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Are Asia’s wealthy inching into DPM?

Private bank and wealth management clients in Asia are slowly putting more money in discretionary mandates, but they still account for a small portion of assets under management, according to Pictet WM and Deutsche Wealth.
Are Asia’s wealthy inching into DPM?
Claude Haberer, Pictet Wealth Management

When asked about discretionary business growth, the responses from banks and wealth managers sound optimistic. But because no one would give figures to back up buoyant statements, growth is more likely a tweak than a surge.

“Our assets under management have multiplied by four since 2011,” Claude Haberer, Hong Kong-based Asia CEO at Pictet Wealth Management, told FSA.

Since 2011, discretionary mandates accounted for around 20% of the firm’s AUM in Asia, Haberer said, but he declined to disclose figures. He added that having a 20% share in AUM in discretionary mandate is high in Asia. “I don’t think that any bank in Asia has higher than 20% penetration in discretionary mandates.”

Globally, Pictet Wealth manages around CHF 200bn ($201bn) in assets.

Similarly, Deutsche Wealth Management is also seeing more money coming into its discretionary business, Tuan Huynh, Deutsche Wealth’s head of discretionary portfolios for Asia-Pacific, told FSA in a separate interview.

“We are consistently seeing inflows into our wealth discretionary business, but it has recently picked up in the last 18 months.”

However, Huynh acknowledged that the percentage of its discretionary business accounts for only around the “mid-single digit” area of its total AUM (he also declined to provide specific figures).

“Inflows into discretionary mandates are improving, but not substantially in terms of the relative share because we are coming from a relatively low absolute number to make a substantial improvement. You would need to double, triple, quadruple your AUM in order to make a substantial impact.”

Tuan Huynh, Deutsche Bank Wealth Management

Nevertheless, the firm has ambitious plans to at least double its discretionary AUM in the next two-to-three years, which would increase its share to the “high single digit” area, he said.

In terms of market segments, Deutsche Wealth is seeing demand from Southeast Asia, particularly Singapore and Indonesia. In North Asia, demand is from mainland Chinese investors.

“Hong Kong is growing substantially, but not as much as mainland China,” he said. He added that due to the “trading mentality” in Hong Kong, interest in discretionary is lower than it is in Singapore.

Advisory dominant

The bulk of wealth management for both banks is from the advisory business. Pictet Wealth’s advisory business in Asia accounts for 55% of the firm’s regional AUM.

“Asian investors are definitely more hands-on. Globally, our discretionary assets are approximately 40% of our AUM, twice the proportion of Asia,” he said.

Haberer added that most of its advisory clients are the “mid-sized customer”. He explained that most of the firm’s clients for its discretionary business are the large customers, such as family offices, because they look for investment expertise. That compares to the mid-sized customer, who believes he can make his own decisions.

“So advisory is usually neither for the very big nor for the very small customers,” he said.

Part of the Mark Allen Group.