As PBs up threshold, do boutiques move in?

Simon Parfitt, Pyrmont Wealth Management

“Our sweet spot is at the gap where clients are not getting the service they would want from a retail bank, but at the same time, aren’t necessarily at the threshold of some of the private banks,” Parfitt told FSA.

Pyrmont Wealth, which can serve only professional investors, have clients with liquid assets of at least $1m.

The regulator’s definition of a minimum amount for a professional investor is HK$8m ($1.1m). “There are some banks that will accept clients at that level, but some [of the big ones] have been increasing the minimum requirement,” he said.

“That creates a nice space for us to operate in.”

Banks such as Standard Chartered and JP Morgan have increased their client requirements. Standard Chartered last year said it will increase the threshold of investable client assets to $5m from $2m, while JP Morgan doubled its minimum for investable assets to $10m, according to a report from the Financial Times. Bank of Singapore also planned last year to increase its requirements to $5m from $2m, according to a Bloomberg report.

However, other banks, such as UBS, did not follow. UBS retained a $2m threshold, according to the Bloomberg report. “We don’t want to limit ourselves, a $2m dollar client can become a $2bn dollar client overnight,” the report said, quoting Marina Lui, the bank’s China head of global wealth management.

In Hong Kong, most of the private banks require their clients to have investable assets of $1m-$2m, according to the private banking listings posted on the South China Morning Post. The highest requirements come from Citi Private Bank and JP Morgan Private Bank, which require clients to have at least $10m in assets.

Private bank requirements

Source: South China Morning Post, data as of 2016

Turning to retail banks, Parfitt said that some of them have launched “preferred services” for the affluent segment that don’t meet private banking requirements.

“But often clients are not dealing with the same relationship manager [on each interaction] and there’s very little financial planning involved,” Parfitt said, adding that these preferred services may not take into consideration clients’ tax circumstances or their intentions to change jurisdictions in the future.

Pyrmont Wealth received its first SFC licence (advising on securities) in 2003 and subsequently was granted an asset management licence in 2006, according to records from the regulator. Its previous name was Orb Global Wealth Management and it rebranded to Pyrmont early last year, SFC records show.

The firm manages £120m ($157m) in client assets in Hong Kong, with the majority of clients expatriates from the UK and Australia, Parfitt said.

The firm has around 10 staff, which mostly consist of client-facing financial advisers, Parfitt said.

Other wealth managers, such as UK-based St James’s Place Wealth Management, also target affluent expatriates in Hong Kong. For its Asia-based clients, the firm managed £900m ($1.25bn) as of February this year.

Dimensional Funds 

Pyrmont Wealth makes use of a risk profiling tool that puts clients in one of the firm’s 10 risk profiles.

A risk profile correspond to a core portfolio, which is a mixture of mostly funds managed by US-based Dimensional Fund Advisors (DFA), according to Parfitt.

The firm also makes occasional use of ETFs managed by Vanguard and Blackrock, and includes other funds based on client requests.

“But if we have full discretionary authority, then we would opt for 100% DFA funds.”

DFA believes it has found a winning investment philosophy that centers on factor investing. The firm received regulatory approval last month from the Monetary Authority of Singapore for its nine funds for sale to retail investors, according to records from the regulator.

The firm also has an office in Hong Kong, where it obtained a Type 1 licence (dealing in securities) from the SFC in November, according to the Hong Kong regulator.