“80% of the wealth [in Asia] is onshore, not in offshore centers, and the only way to tap it is through partnerships,” Bruno Morel, Singapore CEO, told FSA.
“We understand how business is done in offshore locations but we don’t have inroads to a pool of ready available wealth management clients, which is what Hywin has.
“Because wealth is growing onshore, more individuals want to diversify offshore, and from the perspective of the next generation, where they think their family will move to.”
The bank has been positioning for growth. Last year, VP converted its Singapore subsidiary to a full branch and upgraded its licence to wholesale banking from merchant banking, permitting the full range of bank services. Regional target markets are Singapore, Hong Kong, Malaysia, Thailand, Indonesia and China.
Global operations are split evenly between two lines of business: intermediary, in which the bank provides supporting services for wealth management operations of independent asset managers and family offices, and direct wealth management clients, which is mainly advisory in Asia.
Fund selection is done in Lichtenstein from a universe of 900 funds globally using a quantitative and qualitative filtering process, said Thomas Rupf, head of investment advisory and treasury in Asia.
Morel, the CEO, admitted the bank is small – global AUM is 45.6bn CHF ($46.1bn) – and it has no asset management unit. Therefore, it can’t compete on marketshare but focuses on client relationships, which he sees as a way to fill a niche in the competitive landscape.
He sees credit — client property loans for personal residence or property investment – as a cornerstone of the bank’s strategy.
“In Asia that can make a big difference because a lot of wealth is still in property,” he said. “We become a core partner for the client.”
He acknowledges numerous other banks also offer credit, but believes VP’s financial position sets it apart. According to the bank, it has a Tier 1 capital ratio of 19.7% at the end of the first half and an A “stable” rating from S&P.
“It differentiates us from some boutique banks that don’t have the balance sheet for credit,” Morel said.
Hunting for staff
One challenge is hiring staff, which will be an enabler for expansion. In Singapore, Morel said the bank has 90 staff and 50 relationship managers. The hope is to hire more RMs, but he concedes in Asia it’s difficult because many banks are in a hiring mode.
Several senior execs joined in Singapore within the past 18 months, including Thomas Meier, former CEO of Julius Baer in Asia, who was elected to VP’s board, ex-UBS banker Reto Marx, head of client business and Thomas Jost, head of intermediaries.
However, the bank’s head of private banking in Singapore, Kimmis Pun, quit in 2019 after only 10 months in her role.
Other challenges include rising costs for talent, compliance and technology, which have been driving a shakeout among private banks in Asia, underscoring the need for scale.
VP targets clients with a minimum of $1m in investible assets, which some consider the high end of the mass affluent market.
Morel noted that the big global banks continue to raise the wealth threshold for new clients, creating an underserved segment. “A lot of big banks will say if you take clients below $10m, you cannot [participate] in this market. It’s not true.”
Robo-advisories are also evolving in the region and appear to be an attractive solution for the mass affluent.
Morel doesn’t see them as a competitive threat yet. “The younger generation is very tech savvy, and perhaps enjoy using [robo-advisors],” Morel said. “But managing assets and managing wealth is very emotional for people and robos haven’t reached that level.
“High net worth still want the personal service. When markets are going bad and the client is managing the feeling of keep or sell, they want to speak to someone.”