Kenny Lam, group president, Noah Holdings shares his views with Asian Private Banker in the ‘Final Word’, a ten-part series where the industry’s leaders share their thoughts and opinions on key issues around industry trends, business performance, investment solutions, regulations and compliance, and technology.
Industry trends | What is the state of Asia’s talent pool and did your firm pay significantly higher for new talent? What is your view on private banking talent development in Asia?
Our firm’s frontline is relatively stable, especially amongst top-tier relationship managers — we’ve had almost complete retention. For new top management, we were able to attract the most suitable talent to Noah because we’re the leader in a sunrise industry, and along with salary compensation, we provide them with significant bonuses and stock options. I think it’s important to understand that at this stage of industry development, it is no longer just about compensation. We also invest a lot in career development and that allows for great talent to build their careers within Noah.
On talent development of the regional industry, we are seeing a flight to quality — great, high-quality talent is gravitating towards platforms that are more stable and sustainable. The days of high churn for the next higher compensation should be gone soon and it would make for a healthier industry.
Industry trends | How important is it for your business to make substantial inroads in China to ensure sustainability and growth over the next decade?
We were founded in Shanghai in 2005, and are still headquartered there. We have over 3,000 staff working in China in 81 cities, and over 230,000 registered HNW clients from China. We continue to expand our presence in China into regional hubs while solidifying our market share in first- and second-tier cities.
Business performance | In the midst of what has been construed as an increasingly difficult macroeconomic environment, how do you think the private banking and asset management industry will perform in 2019? Will it be a year to separate the wheat from the chaff?
2019 will be a year of trials and tribulations. Under tightening regulation, it will be harder for those firms that dabbled in implicit guarantees, shadow lending, duration mismatch, etc. to survive. This is a good exercise to separate the well-regulated firms from those that are not, and to reduce overall risks in the financial system.
Business performance | What is the one revenue line that you must build up significantly in the coming few years to ensure business sustainability? What is your view on the revenue mix of the industry in general?
Recurring service fees — which have already risen from less than half of total revenue to more than half.
Investment Solutions | Though continued geopolitical uncertainty and volatility pose a challenge for DPM performance, will this ultimately prove to be a boon for the discretionary business, converting clients from trade to delegation? In these same market conditions, how critical will the alternatives business be for private banks in Asia moving forward?
The alternatives business is what Noah has always focused on, and that has proven very popular with our clients, where standard product returns had not been satisfactory. More and more of our clients are coming to us and looking for discretionary asset allocation portfolio solutions. In this volatile market, they need to constantly upgrade their knowledge in order to keep up with the changing markets, thus they find the management fee of discretionary portfolios more worthwhile.
Regulations & Compliance | What’s the essential tool you have or are planning to create that will help your firm tackle the uptick in regulatory stringency and scrutiny? Do you think that the compliance costs of your business have peaked?
We have always held ourselves to the strictest compliance standards, and so we continue to keep track and regularly check and cross-check various functions, from relationship manager training to KYC to product risk to after-sales.
Regulations & Compliance | Are you satisfied with how regulators interact and solicit the industry for feedback?
We see China as a market that is evolving quickly to reach global standards. While there may be some volatility ahead, we believe things are moving in the right direction and that the industry will ultimately be protected in the long run.
Technology | What is your view on robo-advisors and is your firm developing robo-capabilities of its own? Have you observed any robo-advisory developments that could materially disrupt the industry?
Robo-advisory will be an efficient and great way to standardise how we interact with our clients, especially the mass affluent, who may not need or want face-to-face guidance from a financial advisor. Further, it might not make economic sense for them to pay for an advisor.
We have an online platform that offers standard products to the mass affluent, along with financial educational tools, texts, and videos. This platform is developing robo-advisory capabilities to capture the needs of this market segment and provide AI fund selection and precision marketing services.
Technology | What emerging technology applications do you expect to reach an inflexion point in their convergence with private banking and wealth management? What impact will they have on the operational models of private banks and wealth managers? Who will be the biggest industry disruptors?
I expect more and more private fund transactions to be made online by HNW clients, after making an informed decision from information provided through applications. This will make in-person standard financial advice obsolete. Private banks and wealth managers will need to focus more on the higher UHNW client segment and institutions, providing them with tailored advice and portfolio management services to cater to their different asset and cash flow needs.
Meet 2018’s industry leaders in the full round up of of Asian Private Banker‘s the Final Word 2018.