After focusing on Asia’s developed markets, such as Hong Kong, Taiwan and Singapore, Pictet Wealth Management is now planning to target the growing wealth in China and Indonesia, Claude Haberer, equity partner and chief executive for Asia-Pacific, told our sister publication Fund Selector Asia.
He explained that Indonesia provides significant opportunities for wealth managers, especially after the country’s government launched the tax amnesty programme in 2016, which encouraged high net worth individuals (HNWIs) and families to transfer their offshore wealth back to Indonesia.
Wealth in the country rose significantly after the amnesty.
There were around 124,090 HNWIs in Indonesia in 2017 and their wealth increased to $700bn (£537bn, €626bn) from $184.27bn in 2016, according to data from Capgemini.
“The Indonesians have now clarified their financial situation,” Haberer told FSA.
Targeting HNW wealth
Other wealth managers have begun targeting Indonesia’s wealthy following the tax amnesty programme.
Lombard Odier, for example, formed a partnership with Bank Mandiri in April 2018 to develop its private banking arm through investment and family services.
In 2017, Singapore-based OCBC launched an onshore private banking business in the country.
China keeps on growing
According to a Knight Frank report, China has the world’s second highest number of individuals having at least $30m in investible assets (9,953). The number is expected to grow 30% in the next five years.
Chinese wealth is also expected to flow into Hong Kong.
Up to 49% of the special administrative region’s private wealth AUM could come from by mainland China by 2023, according to a KPMG report.
To capture these opportunities, Pictet WM plans to hire more bankers in Hong Kong and Singapore, which are the firm’s regional hubs, according to Haberer.
The Hong Kong office focuses on greater China clients, while the Singapore office covers southeast Asia, which also includes non-resident Indian (NRI) portfolios from clients in Dubai.
Without giving exact numbers, Haberer noted that the firm will not be hiring aggressively. Currently, it has 52 bankers based in the region.
“We must be in a position where a client has access to a banker, an investment specialist, a product specialist, as well as a partner within the firm.
“I still meet most of the clients, but you can’t do that if you have 500 relationship managers and thousands of customers,” he said.
Fintech development
Pictet WM is also engaging with fintech firms to gauge the effectiveness of tools that could be used in wealth management operations, including face-to-face interactions with clients, client on-boarding and communications, according to Richard Mak, Hong Kong-based managing director and head of Asia advisory.
Mak noted, however, that the firm has no plans to offer a robo-advisory services or any platform that will allow clients to make direct transactions online.
The firm’s wealth app, for example – which enables clients to access market information as well as their accounts – does not allow client transactions, Haberer said.
“We are not in the business of pure transactions. We are in the business of the transaction being a consequence of the recommendations and advice that we provide.
“Our purpose is not to industrialise, like what a retail bank would do with robo-advisory, but to enrich the investment content and insight.”
Financial advice still dominant
Speaking about the firm’s discretionary business, Haberer said that a majority of the firm’s AUM in the region still stems from advisory.
Since 2011, around 20% of its Asian assets have been in pure discretionary mandates. Including managed investment funds, that figure rises to around 30%, he noted.
The reported figures are lower for some other private banks. Bank of Singapore, for example, has around 7% of its S$139bn ($102bn, £78bn, €91bn) AUM in discretionary mandates, according to the firm’s website.
For Deutsche Bank Wealth Management, its discretionary business accounts for around the “mid-single digit” area of its Asia AUM.
According to Haberer, the average in Asia for pure discretionary is low – at around 5-10% of managed assets.
Asia is just starting to accumulate
Haberer explained that wealth accumulation is less mature in Asia.
“In Europe, we are faced with fourth or fifth generation business owners, often not even running their businesses anymore. They are used to delegating. They delegate the management of running of the business and they delegate the management of their funds.
“In Asia, where most businesses are run by the first or second generation, the mentality is very much you run your business, you make your decisions and you take your risks. That is why the non-discretionary part is higher in Asia.”
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