Arnaud Tellier, CEO Asia Pacific, BNP Paribas Wealth Management shares his views with Asian Private Banker in ‘The Final Word’, a year in review by the region’s private banking leaders as they share their thoughts and opinions on key issues around industry trends, business performance, investments, regulations, and technology.
Industry Trends | In what ways has the COVID-19 pandemic irrevocably changed the private banking industry and your own bank’s approach to operations and service?
COVID-19 has demonstrated the resilience of the human spirit to surmount challenges and quickly adapt to the ‘new normal’. Although the current pandemic is not something that anyone could have anticipated, it provides a perfect opportunity for testing the agility and efficiency of front and back office-focused digital solutions that we have developed.
We have redefined workflows, streamlined operations and rewritten the rules of engagement. We adapt to an evolving situation in the various markets in which we operate in order to ensure the safety of staff and continue to provide service and support to clients as much as we can. Many of our client-centric applications are already available on myWealth, our e-banking platform. The launch of myAdvisory, the digital leg of our advisory service, in mid-2020 is a major step for us in blending human and technological capabilities to deliver the full value of BNP Paribas Wealth Management offerings to clients. In addition, we use traditional tools (such as emails and phone calls) and non-traditional tools (including webinars and audio conference calls) to update clients on various investment opportunities.
We will continue to make full use of digital tools in client interactions and expect that such formats will become an important and regular feature in our business model.
Industry Trends | Few can deny the importance of Asia’s onshore wealth markets — in terms of asset pools and the need for wealth management from increasingly sophisticated domestic investors. What opportunities do these markets bring to your business, and to what extent will ‘onshoring’ shape your strategic agenda?
Onshoring is definitely a long-term wealth trend and gaining momentum in Asia. Local players have become more sophisticated. BNP Paribas has a long-term presence in most major Asian countries and we will make the most of this presence strategically in key markets across Asia over time.
We already have a strong onshore presence in Taiwan and are looking to implement best practices from our successes there, as we implement a model, unique to each onshore market.
Business Performance | NNA gathering and account opening have proven challenging in a pandemic-affected world. If we continue to experience lockdowns and travel restrictions in 2021, how can private banking businesses adapt?
The private banking industry has been extremely resilient to the crisis and nimble in adapting to the ‘new normal’. Clients too have been an important factor of this transformation and have seamlessly moved to digital and virtual platforms of engagement. Furthermore, this pandemic has been the booster shot that accelerated digital adoption with end users and service providers. We do not see a slowdown or an adverse impact should we continue to be restricted due to the pandemic in 2021.
Investments | From a portfolio perspective, how important will (a) Chinese assets and (b) alternative investments be for delivering clients’ objectives over the next five years?
Beijing’s five-year plan focuses on domestic demand, as well as opening up the domestic financial system and RMB internationalisation. China’s priority in technology innovation and self-sufficiency benefits domestic tech companies. Also, the lifting of restrictions in domestic financial markets, plus the inclusion of A-shares and onshore bonds in major global indices are increasingly opening up the country’s onshore financial assets to foreign investors (foreign ownership is only 3%). Onshore Chinese assets could be a great diversifier to global investors’ portfolios (the correlation between the MSCI AC World and the CSI 300 Index is a mere 0.3).
The traditional 60% equity, 40% fixed-income portfolio strategy is not going to work well as bond yields are currently at record lows. The weighted average of global sovereign bond yields has fallen from 1.6% in late 2018 to just 0.5% currently. We are unlikely to see the historic average returns of a traditional 60:40 (equities/bonds) portfolio, considering the lack of income from the bond allocation, and the lower ability of those bonds to offset the drawdown in equities in market corrections.
Hence, we need to find new instruments that have inverse or little correlation to equities for diversification. Alternative investments, such as gold and other precious metals, hedge funds (global macro strategy, long/short equity), private equity and private infrastructure are good diversifiers.
Investments | What key investment themes shape your bank’s 2021 outlook — and why?
Our key investment themes in 2021 focus on economic recovery, on the back of COVID-19 vaccine developments, a strong expected earnings rebound for corporates, as well as continued support for financial markets from a combination of monetary and fiscal stimulus.
