Cedric Lizin, regional head, private banking, ASEAN, South Asia and global South Asia community, Standard Chartered Bank 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?
The private banking industry as we know it, characterised by high-touch and personal relationships, has adapted in 2020 with the pandemic.
While the industry was gradually embracing digital, the pace greatly accelerated in 2020.
We witnessed an uptick in digital adoption rate. New client sign-ups to our SC Private Banking app increased over 30% in 2020 and the average time spent on the app increased too.
Many initiatives already in the works have been fast-tracked. These were primarily initiatives that improve our engagement with clients, the productivity of our bankers, and the efficiency of internal processes.
For instance, we accelerated the digitalisation of our account opening process and are now using video-calls to verify identity documents, and e-signatures for account opening documents instead of wet signatures on hard copies. We rolled out new features in our mobile app, such as more personalised content or dynamic portfolio performance views. We launched a video-based role-play training programme for RMs to practise and perfect their virtual client communications skills through a series of scenarios.
Next to these client-facing initiatives, we digitalised a series of internal processes, such as moving to e-instructions and removing all paper exchanges between departments. This has greatly improved the turnaround times of many of our internal processes.
Finally, we are engaging with our offshore clients through video calls instead of travelling. We see a hybrid model of engagement becoming a norm in private banking where clients increasingly use digital channels to engage with us — in addition to direct interactions with the RM.
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?
We see the trend of more individuals keeping their wealth onshore in Asia. We are looking at two opportunities in this respect: expanding onshore and offering offshore solutions based on onshore assets.
Many HNW individuals have their businesses and assets onshore and need funding and wealth advice. This presents tremendous opportunities for Standard Chartered as we have had an onshore presence in many markets in Asia for a long time — some for more than 160 years. Our onshore Commercial Banking and Corporate Banking businesses for example already cover the businesses of many HNWIs and UHNWIs.
Today, we have a wealth management offering in 13 Asian retail markets onshore on top of a global private banking offering. We are considering the needs of our affluent and HNW/UHNW clients holistically in order to provide an integrated offering to service this continuum of clients.
We are also exploring onshore JV opportunities with local players in a couple of markets in Asia.
Thanks to Standard Chartered’s extensive onshore presence in emerging markets, we are already offering solutions to clients where they can make investments offshore based on their assets onshore. We are working on expanding such solutions.
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?
We have continued to open accounts during the pandemic as we quickly adapted to the unexpected challenges brought about by the pandemic.
We have accelerated the implementation of many digital initiatives, including the digitisation of the account opening process. Our quick response has allowed us to continue opening accounts for clients despite lockdowns.
Clients have quickly accepted and adopted new ways of engagement — such as via video conferencing instead of face-to-face meetings, and using the mobile app for basic banking services. As an anecdote: we have an 80-year-old client who was amongst the first to register for our SC Private Bank app when the pandemic hit.
The Net New Money performance of our offshore business has been higher in 2020 than in 2019
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?
We view China equities as attractive relative to Asia ex-Japan equities from a policy, positioning and flows perspective, and score them as “preferred” on a 12-month horizon.
Rising northbound and southbound flows via Stock Connect have supported China equities despite market volatility. Foreign investors have been adding exposure to China onshore equities from its low positioning, while Chinese investors have been buying China offshore equities on dips.
Monetary easing measures have improved liquidity, and further easing is likely to be supportive for China equities. The secondary listings of the Chinese ADRs could be the driver for the China offshore market as the pace increases.
Strategically, we see alternative strategies as an important complement to a traditional, long-only equities and bonds investment allocation. Alternative strategies give exposure to sources of return that may not be directly accessible via long-only investments in stocks and bonds and therefore, may enhance the diversification of traditional allocations across a broader set of fundamental drivers and investment opportunities. We maintain alternatives as a core holding.
Within alternatives, all four strategies remain core holdings — equity hedge, global macro, relative value, event driven.
Correlations are expected to remain higher than average and market volatility is expected to decline, which would reduce performance dispersion. In addition, risk sentiment remains fragile and trade sizing may remain conservative until the public health situation stabilises and the economic recovery is on a firmer footing.
