In today’s highly competitive private banking world it’s essential to find your niche. That’s the principle guiding RBC Wealth Management’s strategy in Asia.
Despite widespread media reports that RBC, a subsidiary of Royal Bank of Canada, has been considering winding down its Asian wealth business, the group has confirmed it’s very much business as usual. In fact, there are plans to expand further across the region.
In Asia, RBC employs about 2,000 people across its wealth management, global asset management, capital markets, and investor and treasury services. The bank’s wealth management division services high-net-worth (HNW) and ultra-HNW (UHNW) Asian clients from its Hong Kong and Singapore offices and has more than 400 employees across these two markets.
RBC’s private wealth business includes Asia’s Global Families, which is an overarching client segment, and three others: Business Owners and Entrepreneurs, Corporate Executives and Professionals, and Intermediaries and Family Offices.
Michael Reed, head of wealth management for Southeast Asia and chief executive of RBC’s Singapore branch, believes that targeting Asia’s 'global families’ is what sets the group apart from its competitors.
‘The one thing people get confused about is that it’s not “Asian” global families as a client segment,’ he says. ‘That’s actually where we started, but then we realised that “Asian” global families almost makes you think that you have to originate from Asia.
‘So, we named the client segment Asia’s Global Families to reflect the way we cater to those families connected to Asia but also, in our terms, Canada, the US and the UK because that’s where our strengths also lie.
‘We believe with Asia’s Global Families we can win way more than otherwise if we were just going after mainstream clients in the region.’
Based in Singapore, Reed also heads RBC Wealth Management Asia’s client and business development, and the Hong Kong Trust Company. He has been with RBC for 18 years, where he has held leadership roles in Canada, the US, Hong Kong and the British Isles.
Prior to focusing on Asia, he led the international side of RBC’s wealth management unit in London, which includes global UHNW clients, the Middle East, Europe, Americas and global South and East Asia. Most recently he was head of multi-family offices, focusing on institutional clients.
Asia's Global Families
For RBC, Asia’s Global Families are Asia-connected families with links to Canada, the US or the UK who have crossed borders as a result of employment, property acquisition, education or permanent relocation. They share a connection with Asia as either their region of origin or as an adopted home.
As crossborder investments and multiple jurisdictions between generations can be overwhelming for clients, the Toronto-headquartered bank offers an integrated approach to wealth planning and structuring using its global network of specialists.
‘When it comes to cultural identity we understand Asia, as well as North America and the British Isles,’ Reed says.
‘To give you an example, we have a client whose family is mostly focused in Singapore, but one of their children went to school in Canada and ended up staying there. Dad saw the opportunity in Vancouver and wanted to get involved in the property market there.
‘Because of our connections and our presence in Vancouver, it was obvious that we could connect him with the right people and arrange the financing.’
RBC’s client needs vary from estate and tax planning, investments and real estate sourcing to school entry for children, cash flow and credit, and banking and cash management.
Reed sees a high portion of UHNW clients served by the Singapore and Hong Kong centres sending their children to Canada, the US, the UK or Australia for education.
What’s more, wealthy investors are also moving into prime real estate investments in London, the north of England, Vancouver and Los Angeles. In 2017, investors predominantly based in Hong Kong and Singapore ploughed $1.4 billion into London’s new-build property market. Hong Kong investors favoured areas such as Tower Hamlets, Greenwich and Southwark, while Singapore investors preferred Westminster, Tower Hamlets and Southwark.
‘International business expansion is another trend we see among our clients,’ Reed says. ‘Recently, we helped a client who is involved in the media industry in Asia expand business into the US, which has different business and personal planning rules.
‘Because of the way we operate, we were able to make that connection and help him from both sides of the ocean, making it a lot less complex.
‘Another example is a very wealthy Chinese family who wanted to diversify their assets by investing in the UK. Mom and aunty were in fact going to move there. We are not only able to help them on the capital markets side, but also to help them settle in the UK.
