EFG Bank wins in Asiamoney’s Private Banking Poll 2016
It was a clean sweep for EFG Bank in Asiamoney’s Private Banking Poll, cementing a strong run that has seen in dominate in multiple categories over the past three years. Shruti Chaturvedi reports.
The Asiamoney private banking poll surveyed 1,944 respondents in three categories: high net worth individuals (HNWI) with assets under management of $1m-$5m and $5m-$25m, and ultra HNWI with an AUM of $25m or above.
The strength of Switzerland headquartered EFG Bank was underlined this year by it winning all three categories in Asia. The bank has been a consistent winner in the past too, taking the top spot in the $1m-$5m and $5m-$25m brackets in 2014 and 2015. But this year EFG scored a hat-trick, leading the $25m and above category as well.
At just over two decades old, EFG calls itself the new-kid-on-the-block when compared to Swiss banks that have had private banking operations for hundreds of years.
This newness and the fact that most of its revenue come from the private banking division gives it an edge in terms of being nimble, said Albert Chiu, EFG’s chief executive for Asia Pacific.
“We do not product push,” he said. “We go to the clients and find out what products or services they need, then we go out to the market and research for the specific product that fits our clients’ family or wealth situation. We then find the best available for our clients.”
Deriving the bulk of its revenues from the private bank also gives EFG the freedom to offer a pure open architecture platform, rather than being constrained by having to offer other banking products or investment banking services to generate more return per client. What has also allowed it to gain ground is its policy of employing only professionals with at least 10-15 years in the private banking industry. These employees bring not only their experience but also their relationships, which in the world of HNWIs, where relationship managers are privy to very personal and sensitive information, tend to be sticky.
While EFG emerged the overall winner for Asia, the country-level results were more varied. Respondents revealed their preference for local expertise.
For example, UHNWIs with assets in India picked Centrum Wealth Management as the winner.
Centrum Group had its beginnings as a boutique investment bank 20 years ago, serving business owners and controlling shareholders in areas such as capital raising, corporate finance, private equity and IPOs. With the majority of employees in Centrum Wealth Management also owning stock in the company, the company's staff take a long term approach, points out executive director, Arpita Vinay.
“The orientation for us has been sustainable and customer centric,” she said. “Which would not work if the person executing at the frontline is not aligned to that DNA. We want to build a culture that is long term, customer centric and based on employee pride – whether you’re a service manager or someone more senior: are you going to be around when the product matures?”
One insight from working with Indian clients is that they do not differentiate between personal assets and business assets, said Vinay. And the value proposition they expect from a private bank is not just efficient allocation of wealth but also research and advisory, including succession planning and how to navigate regulations and taxation.
While Centrum and EFG like to emphasise the nimbleness of their franchises, DBS Private Bank, which was ranked the best domestic private bank in Singapore and the favourite among HNWIs in the $1m-$5m category in the city state, benefits from the diversity of its offering and a vast network in Asia.
“When clients come to us they can have access not only to private banking platform but work closely with our investment banking corporate finance platforms to provide a holistic solution,” said Tjandra Januar Jun, the head of North Asia private banking at the Singaporean lender.
“For many other foreign banks, their core focus is the investment bank plus private banking solution. They don’t have that kind of depth in consumer banking or corporate banking.”
In North Asia, where many entrepreneurs are in the wealth creation phase, consumer bank services become more relevant. To illustrate, Tjandra noted the migration of Chinese clients to Singapore, which accelerated about 10 years ago.
“When they come to Singapore it is natural they need a house and a mortgage, to set up a consumer banking account and a credit card. When it comes to these we can really provide an end-to-end solution and from a competitive standpoint this becomes our key strength.”
Most market participants interviewed by Asiamoney agreed that in a low interest rate environment and with a great deal of political uncertainty, be it the aftermath of Brexit or the turmoil in the Middle East, preserving rather than growing wealth was a top priority among clients.
