Asia’s high net worth individuals want to work with local, onshore private banks, according to Vincent Magnenat, Asia CEO at Lombard Odier, which is building out its partnerships across the region.
‘In the global environment, we can see with Common Reporting Standards and tax amnesties, even in Indonesia, you have the need to keep assets onshore but the need to invest globally in different currencies,’ he said. ‘Offshore centres will have to bring a different value to clients. It’s a huge opportunity for local private banks if they can bring the same quality of service and access to the global market.’
As regulatory changes worldwide force banks and their clients to reassess offshore wealth management, Lombard Odier has built links with banks in Japan, Korea, China and Australia. It made its first foray into Southeast Asia in 2014, through a partnership with Kasikornbank in Thailand, and followed that with an agreement with UnionBank in the Philippines in 2016.
‘They [local partners] have been managing money in their own countries for the last 30-50 years. They know their local markets extremely well,’ Magenenat told Citywire Asia. ‘We also believe the local clients want to be served locally. It’s always very different to see the world locally.’
The company hired Emmanuel Roulin as head of partnerships in July.
While each partnership model is different, in Thailand and the Philippines, Lombard Odier offers multi-asset solutions through local banks to onshore clients, either as a co-manager of the funds or an adviser to the local bank. The funds, one of which was launched in the Philippines on 19 July, are invested in global assets -- developed market and emerging market equities, credit, sovereign bonds and commodities.
Under its agreement in Thailand, the bank also offers offshore custody services for Kasikornbank clients through its Singapore booking centre.
Alongside investment services, Lombard Odier helps local partners address other aspects of wealth management through knowledge-sharing and training of relationship managers and financial advisers.
For example, wealth planning services is an important part of the Philippines partnership, Magnenat said. Asean’s third-largest economy is home to over 30,000 high net worth individuals and families, and family services has been a popular topic of discussion.
‘We are dealing with the first and second generations, so to structure the wealth and pass it onto the next generation is key. In the Philippines, the families are spread across the world, so that’s what we have to look at in terms of structuring and managing the wealth,’ said Magnenat.
Lombard Odier’s global custody and reporting services business is growing fast in Asia because of the global footprint of Asian high net worth families, according to the executive based in Singapore, which is also where the Asia team for the services sits. The reporting platform allows a client’s family members ‘to report all the investments, liquid and non-liquid, deposit and non-deposit, with Lombard Odier every day to the client so they have the overall view.’
Lombard Odier has been pushing its risk-based allocation model, which was developed for institutional clients but has since been rolled out to discretionary portfolios in the private banking business. The model bases exposure to assets on the current risk profile of the asset and the client as well as the current risk environment in markets, requiring active rebalancing.
Discretionary portfolio management is well-known to the 221-year-old, family-owned Swiss private bank, which has $230 billion in client assets globally as of December 2016. While adapting that to the Asia market has been challenging, as clients prefer to maintain control over their own portfolios, 60% of Lombard Odier’s client assets in the region are managed through discretionary strategies – a figure nearly six times higher than the industry average in the region.
Approximately 5-10% of Lombard Odier’s global AUM comes from its 30 relationship managers, partnerships and family services in Asia.
‘We believe the core investments and risk based approach should be between 30-70% of the client’s portfolio. This includes cash for short term needs and core investments, which is the long term strategy,’ said Magnenat. ‘The core is the liquid part of the assets and that is important, because we can see that more and more satellite investments are less liquid, such as private equity and real estate, so the key for us is to provide a liquid core portfolio.’