Here be dragons
The wealthy of today need a new breed of bankers and advisers
As a major global finance centre, Hong Kong’s wealth management sector is ideally placed to capitalise on the swelling ranks of millionaires on the mainland and across the region, but the industry still faces the hurdles of operating in a stricter regulatory environment, coupled with a talent scarcity.
Bridging the gap between the retail and premier banking wealth management sectors, Maria Leung, director and head of Citigold Private Client (CPC), says the role of wealth managers is becoming more complex.
“As the use of technology plays a bigger part in wealth management, the traditional role of the relationship manager (RM) in providing clients with the decision-making information they need is diminishing,” says Leung.
Instead of providing information, an RM’s role these days leans towards helping clients understand the information available so they can make informed financial decisions, she adds.
To achieve this, Leung says Citigold, which serves the “core wealth” segment, puts a great deal of effort into creating relationships through building connections with clients identified as individuals with US$1 million to US$10 million in investable assets. According to Citi research, this “core wealth” segment accounts for the largest amount of unmanaged wealth in Hong Kong.
Leung says that while clients are looking for transparency, instant investment alerts and benchmarking, the main factors remain trust and the relationship they have with the bank and its wealth management team.
She believes this is a key strength for CPC, where the majority of bankers have been with the firm for 15 years or more. “We tend to train and groom from within and strengthen our capabilities with additional specialist hires,” says Leung, who notes that with the emergence of new wealth-management providers – including virtual firms – the demand for talent will continue to grow and the challenge of hiring experienced wealth managers will become even more difficult.
Fiona Yung, executive director with recruitment firm Tricor Executive Resources, says that in the current tight talent market, it is not so easy to persuade experienced wealth managers to move from one organisation to another. A few years ago, the main point of client contact tended to be with the relationship manager instead of the bank itself, she adds.
“If an RM moved to a new organisation, it was often the case that they would take their clients with them, and sometimes several of their colleagues,” she says.
Yung notes that wealth-management organisations, particularly private banks, are moving more towards a team approach. This means the client relationship becomes more embedded with the organisation. “RMs are going to be reluctant to move if they feel they could lose part of their client base,” she says.
As many mainlanders look for wealth management solutions from Hong Kong providers, Yung believes they will prefer to do business with well-known banks with solid reputations. She thinks this could be another reason that experienced wealth management individuals are cautious about moving to boutique banks. “Branding and reputation are two key areas wealthy mainland people are mainly interested in. Therefore, wealth management specialists are more likely to stay with these organisations,” says Yung.
In a relatively young, but maturing wealth-management market, Kwang Kam-shing, JPMorgan Private Bank Hong Kong market manager, has noted the beginning of a trend at the high-net-worth individual (HNWI) end. The focus of her observation is a new generation of HNWIs who are generating wealth through innovation, usually related to finance and technology. “Hong Kong’s first generation of wealth creators mainly created their wealth from manufacturing and property,” she says.
Kwang says these younger entrepreneurs have a different approach to wealth management. Although she stresses this is not happening overnight, Kwang says the next generation of wealth creators tend to be open to a broader range of investment ideas. “They ask lots of questions and need to be convinced of the value of the proposition, but once they make a decision, they are prepared to move quickly.”
Kwang says philanthropy is another area where clients are increasingly seeking advice and assistance. She says whether it is education, healthcare or a particular cause close to an individual or family, HNWIs are looking for ways to give back to the community.
“Philanthropy is very important for our clients, and being a larger private bank with the experience and specialist resources, we are in a strong position to help them,” says Kwang, who points out that, in all areas of JPMorgan’s activities, it is the long-term client relationship that is the most important focus. Also, where the firm has clearly defined recruitment needs, private banking professionals must have individual areas of specialisation but also be prepared to work as a team.
Bruno Lee Kam-wing, Fidelity Worldwide Investment regional head of retail Asia ex-Japan, feels it is an exciting time to be in wealth management. “Although economic cycles seem to be getting shorter, market volatility has stabilised a little and there are signs of recovery in the US and the stronger European economies, which is encouraging.”
He adds that, in Hong Kong, would-be investors are sitting on large sums held in savings deposits. For the past few years, they have been taking a wait-and-see approach, according to Lee. However, investors seeking investment opportunities are also being cautious and looking for trusted advisers and transparent investment vehicles, he adds.
“We see many investors adopting a back-to-basic approach, which fits well with our Fidelity Wealth business model,” says Lee.
At the heart of the Fidelity Wealth operation is a team of private client managers who work closely with customers to keep them well informed so they can be confident when making investment decisions. Designed for mass-affluent investors – or those with US$100,000 in liquid assets – Fidelity’s retail investors can access over 380 mutual funds spread over different asset classes, geographical regions and structures provided by 10 fund houses, including Fidelity’s own funds. “Fidelity is the only Hong Kong asset manager to offer third-party funds to retail investors,” says Lee.
In an industry that is always looking for talent, Enid Yip, CEO of Asia at Bank J. Safra Sarasin, says it is not possible to read a CV and say, “Now there’s a great private banker.”
From an operations perspective, Yip says growth is not difficult. “You can achieve it by opening branches here and there, hiring more people, but that can all be smoke and mirrors,” she says.
She adds that running a profitable business that can grow sustainably is the key. “That’s the challenge, because there is a lot of competition, margins are thinner and costs are higher for compliance, wages and IT,” Yip says.
She adds that combining two family traditions in private banking, the merger in June this year between Bank Sarasin & Co and Bank J. Safra (Switzerland) has dramatically strengthened its position as a private bank. “This has reinforced our shared philosophy of a sustainable and conservative investment approach for our clients,” says Yip, who adds that the merger is a compelling story for clients and client relationship managers.