Around 82% of the 33 PWMA members surveyed indicated regulation as their major challenge, with anti-money laundering (AML) and tax evasion as the main areas of focus.
According to the survey, ambiguous regulations, lack of implementation flexibility and the difficulty in prioritising multiple regulatory obligations are among the key concerns in regard to compliance.
Source: PWMA, PwC
More than half of the respondents (64%) said that they have spent more of their budget and resources on AML and know-your-customer (KYC) compliance than all other regulatory areas.
However, perhaps because of the investments in AML and KYC, onboarding clients is taking longer than in the past. In last year’s survey, 74% of private wealth management firms (PWMs) were able to onboard their clients within 30 business days. This year, only 48% are able to do so.
Key issues within the on-boarding process include limited resources, fragmented processes and legacy systems.
Source: PWMA, PwC
Another key concern among PWMs is talent management. According to the survey, 85% of the respondents consider that their current talent acquisition and retention model is not sustainable in the long term, especially with expectations that assets managed by PWMs in Hong Kong will double in five years.
It is estimated that the AUM managed in Hong Kong is around $800bn, according to the survey.
Recruiting people from peer firms − poaching − is the number one method of talent acquisition for PWMs, the report said. Most firms do not seem to nurture talent through internal development programmes, particularly for the relationship management role.
In addition, firms consider previous private banking experience and extensive personal networks as the most important attributes when making hiring decisions. Such a stringent selection process limits the pool of target candidates, the report said.
“It is clear that a new approach to talent recruitment is necessary to adequately support the rapidly growing PWM industry,” Peter Stein, PWMA’s managing director, said in a statement that highlights key survey findings.
To address this challenge, the PWMA co-launched with the Hong Kong Monetary Authority (HKMA) for an apprenticeship programme aimed at attracting university students. According to Stein, the programme had “initial success” and both the PWMA and HKMA are preparing to recruit another pool of talents from Hong Kong universities to begin their apprenticeship in 2018.
The survey also highlighted the challenges of dealing with the digital trend sweeping the industry.
According to the report, around 75% of the firms surveyed provide one or more digital solutions online or via mobile channels.
However, 64% of those that provide digital solutions believe that they are lagging behind peers, citing the lack of budget as one of the key challenges.
“There is now a new generation of PWM clients who expect multi-channel interaction with their wealth manager and this is key to attract the new generation,” Antoinette Hoon, private banking advisory services partner at PwC Hong Kong, said in a statement accompanying the report.
Currently, most PWMs do not provide digital portfolio simulation, financial planning and online trading, although many have these services in their two-year plans, according to the survey.
Of the 25% of respondents without digital solutions, a majority of them plan to launch such services in the next two years.