Boutique private banks struggling in Asia
There’s been a steady flow of Western private banks – chiefly from Europe – setting up shop in Hong Kong and Singapore in recent years, but making a success of an Asian wealth business is easier said than done.
The years 2009-2010 in particular saw a swathe of firms – from small boutiques such as Reyl & Cie to mid-tier players like BSI – establishing a presence in the region. Swiss boutiques Bordier & Cie and Gonet & Cie are two of the more recent arrivals in the Lion City, in January and November 2011, respectively.
“In 2009 it was all the rage for private banks to open offices in Singapore or Hong Kong, but many have not been successful connecting with the ultra-high-net-worth segment, and so they have started to move down the scale,” says Mykolas Rambus, chief executive of Wealth-X.
“The reason for this failure to gain traction is that they have no clear client acquisition process," he adds. "Many put branches in Asia, but when it comes to new clients, they hope for the best but don’t really have a structured plan.”
It doesn’t help that the cost of compliance has risen sharply due to tighter rules on capital reserve requirements and selling products; the cost of paying staff has risen due to greater competition for private bankers; and margins have been compressed, as so many products have been commoditised and clients have demanded lower fees.
It is the marginal, lesser-known foreign firms that are finding life particularly difficult, to the extent that some are throwing in the towel.
Six years after launching an Asia head office in Singapore, Israel’s Bank Hapoalim is due to close it this month, having said in July it was restructuring its business in the region. The activities of the branch, which focuses on private banking, have been transferred to Hong Kong and China.
The firm may have been unfortunate in the timing of its early-2007 launch, but as an Israeli-run bank it did not seem a natural fit in Southeast Asia in any case, note market participants.
Liechtenstein-based VP Bank is another case in point. Last year regional CEO Ian Pollock exited and the firm laid off 60% of the private client marketing staff it had hired in Hong Kong and Singapore in 2012, says a senior recruiter. The intermediaries team in Singapore remains intact, with an internal memo reportedly saying this would be its regional focus now, although managing director Reto Isenring stresses private wealth clients remain a priority.
“It’s stories like this that deter people from joining boutiques,” says one Singapore-based recruiter.
Meanwhile, Italian insurer Generali’s decision to sell BSI – which emerged in mid-2012 – has made it harder for the private bank to attract and retain clients, say sources. BSI did not respond to requests for comment.
Another negative for the more marginal players is that while mutual fund sales through private banks seem to be rising, they are largely being bought from the well-established firms, notes Stephen Grundlingh, head of Southeast Asia at Franklin Templeton. “There’s a fairly negligible amount attributable to new, smaller players.”
A feature on the private banking industry in Singapore will appear in the April issue of AsianInvestor magazine.