‘That’s the reason why we partner with our Canadian, American and British Isles businesses. Having a single source of expertise can actually reduce complexities between multiple jurisdictions. There are many financial firms that can’t make that link.’
Reed adds that one of the most attractive features of these families is that sometimes the trades they take on – especially the younger generation – are more aligned to Western habits.
Paying for quality is something they are more willing to do, so having someone manage their money becomes a need, making it more attractive for discretionary and managed accounts. As such, the bank is seeing a higher percentage of assets going into discretionary.
Passing the baton
Succession planning is a major part of Asia’s Global Families. To fully understand how wealthy families in Asia are transferring wealth to the next generation, RBC undertook a five-month study, surveying 425 respondents across Singapore, Hong Kong, Taiwan, China and Indonesia with an average investable wealth of $5.15 million.
The study found that only 31% of the respondents have established a complete wealth-transfer plan and 52% plan to gradually gift assets to inheritors during their lifetime. Interestingly, 64% of past and future benefactors in Asia have had conditions attached to their inheritance. What’s more, 60% of those with no wealth-transfer plan lack confidence in their children’s ability to grow and preserve wealth.
‘This is worrying because when you cross a border and have properties or assets in multiple jurisdictions and don’t have a will, it can get complicated. A lot of people don’t understand how it works in Canada, the US and the UK, and this is where we come in.
‘There are some efficient planning strategies that can be applied based on where the next generation lives. For example, a Hong Kong great-grandmother wanted to leave a large inheritance to her great-grandchildren in Canada. The structure she set up will both accomplish her wishes and be very fiscally efficient.’
Investing in people
RBC is looking to hire experienced private bankers and brokers to complement its growth strategy for Asia’s Global Families. When considering what skills are needed for relationship managers (RMs) serving this specific client segment, Reed says he’s on the lookout for those who are familiar with crossborder estate-planning rules.
The bank is also focusing on developing the skills and capabilities of its existing RMs who can better serve their existing clients and grow the clientele of Asia’s Global Families.
Currently, RBC has about 13 million clients in Canada and a lot of these families have a connection to Asia. Apart from its RMs in Asia, the bank also has a team in Vancouver called the Canada Asia Centre.
‘Both our Asia-centric clients and Asia’s Global Families have increasing complexity in their lives, thus increasing complexity in managing their wealth, which requires special understanding and expertise.
‘So, we are spending considerable time and resources in advancing the ability of our RMs to conduct thorough discovery through our sales methodology training programme,’ Reed says.
‘We are also complementing our existing bankers in Asia by hiring new talent, with expertise and experience in working with Canadian, US and UK clients.’
Plans for Asia
As well as the Asia’s Global Families operation RBC’s Asian wealth business includes Business Owners and Entrepreneurs, Corporate Executives and Professionals, and Intermediaries and Family Offices.
Reed says the Corporate Executives and Professionals and Business Owners client segments may also be Asia’s Global Families, albeit they may have just arrived in Asia and may only be here temporarily. This is where RBC provides wealth planning solutions for expats from Canada, the US, and the UK who live in Asia.
‘These clients have multiple accounts, thus they require a certain type of expertise. They may be looking to invest the proceeds from the growth, protect their wealth or undertake succession planning for the future.
‘For example, we had a Canadian client who has part of his wealth in Canadian dollars come to us. He said that it is almost impossible to find a bank that can actually manage a Canadian-dollar portfolio. Of course, we were able to do it.’
For US solutions, RBC is leveraging its US partners to create a discretionary solution that caters for US citizens living in Asia. Americans who are not resident in the US still have a number of reporting and ownership restrictions based on US rules.
For this reason, the wealth manager has leveraged solutions that specifically avoid certain types of investments that could potentially cause complications. This also spills over into wealth and estate planning that is unique for US citizens and their spouses.
‘Our wealth business in Asia is focused on building on our collective strengths in the region and globally. We remain focused on growing and strengthening our position in the market by being steadfast in our client acquisition and segmentation strategy and driving our brokerage and discretionary portfolio management.’
This article was first published in the November issue of the Citywire Private Wealth magazine.