The battle to manage Taiwan’s wealth
Taiwanese banks are making a concerted effort to gain a bigger slice of the local wealth management pie, which is dominated by foreign players. But the latter group is not surrendering its share of this lucrative market easily group, despite being buffeted by headwinds globally.
As a percentage of population, Taiwan’s high-net-worth community is almost five times the size of those in other Asian markets. UK research firm Verdict Financial Services estimates there to be 90,600, or 0.48% of the adult population.
Capgemini’s Asia-Pacific Wealth Report 2016 placed the number at 127,000 HNWIs in Taiwan, once offshore assets are counted, boasting a combined $413 billion in wealth.
Moreover, between 2006 and 2015 the island’s HNWI populace grew by an average of 7.6% a year, while their wealth rose 7.5%. If that rate holds for the next decade Taiwan will have over 265,000 wealthy people holding $853 billion in assets by 2025, according to Capgemini.
And servicing HNWIs can be very lucrative. Taiwanese banks typically source about 50% of their profits from about 10% to 20% of their clients, said Samuel Lin, senior vice-president of Taishin International Bank.
New gaps to fill
What’s more, the withdrawal or takeover of various private banks from Asia has left gaps for others to fill. In the past two-and-a-half years eight international private banks have withdrawn from the region for one reason or another: Societe Generale, Coutts International, Barclays, BSI, Falcon, DZ, ANZ and ABN Amro have followed.
No official figures exist about how much of Taiwan’ s HNWI investable wealth lies with local versus international banks.
BNP Paribas Wealth Management said Taiwan was the fastest-growing market for its Asian business. The firm’s AUM on the island grew at 20% per annum from 2012 to 2015. UBS said its Taiwan expanded at the same rate in 2016, but declined to provide earlier figures.
However, Taiwan’s biggest local banks can point to similarly robust expansion. Big local banks have seen both the number of HNW clients and assets under management from them grow by a similarly robust 20% annually since 2010, said Lin.
Taipei-based consultancy Keystone Intelligence’s figures shows the five largest Taiwanese banks posted an average 22% compound average growth rate in wealth management fee incomes between 2011 and 2015.
CTBC Bank, the largest domestic bank in Taiwan, said the AUM of its HNWIs grew at a slower but still compelling 14.7% compound annual rate over the past three years.
Product evolution
These domestic players are keen to stress how their offerings have developed.
Albert Lee, chief executive of global retail banking and head of international private banking at CTBC, said longer-term relationships with clients and hence a better understanding of their long-term needs. He believes this should ensure they keep expanding their share of the wealth market.
His bank claims to have rolled out “complete” wealth management teams, products and services to HNW families and their businesses, including financial and professional advice, investment research, and HNW-exclusive concierge services. The bank even launched its first overseas private banking office in Singapore in 2012 and has expanded it to the Philippines and Indonesia, largely chasing offshore Taiwanese clients.
Another local player, Taishin Bank, has been covering HNW clients for 11 years, rolling out what it calls a “complete product range”. It’s adding new products, including a US-Europe strategic value investment portfolio in 2016, and it’s offering preferential healthcare and services in credit cards, as well as sport and entertainment activities.
It’s important that international private banks gain support from headquarters to head off this push by local banks, said Dennis Chen, country head and head of wealth management at UBS Taiwan.
The Swiss bank is targeting 20% growth this year, and as part of this it intends to make further investments into its wealth and asset management businesses. A 5% to 10% growth in headcount and IT is budgeted for this year.
BNP Paribas has higher ambitions. “We are able to face any competition from local banks,” asserted Tina Hsieh, head of onshore wealth management in Taiwan for BNP Paribas Wealth Management.
The bank aims to triple the size of its business over the next three years across headline parameters such as revenue, said Henry Pang, head of Taiwan. To do so it intends to double its relationship manager team over that time. It also aims to trumpet its services in wealth planning, key client solutions and philanthropy, among other areas.
CTBC’s Lee admits his international rivals enjoy specific advantages – namely their global teams and product exposure, and big investment in staff training.
But while international private banks boast greater sophistication, many domestic lenders already offer HNWIs loans, cash management and other essential operations. Local banks also tend to have longer-serving staff than international rivals. CTBC Bank’s HNW relationship managers have worked there for an average of 12 years, for example.
The coming years will bear out whether Taiwan’s wealthy will be drawn to the worldliness of international banks or look to stalwart local lenders.