per cent of Asian businesses currently in the hands of their founding families. 

This integrated approach, however, shows the high level of detailed knowledge required of relationship managers by some banks, with the advisers expected to be able to understand the intricacies of M&A and liquidity transactions, in addition to portfolio management. 

“We are not saying there is no room for pure play private banking, but to become the key relationship bank for a client, you ought to have investment banking capabilities attached, or you will end up just managing a tiny share of the family’s wealth pool.”

The challenge has intensified since the global credit crisis, as many clients have started to “spread their eggs” across a greater variety of private banks, with the three-to-five of old formula now expanding to six or even. But these banks also face an uphill struggle to justify their existence, believes Mr Cavalli. 

“If you’re just buying stocks or bonds, you don’t need seven banks. We will be a natural beneficiary of ongoing consolidation.”

Talent pool

In some ways, however, the largest players can be in a tricky position, targeted by many medium sized banks as a source of ready-made talent. “In some areas we are the biggest, but we are also the hunting ground,” are the ominous words from Amy Lo, head of the Greater China private banking operation at UBS in Hong Kong.

“There is a recognition here that if you are any good, people will come to hunt you. For 85 per cent of the banks in Hong Kong, talent is the biggest challenge,” says Ms Lo, who is also the chairman of the territory’s Private Wealth Management Association and is looking at a new way of managing inter-bank rivalry.

“Instead of this ‘I hunt you, you hunt me’ mentality, we need to groom local talent. We need to emulate the apprenticeship programme they have in Switzerland, the very wise mother of wealth management.”

Much of the training also involves coaching bankers about particular markets and the products and services which are culturally preferred in each one, rather than just an overall education in portfolio management. 

“Working with south-east Asian clients is increasingly about understanding different client segments,” knowing what drives inflows from rich Indonesians and Malaysians into the region’s private banking hubs, says Julia Leong, financial services partner at PwC in Singapore. 

“We continue to be an offshore banking centre, but we have to ask ourselves, how can we continue to grow in south-east Asia? We are looking at Thailand and the Philippines much more seriously than five years ago, realising the need to look at each market on its own merits. These two countries in particular are much more politically stable and better regulated than previously.”

But understanding these cultural discrepancies is not where the recruitment challenge ends. PwC is working closely with Ms Lo’s PWMA in Hong Kong to try and foster a new, more innovative mould of banker.

“We are no longer just talking about advisory skillsets, but about understanding the digital environment we now find ourselves in,” says Ms Leong. “In today’s world, where clients are digitally enabled, we must embrace this trend, not fight technology. We need to see it as a channel through which to interact with clients and be comfortable using it and be able to tap into the infrastructure which many banks can provide.”

Back to school

Certainly for the last 15 years, wealth management has been linked to the development plan for Singapore as a nation state. But the Wealth Management Institute (WMI) – originally set up by the country’s sovereign wealth fund, Temasek, to help train relationship managers – has now split away from government to become an autonomous unit of the Nanyang Technological University. The idea is to give the training institute a more innovative ethos, moving away from the perception of a bureaucratic, box-ticking body, associated with the state.

“Now we can tap into all the wonderful things linked to being a world class university,” says the WMI’s CEO Foo Mee Har, also a politician in Singapore’s parliament. “We are playing an even more instrumental role in shaping Singapore’s wealth and asset management industry, supporting talent development and thought leadership, through cutting edge R&D work.”

The WMI also works with online training solutions and has developed a module for bankers at UBS for the last three years, helping them to combat money laundering. A new initiative being discussed with the Monetary Authority of Singapore will also allow mid-career professionals to become much more familiar with new technology which some of them may have previously shunned.

“When you don’t have enough staff, the traditional approach from the banks has been ‘you take mine and I’ll take yours’, but there is no net gain from this. The only answer is to help our industry grow our own timber,” believes Ms Foo.

Learn the lingo

Singapore-grown bankers, she says, echoing the views of many senior bankers in the region, must be much closer aligned to the country’s increasing number of target markets. This means improving both language and product-related skills.

“We don’t speak a lot of Mandarin in Singapore, but it’s still a competitive advantage,” she says, describing the country’s policy to encourage proficiency in one of its official languages, especially considering the renewed influx of Chinese migrants to the country.

“To relate to a client segment you serve, speaking the language makes a lot of difference. With some effort and discipline, we are brushing up our knowledge of financial terms.”

But knowing which types of products clients prefer is just as important, says Ms Foo. “I used to get laughed at for proposing very conservative products to Chinese when their yields were multiples of these,” she recalls. 

“You have to understand which products to propose to which clients. Cultural intelligence is vital to the work of private bankers.”