There is the short-term tactical theme “Vaccine, Recovery & Reflation” which plays the cyclical recovery of the global economy. Then, we have three medium-term portfolio balanced themes, offering diversified solutions for this record low yield environment, such as low volatility absolute return, investing in “fallen angel” credit and Asia/EM local/USD bonds, as well as the importance of a new balanced diversification by adding alternative investments.
For the longer term, we include four structural megatrend themes all benefiting from China’s opening up of capital markets and economic reform, new consumption habits in a post lockdown world, improving quality of life, and smart technologies. Lastly, there are two long-term ESG themes about energy transition and investing in companies with strong governance and profitability.
Investments | What important steps did your bank take to drive the sustainable investing agenda and to increase access to sustainable investing opportunities in 2020?
We have accelerated the ESG integration into our products and services in 2020. We improved our proprietary ESG rating methodology by focusing more on metrics that drive investment performance and expanding the coverage universe from 3,000 issuers to 12,000 issuers.
We have incorporated ESG in all Discretionary Portfolio Management mandates and introduced new ESG funds, on themes such as energy transition or sustainable food. These have outperformed non-ESG funds, therefore we are seeing increased client interest to shift their wealth into sustainable investing.
Overall, ESG integration in our AUM has increased to 70%, in line with our target of 90%+ and our funds ESG penetration rate has increased by +20%.
We continue to provide structured sustainability training and educate our client-facing staff (RMs & ICs). Building a sustainability culture in our organisation is paramount and we intend to make sustainable investing a Business as Usual.
Regulations | Both Singapore and Hong Kong are placing a strong emphasis on cultivating a competitive and supportive environment for family offices. What further initiatives should each/either regulator undertake to nurture the development of a family office-supportive ecosystem?
Asian financial hubs are eager to promote themselves as a place of business, but would be well-advised to delineate more clearly their unique selling propositions in terms of their location for both Asian families and non-Asian families seeking to build an Asian presence.
For both categories, a leaner, more actionable framework to sophisticated private investment offices would be desirable. This could take the form of a dedicated regulation enabling families to be treated like institutional investors and be allowed access to relevant content.
Regional and global family offices would gain from a moderated platform to network and share best practices and deal flows, notably for Asian ESG and SRI [socially responsible investing] related investments, including articulating best practices and opportunities for philanthropy — which is a common ‘ask’ by most family offices.
Most of the Asian entrepreneurial wealth remains firmly held in the hands of family patriarchs and the transfer of both wealth and business is still very much unfolding. In this context, regional financial hubs would benefit from educating UHNW families about the advantages of timely planning and structuring the transition to the next generation of wealth holders (family governance, wealth planning). Particularly, a strong focus on NextGen education and enablement would be desirable (e.g. a family office chair at a leading university).
Technology | Where do you see the best application of data analytics/machine learning in private banking?
The beauty of digitalisation is the ability to take both structured and unstructured data sets, and leverage technology to convert them into a form that can be easily analysed. Transaction data is an example of a data set that can be examined. But call reports and logs are unstructured and we can leverage artificial intelligence for speech-to-text conversion, and layer machine learning tools to analyse our clients’ investment behaviour and propensity towards certain investment decisions. All these elements serve to produce findings that can help us improve the client experience.
With this data, we can do a multitude of things, from fraud monitoring and prevention for risk mitigation, to hyper-personalisation, where we present curated and relevant content and product offerings to our clients.
The possibilities are endless, only our minds can draw the boundaries of what we can achieve.
Technology | How is your bank optimising the utility of the relevant digital tools to prepare frontline staff for client engagement in a post-pandemic environment?
There are two huge opportunities for us to move forward on this.
One being the increasing use of myWealth, our one-stop digital banking platform for clients to have immediate access to their portfolios and trade online. Our frontline staff are able to co-browse with our clients, so that we can see exactly what they see – this helps us to advise our clients better, and put the power back into their hands.
The second avenue is integrating into our clients’ existing ecosystems. In this post-pandemic environment, we see communication evolve so rapidly. Our RMs and clients have moved from a world where meeting face-to-face is the norm, seamlessly into on-line and social platforms where clients are already on. This has cemented the bank’s belief in earlier digital investments and accelerated our digital roadmap.
BNP Paribas Wealth Management’s strong digital offering has put it at the forefront of the private banking community. Technology and advice has never been this easy and together with their private bankers, investors would be better positioned to maximise long-term returns.
Meet 2020’s industry leaders in the full round up of of Asian Private Banker‘s The Final Word 2020.