In a region bursting with wealth, private banks’ assets under management (AUM) are coming under more scrutiny as the rising cost of doing business drives a wave of consolidation.
Should smaller banks be worried? ‘The instinctive answer is yes, because bigger banks clearly offer a wider range of products and services to the same clients that they are targeting,’ says Steven Seow, former Asia head of wealth management at investment consultant Mercer.
But does it mean that small banks will fail? ‘The answer is no,’ Seow says. ‘If they know how to differentiate themselves, there will still be a role for them to play as far as the client is concerned.’
It is not uncommon for ultra-high-net-worth clients in Asia to have five or six different bank accounts. But they go to each bank for a different service, Seow adds.
Bordier & Cie is an interesting case study for the former executive, who now runs his own consultancy.
As a small, family-owned bank, Bordier & Cie can get things done quickly and doesn’t have to deal with shareholders.
‘It is happy to stay small and lean, and it seems to know how to differentiate itself from others. It has open architecture, the way it acquires clients is slightly different and it prides itself on being hands-on,’ Seow explains.
Bordier’s managing partner and Asia CEO, Evrard Bordier, couldn’t agree more. Bordier can survive with assets under management of less than $20 billion because its boutique structure allows the bank to keep associated costs low, he says.
The bank came to Singapore in 2011, and having transferred some assets from Geneva, became profitable within the first 11 months of operation. Today, the Swiss bank has 35 employees and outsources its back-office functions to manage costs.
It also relies on partnerships. ‘If I can tell you the best legal firms, accountants and property agents, then I think the client will see the value in trusting me to do everything over a big bank,’ Bordier notes.
The bank is harnessing technology to differentiate itself. It has built a psychometric tool to get to know its clients better, categorising them into five behavioural archetypes to customise services – from alerts about the next Chanel show to opportunities for philanthropy.
Bordier also offers clients tax information and statements – setting it apart from most other private banks in the region.
Meanwhile, Union Bancaire Privée (UBP) inherited good bankers, a lending platform and a strong product shelf in the region when it acquired Royal Bank of Scotland’s Coutts business in 2015, Seow says.
UBP’s assets in Asia ballooned from $1 billion to $14 billion following the Coutts acquisition, and 95% of the staff today is from Coutts.
‘Coutts was good at managed investments and funds. They had a good fund selection team that came over,’ Seow says. ‘That team is one of the strongest in Singapore.’
With a majority of the acquisition and integration costs now out of the way, the private bank became profitable in Asia in 2017, says UBP’s Asia CEO Michael Blake. The private bank is pursuing sustainable growth by paying attention to the kind of people and partners that it brings in, as well as product development and time-to-market.
Other banks that have since exited Asia tried to force fit the European private banking model onto the Asian market, Blake says. ‘The lesson for us is that we have to be relevant to this market. If that means having a very locally attuned product platform, with product experts in this part of the world who are able to talk directly to the clients and relationship managers who are plugged into their communities as well, then so be it.’
Another bank with a legacy in the region is Indosuez Wealth Management, which prides itself on being a ‘human-sized’ bank with the international resources, products and services of one of France’s biggest banks, the Credit Agricole Group.
In 2017, it acquired the Hong Kong and Singapore private banking units of Credit Industriel et Commercial to grow its assets to $14 billion.
In Asia, the bank has expanded its suite of products and services to cover everything from discretionary portfolio management and private equity advisory to wealth structuring and credit lending. ‘It’s on a par with the biggest specialised players in the industry’, says Asia CEO Pierre Masclet. The bank has decided to screen out US clients and their tax reporting requirements, while also outsourcing its front- and back-office needs to Credit Agricole Private Banking Services.
Whichever path to profitability a smaller bank chooses, it needs to know what it has to do to survive, Seow says. ‘I need Starbucks because I like the idea that they are everywhere. But that doesn’t mean I don’t need small, artisanal cafés too.
‘There is a role for smaller banks but they have to be clear what role they are playing,’ he concludes.
The article was published in the May issue of the Citywire Private Wealth magazine.