Deutsche sets its sights on HNWIs, retail distribution

Deutsche Asset & Wealth Management (DeAWM) is to pursue the high-net-worth (HNW) segment and retail bank distribution in Asia in a bid to expand its wealth and asset management business.

In a break from its traditional focus on the region’s ultra-high-net-worth investors, the German firm’s franchise and strategy chief said its platform outsourcing moves would allow it to handle an increased number of transactions.

And the firm has started to hire additional relationship managers to focus on the HNW segment, with plans to gradually build its headcount.

Hong Kong-based Mark Smallwood, head of Asia franchise development and strategic initiatives, told AsianInvestor that DeAWM saw tremendous upside in moving down the client chain. It has traditionally been focused on serving the ultra-high-net-worth individual (UHNWI) segment and large institutional investors in the region.

DeAWM’s sweet spot in wealth management/private banking has been UHNW (with $30 million in investible assets) but from next year it will be targeting the HNW segment (with $5-25 million investible assets) as a new wealth management platform becomes fully functional.

DeAWM started outsourcing its wealth management platform and back-office operations to Avaloq last year. With the completion of this move at the end of 2015, the firm will be able to handle a larger volume of transactions, Smallwood said.

The firm has also recently started hiring relationship managers, including a managing director in Hong Kong, to focus on the HNWI business. More hires will be made next year but the team build-out will be made gradually.  

“We’ve hired the initial one to two bankers and we’re formulating the plan on how to build out,” said Smallwood. “We are not hiring 100 people at once. Initially it will be an organic build-out within the existing teams and as momentum grows we will see how it develops.”

The most recent hire was Pauline Ko, who joined as managing director and head of wealth management for Greater China from Swiss private bank Julius Baer in July.

DeAWM has 200 relationship managers and it aims to double this number in five years with a focus on the HNWI segment. It is looking at hiring at the director- and vice president-level, with access points to these type of clients.

“Our process is very systematic and disciplined,” Smallwood said. “Our private wealth management business is doing well because we are focused on our strength, which is ultra-high, and we have managed our costs well. High-net-worth is a complement to that and will be undertaken in a measured way. We are moving into this space and initiating the plan. The effect will be felt next year.”

The firm considers UBS, Citi, Credit Suisse, HSBC and JP Morgan as its competitors. On the difference between serving UHNW and HNW investors, Smallwood said the HNW products and their pricing will be slightly more “industrialised” than those for the UHNW investors, who demanded more bespoke solutions. He cited private banks such as UBS, which provide more industrialised products and solutions.

“They’re like a machine. Certainly UBS does it towards that way to manage costs and make sure that the business is running efficiently and profitable. I don’t think we’ll ever be like a machine,” Smallwood said.

Regarding its asset management business, DeAWM said it started from a small base and had focused on larger insurers and sovereign wealth funds due to limited resources. In fund distribution, it has focused on private banks but the next phase for the firm will be to pursue retail banking distribution.

“It’s a bit like our initiative on the private banking side. We’re looking at it [retail banking distribution]. It illustrates, from our private bank and institutional coverage, the upside we have is tremendous. It’s a higher end [business, and] we have lots of opportunities to move down,” Smallwood said.

DeAWM is also expanding its sales and asset management team. “We are not able to disclose numbers but we are expanding as we move [the] mind and management of Asian assets to Asia, and as we build onto this platform,” Smallwood said.

The firm has started moving the management of Asian assets to Hong Kong from the UK and Frankfurt. It relocated Sean Taylor, chief investment officer, to Hong Kong last year, as reported.

It has also strengthened its investment team with the appointment of Elke Schoeppl-Jost as regional asset class head and Henry Wong as fixed income head.