More specialist bankers needed for rising tide of HNWIs
With the growing economies in Asia driving the frontiers of wealth creation, the prospects for the private banking industry in the region looks compelling, according to recruiters, industry bodies and wealth management advisers.
Despite five years of the world lurching from one financial crisis to the next, figures from The Wealth Report 2013 by Knight Frank predict substantial growth in the number of high-net-worth individuals (HNWIs) in Asia.
The report suggests that between 2012 and 2022, the number of HNWIs - individuals with assets worth more that US$30 million - in China will jump from 10,849 in 2012 to 25,660 in 2022, a rise of 137 per cent. In Hong Kong, the number of HNWIs is expected to rise 49 per cent in the same period, from 3,206 to 4,778.
Meanwhile, the most substantial growth in percentage terms is predicted in the continent's emerging economies. Myanmar, for example, is expected to see a 687 per cent growth in its number of HNWIs from 2012 to 2022, followed by Indonesia at 402 per cent and Mongolia at 369 per cent. All this bodes well for the region's private banking industry.
According to industry practitioners, as a regional financial hub, Hong Kong has also benefited from a relocation of funds from traditional private banking strongholds in Europe, where banks have been changing their business models to fall in line with changing regulations.
Industry practitioners also say that much in the industry has changed since the global financial crisis in 2008. These days, private wealth clients are taking nothing for granted and frequently examine the fundamentals of their adviser relationship. Rocked by various financial disasters, many private banking clients are now looking for solutions that mitigate risk rather than produce quick rewards. Meanwhile, second- and third-generation high-net-worth families have various succession-planning needs to make sure they avoid the "rags to riches to rags" trap.
"Demand for talent is increasing as banks expand in Asia and more private banks enter the market," says Enid Yip, Asia CEO at Bank Sarasin. "This is driving costs up at a time when margins are under pressure. Banks need to ensure that they are operating sustainable businesses."
Later this year, the Hong Kong Institute of Bankers (HKIB) is scheduled to introduce two new streams to its Postgraduate Diploma in Wealth Management, which are designed to strengthen core competencies and boost the wealth-management talent pipeline.
Carrie Leung, CEO of HKIB, says the introduction of qualification streams in "Business Strategy in Private Wealth Management" and "Global Portfolio and Client Relationship Management" will cover topics requested by the industry. "We conducted training-needs analysis research by talking to traditional private banks, local banks that offer private banking and wealth-management services, and the regulators," she says.
While regulators indicated a need to focus on risk and compliance, employers stated that in addition to technical skills, soft skills and leadership development were needed to help provide stability in the industry.
"It makes sense that banks offering private wealth-management services would want their employees to stay with them because it strengthens the client relationship," Leung says, adding that when relationship managers move from bank to bank, often their clients move with them.
The postgraduate programme will serve a dual purpose. "Participants who complete the programme can show they have achieved recognised industry standards, while employers can show that their employees have fulfilled regulatory professional training requirements," Leung says.
While pointing out the strength and capabilities of the city's private wealth management industry, Norman Chan Tak-lam, CEO of the Hong Kong Monetary Authority, believes it is vital for the wealth-management sector to ensure its staff are equipped with the necessary knowledge and skills to perform their jobs effectively. Speaking at an HKIB function last year, Chan said the availability of professional talent is vital to Hong Kong's private banking industry.
"Institutions can only be as strong as the people who work in them," Chan said. "To create value for their clients in this challenging business environment, private banks need strong teams of professional staff, from the front end to the back office."
To strengthen the skill sets of its relationship managers, ABN AMRO Private Bank has partnered with international business school INSEAD to create a relationship manager global certification programme, covering topics ranging from risk management and product knowledge to wealth restructuring.
To date, about 250 relationship managers have completed the programme, and the aim is to have 500 relationship managers certified this year.
Philip Quinn, banking and finance managing consultant at Kelly Services, says programmes offered by the Hong Kong Securities Institute, such as the International Wealth Manager Programme, can help to upgrade industry recognition. Such qualifications, however, only form part of a bigger picture.
"Private-banking clients expect and demand quality and efficient services that are tailored to their specific needs," he says. "Volatile markets have made clients sceptical, so a high level of technical competency and ethics, in addition to high standards from the front to back office, are also of upmost importance."
Entrants should learn to walk before they try to run
Recognised industry qualifications are important for private banking, but being technically competent and having the ability to tailor solutions to specific client needs are the core competencies of being a private wealth manager.
Carrie Leung, CEO of HKIB, says that aspiring private bankers should learn to walk before they try to run. To join the industry, new entrants should be prepared to accept junior positions and work hard on soft skills and interpersonal abilities to add substance to their craft.
Traditional private banks, such as boutique banks, have long been the main employers for private bankers and relationship managers. However, the rise in Asian wealth and an expansion of regional business models have seen local retail banks build their HNWI offerings, creating a channel of new career opportunities in private wealth management.