Investments | What key investment themes shape your bank’s 2021 outlook — and why?
There are five factors that will define the financial markets in 2021: vaccine distribution, fiscal and monetary policy support, bond yields, the US dollar, and the value versus growth debate.
From these, we have drawn several key cyclical and structural themes:
Vaccinating against valuations: Rapid vaccine development suggests 2021 is likely to be a better year than 2020. We expect equities, credit and multi-asset income strategies to perform well.
Race for income: Investors are likely to become increasingly innovative when it comes to searching for yield. Therefore, we believe diversified multi-asset income allocation is likely to perform well.
Ready, steady, rotate: We expect Value equities to start to outperform Growth and Quality equities. Accelerating economic growth is a key positive driver, though any rise in bond yields is likely to be contained.
USD to slump in 2021: We expect USD weakness to extend into 2021. A weak USD is generally good for investment returns as a whole, especially for Emerging Market assets.
Golden equity themes for 2020s: The next wave of innovation is expected to be driven by permanent changes brought about by COVID-19 in medical tech, Internet-of-Things (IoT) and e-vehicle technology breakthroughs.
The time for climate investing: Many factors support the current momentum behind climate investing, including the change in US political leadership. We see four top themes in this space: circular economy, sustainable food, water and a focus on energy transition.
In a world of yield-free risk: Generating returns and ensuring downside protection is becoming more challenging. We believe investors will need to take additional risks and/or become more innovative.
Investments | What important steps did your bank take to drive the sustainable investing agenda and to increase access to sustainable investing opportunities in 2020?
Sustainable investing has been a key agenda for Standard Chartered Private Bank for several years now. This aligns with the broader bank’s sustainability aspirations.
In 2020, we anticipated the need for additional due diligence to mitigate ESG washing given the proliferation of ESG solutions in the market. We therefore launched ESG Select, which is our framework to help us more systematically and rigorously review ESG products.
We expanded our product shelf, including additional climate-themed and SDG-themed investment opportunities and making them available to both private and retail banking investors. Investors can access a range of sustainable investing strategies on our platform, from best-in-class ESG investing to key sustainable thematic.
An innovative but simple solution we launched for private banking clients was Sustainable Deposits, which was first launched to our corporate and institutional clients. Sustainable Deposits are term deposits which allow clients to have their capital referenced against sustainable assets of Standard Chartered (e.g. green financing, sustainable infrastructure projects, microfinance, etc.).
Most recently, the bank launched the first Singapore dollars sustainable time deposit to private and retail clients in Singapore.
Colleague training remains key to enabling quality conversations with clients. We mainstreamed our sustainable investing training programmes and most colleagues are now trained in the basic concepts of ESG.
Technology | Where do you see the best application of data analytics/machine learning in private banking?
Investment advisory is one area where data analytics and machine learning can greatly improve the quality of our advice and client service.
For instance, data analytics and machine learning can provide personalised content, in the form of investment ideas or product ideas, based on clients’ risk profile, portfolio holdings, recent transactions, client investment personas and preferences, and on what other clients with similarities are interested in.
AI can also be used to identify the “next best action” for clients.
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?
We digitalised many of our processes in 2020, including the use of e-signatures and video conferencing.
We launched a video-based role-playing training programme for our relationship managers to help them practise and perfect their virtual client engagement skills.
We will continue to invest into digital in 2021 to modernise our platforms, enhance our digital offering and improve client experience and resiliency.
For instance, today, clients get a 12-month historical portfolio performance view and net positions via the online banking platform or SC Private Banking app. In 2021, clients will have access to investment income and expenses reporting, asset allocation and portfolio risk analytics.
We are working on automatically sending tailored investment and product ideas to clients based on their profile and preferences and on what others like them are doing.
We are experimenting with AI-based applications in the fields of identifying new HNW prospects or predicting client attrition, for example. These however remain in early stages.
In addition, as more engagement goes online, we are stepping up on cyber, fraud and operational risk management capabilities in order to continue providing a trusted and safe banking environment for our clients.
Meet 2020’s industry leaders in the full round up of of Asian Private Banker‘s The Final Word 2020.