“A lot of the high net worth clients have become more cautious and have done their own risk management. Instead of looking for high returns by buying high-risk products, many go back to the basics and invest in bonds and blue-chip quality equities,” she said at a briefing last week.
In its June market outlook, the bank said it advises increased exposure to global equities, in particular European and emerging markets due to attractive valuations.
BMO PB is considered a latecomer to private banking operations in Asia, starting in 2011 by acquiring operations from the Canadian Imperial Bank of Commerce.
The firm has grown the wealth management business in the past two years, Chan said.
“In Hong Kong alone, there are a quarter million Canadian citizens. Moreover, a lot of Asian families like to live in North America because their children study there. We [hope to] serve their cross-border needs between Asia and North America,” she noted.
Last year the bank set up a trust company in Asia, targeting the trend of succession planning, which is expected to increase over the next five-to-ten years.
M&A?
The private bank would like to grow organically in Asia, although it does not rule out acquisitions. There is a trend of consolidations among wealth managers in the region, such as the exit of CIC, NAB and ABN Amro, as well as Edmond de Rothschild, where Chan was CEO and Asia head before joining BMO in 2015.
“I have seen a lot of failing examples of European boutique banks, which wanted to apply the cookie-cutter model from Europe to Asia, for example, to offer discretionary-only services. But in the region most of the investors are interested in the advisory model.”
For BMO PB, the discretionary business accounts for roughly 15% of the overall assets under management, in line with market average in Hong Kong, she added.
The firm has doubled headcount to about 90 people in Asia in the past two years, with about half of them relationship managers. It expects the number to double again in the next few years, Chan said.
BMO’s private banking business in Asia has offices in Hong Kong and Singapore.
China and family offices
In mainland China, the BMO group has a minority stake in Fullgoal Asset Management as well as COFCO Trust, an investment management business targeting institutional and high net worth investors.
It also has three bank branches in mainland China, though they do not include the private banking business.
“Regulation in China is still quite tight at the moment and it’s very difficult to differentiate product offerings compared with the local big banks. So we will be very cautious in our plan for onshore development,” Chan said.
The bank is interested in opportunities targeting the the growing number of family offices in China. “One of the key things we can offer is family office advice and services in onshore China. We also have a lot of Chinese clients who move or reside in Canada and come back to China to do business,” Chan added.
Albert Yu, Asia CEO of BMO Financial Group, said most Chinese wealth is trapped onshore.
“With the current capital controlled environment, banks are mainly set up to serve mainland Chinese money that is already sitting legitimately offshore”, which is estimated at 20% of total Chinese wealth.
“For the remaining 80%, they mainly invest in less sophisticated investment products. Either there will be [more opening up] of the capital control environment or we will look at onshore investment opportunities for wealthy people”, including the development of more transparent and liquid capital market products, such as asset-backed securities, Yu said.
