Michael Blake, CEO private banking Asia, UBP shares with Asian Private Banker his thoughts on the year that has been, and the upcoming year in the ‘Final Word’. This is 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 platform and business model is designed for senior, experienced RMs who have deep investment expertise, strong relationship networks, and who are looking for the freedom and flexibility of a pure play bank to deliver customised investment solutions to clients. There will always be a highly competitive market for the very best RMs fitting this description.
Compensation alone is not sufficient to attract and retain strong RMs — culture, collective success, platform capabilities, and career development opportunities are also critical.
Industry trends | How important is it for your business to make substantial inroads in China to ensure sustainability and growth over the next decade?
At 60% of Asia’s wealth pool, China is key to UBP’s Asia growth plans, as our hiring track record demonstrates. Ten years ago, Chinese entrepreneurs were focused on reinvesting excess capital in their businesses. Today, they are much more open to the benefits of diversification. The increasingly global nature of their financial affairs means they are well disposed to an innovative international wealth management service. We envisage continued tensions in the China-US relationship but do not believe it will derail China’s economic rise and wealth accumulation. The challenge will be to deliver an international wealth management offering that is attuned to the needs of Chinese entrepreneurs.
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?
We expect continued market volatility and lower overall investment returns against a backdrop of moderating economic growth, a rising rate environment, and continued geopolitical tensions. We believe these conditions will continue to favour active managers and demand a highly proactive approach to managing asset allocations and portfolio risk.
Industry trends | 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?
We are seeing that a clear trend towards a fee-based advisory model which is aligned with client interests is leading to a healthier transactional/recurring revenue mix, and will be an important factor in business sustainability in the years to come.
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?
It’s possible to say that we have ended the first phase of regulatory change post-GFC which, by definition, has driven wide-ranging reform of the prudential and conduct agenda. But this rather misses the point.
Regulatory change is a constant and all banks should anticipate continued scrutiny and stringency, particularly in the AML, suitability, and (with a rising interest rate and slower growth environment) credit space. I also expect to see increased regulatory focus on the non-bank financing, asset management, and IAM segments. I expect compliance costs to remain broadly flat, but within this there is an opportunity to spend more intelligently on compliance systems and less on manual processes.
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?
We continue to be guided by our clients who express limited appetite for robo-advisory in its current form. I believe the real disruptive threat to the financial services industry comes from big tech and will initially be focused on mass affluent money transmission and consumer finance. For example, Amazon today accounts for nearly 50% of all US e-commerce sales, more than double the next nine competitors combined. The threat to wealth management certainly exists but I’m not convinced it comes in the form of robo-advisory given the high level of customisation that underpins our key client relationships.
Meet 2018’s industry leaders in the full round up of of Asian Private Banker‘s the Final Word 2018.