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Private banking products: what's changed since the financial crisis

Nine private banks tell Citywire Asia how their product shelf has changed over the last 10 years in the wake of the 2008 financial crisis

Alan Luk, Hang Seng Bank

Head of private banking and trust services

We have seen a shift towards greater risk aversion over the past 10 years, with more private banking customers looking for structured products that have shorter tenors of between one and six months, as opposed to one or two years in the past, and with an underlying basket of just one or two stocks rather than three or four.

This move towards ‘back-to-basics’ investing reflects a greater willingness among private banking clients to accept lower returns in order to reduce investment risk.

More recently, a growing number of partially or fully principal-protected products – for example, booster notes (85% principal protected) and fund-linked notes (100% principal protected) have been launched in the market.

Customers have allocated an increasing proportion of their wealth into fixed-income or interest-rate products, and have leveraged up investment in high-grade and high-yield bonds over the past 10 years.

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Alan Luk, Hang Seng Bank

Head of private banking and trust services

We have seen a shift towards greater risk aversion over the past 10 years, with more private banking customers looking for structured products that have shorter tenors of between one and six months, as opposed to one or two years in the past, and with an underlying basket of just one or two stocks rather than three or four.

This move towards ‘back-to-basics’ investing reflects a greater willingness among private banking clients to accept lower returns in order to reduce investment risk.

More recently, a growing number of partially or fully principal-protected products – for example, booster notes (85% principal protected) and fund-linked notes (100% principal protected) have been launched in the market.

Customers have allocated an increasing proportion of their wealth into fixed-income or interest-rate products, and have leveraged up investment in high-grade and high-yield bonds over the past 10 years.

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Roger Bacon, Citi Private Bank

Head of investments, Asia Pacific 

Since the GFC, clients have become far more focused on diversification, asset allocation and transparency, particularly for illiquid investments.

Our platform has evolved to provide clients with a much more robust and holistic investment proposition underpinned by careful planning and risk management to address clients’ evolving requirements.

Clients are generally using a far greater variety of trading and managed investments solutions than before, having a very equity-centric mind-set pre-GFC and, thus providing a cohesive enduring diversified portfolio strategy around both core and opportunistic ideas, is at the centre of every client engagement.

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Lavanya Chari, Deutsche Bank Wealth Management

Head of global products and solutions, Asia Pacific

In the last 10 years, the fundamental change is that there has been a move towards a more advisory nature. When you look 10 years ago, a lot of clients had been putting on trades and transactions which were in some ways very market-dependant.

Doesn’t mean that we don’t do capital markets business. It still a big part of our portfolio, but we definitely look at a lot more downside protection now than we did 10 years ago. So the one point I would make is downside protection, and the second point is hedging.

Even now when you look at our chief investment office’s top view, the current big theme is to 'stay invested but hedge’. So we look at a lot of hedging for our clients to ensure that once they have exposure to the upside of the market, they do not necessarily suffer the same amount of downside than they did in the past. 

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Kelvin Tay, UBS Global Wealth Management

Regional chief investment officer

Since the GFC in 2008, governance has tightened sharply, banks have recapitalized and fundamentals have improved sharply. For instance, household net worth in the US has climbed to $96 trillion from $58 trillion in 2009.

The average Tier-1 capital ratio for US banks are now at 13.3%, up from 9.8% in Sept 2008. Private investments as a percentage of GDP is currently at 16.7% compared to 20.3% during an average expansion. 

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Stuart Parkinson, HSBC Private Banking

Global chief investment officer

Looking back over the past ten years we have seen greater uptake in discretionary products where clients are looking to professionalise the management of their portfolios. Here we work closely with our in-house asset management portfolio managers as well as third-party managers to provide a wide range of managed accounts and carefully selected third party funds. 

We have also seen increased appetite for alternatives products, particularly in hedge funds and private equity, where clients are looking for opportunities to diversify and to manage downside risk while protecting upside returns.

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James Cheo, Bank of Singapore

Senior investment strategist

Before the GFC, investors were focusing more on transactional trades and big-risk bets. Now, there is a growing demand for multi-asset portfolio solutions as the investing environment is much more uncertain. In particular, there is a greater focus on income-producing assets instead of those that depend on purely on price gains. 

Investors are now more sophisticated. They want to exploit the best tactical and structural ideas, and to generate alpha from as broad an opportunity set as possible – including from alternative assets like private equity and hedge funds.

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Terence Tan, EFG Bank AG, Singapore Branch

Head of investment and wealth solutions

The GFC revealed a need to improve the overall investment experience for our clients, resulting in the formation of EFG Asset Management and taking the central role in the provision of investment products and services to the bank. Investment Research teams were strengthened and product due diligence became embedded within EFG much more than before the crisis.

Alternatives and long-only fund managers now undergo greater scrutiny before their funds can be pitched to our clients. Recommended lists for various asset classes (equities, bonds, funds, alternatives) underwent a thorough and comprehensive process review.

In 2017, the investment process underwent further refinements with the establishment of a central advisory platform to provide investment advisory services. 

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Benjamin Cavalli, Credit Suisse

Head of private banking South Asia and Singapore CEO

Since the global financial crisis, there is less risk taking in the industry and the use of leverage has also decreased significantly. A decade ago, the concepts of strategic asset allocation and diversified long-term investing were not in fashion. Since then clients are now more aware about behavioral biases, particularly herd behavior which was prevalent during the crisis.

Instead, clients are now more rational and have embraced managed solutions to build a core portfolio. This in turn led to a more diversified fund solutions shelf at Credit Suisse, as well as increased penetration rates for discretionary and advisory mandates.

In addition, we also see a shift towards having enhanced product disclosures and more transparency on fees as a result of greater attention from regulators on suitability and selling restrictions.

At Credit Suisse, we responded to these changes with Credit Suisse Invest, a human-led, digitally-enabled advisory solution which combines the bank’s Digital Private Banking technology platform, a retrocession free offering and a contextualized advisory process.

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Arjan de Boer, Indosuez Wealth Management

Head of markets, investments & structuring, Asia

At Indosuez, we pride ourselves to have an 'all weather' product shelf. We advise our clients for the long term and we don't like to focus on what happens to be the flavour of the day. Prudent risk management and client suitability are at the core of everything we do.

This was the case 10 years ago and this is still our philosophy. Naturally, our product suite has evolved and expanded but not because of the GFC.

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