The rising unpredictability of central bank actions has made foreign exchange management and related products extremely important. Investors experienced a lot of pain when the Swiss National Bank decided to unpeg from the euro and are working hard to avoid being caught off-guard again.
“Risk management should be most important consideration,” said Roger Bacon, head of managed investments & advisory for Citi Private Bank, Asia Pacific ex-Japan. His division only serves clients in the over $25m or UNHWI segment.
Preserving capital in times of volatility is foremost, he said adding that volatility is not necessarily a bad thing.
“When volatility is high we work very hard with our third party asset managers to come up with a way to exploit it,” said Bacon. “You can use structured products that go long on volatility and exploit dramatic changes [as opposed to direction] in volatility. There are lots of macro and volatility based hedge fund strategies that capitalise on this.”
The broad trend is one where Asian clients are more mindful of their investment choices.
“Clients are much more conscious of risk, more sophisticated and much more conscious of understanding exactly what it is they are buying,” said Bacon. “They have learned lessons from 2008 well and are working with private banks to diversify their portfolios.”
“The main shift has been a decrease in equity and more fixed income allocations that have gone into cash or bond portfolios or single name bonds and mutual funds,” he added.
Asia, with its growing wealth, provides a rich seam of opportunities for those operating across multiple disciplines. But capturing business from UNHWIs, who are the savviest and most experienced, is far from easy.
Most of these clients engage the services of four to five private banks at the same time. As a result, standing out in such a competitive environment requires a lot of effort and patience. The situation is aggravated by the tough operating environment.
One outcome of this intense competition for a finite number of clients is consolidation. A recent example is the ongoing acquisition of BSI Bank, a fellow Swiss private lender, by EFG.
“The BSI merger should give our business the critical mass to sustainably become the top pure play private bank in Asia,” said Chiu, adding that the scale of its business would essentially double post the completion of the process.
EFG declined to comment on the decision by the Monetary Authority of Singapore to shut BSI’s Singapore branch due to what the regulator called “serious breaches of anti-money laundering requirements, poor management oversight of the bank’s operations, and gross misconduct by some of the bank’s staff.”
Meanwhile, DBS acquired Société Générale’s Asia private banking business in 2014.
“Our SocGen acquisition not only allows us to access their private banking business but also form a strong collaborative programme with its investment banking business,” said Tjandra. “It allowed us to pretty much leverage on its investment solution capability here in Asia.
“If you are familiar with SocGen's strengths you would know they are strong in European market and structured products and the acquisition allowed us to have closer relationship with SocGen in Europe as well.”
Technology to aid
The business of managing the wealth of rich individuals goes back hundreds of years and has always been a profession where personal interaction has counted for a lot. But the emergence of a new crop of business leaders that are internet savvy means incorporating technology has become a more important aspect.
UBS, our winner in the Hong Kong UNHWI category, is one bank that wants to stay ahead of the curve on this account.
“When we look at the future private banking in Asia Pacific, one of the things that we will focus on is embracing digitalisation,” said Ketan Samani, chief digital officer for UBS Wealth Management, Asia Pacific.
The company has launched the ‘UBS Wealth Management in Asia’ app in English, traditional and simplified Chinese. It allows customers an overview of their portfolio and access to UBS research.
“Around 70 clients stepped forward to help UBS with usability testing on the Wealth Management app,” said Samani. “That speaks volumes of what our clients are seeking from us. We only design and build digital offerings that benefit UBS and its clients. We do not offer digital based on what we think our clients want.”
However, technology and digitisation can only augment, never replace its client advisers, said Samani.
For Bacon, the appeal of services such as robo-advisers — where the human involvement is minimal — is likely to be concentrated lower down the wealth curve.
“We think it is a very interesting area for less wealthy HNWI. As a consumer bank, Citi is very engaged in fintech. In the UNHWI space, we are less convinced and whilst we recognise it is an industry disruptor in certain circumstances in the UNHWI segment not many would like to interface with computers.
“Human interaction is very important. The relationship is very important.”