Omar Shokur, CEO Asia, Indosuez 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?
The COVID-19 pandemic has forced the industry to be able to adapt to a fully work-from-home scenario. Doing this whilst still providing a seamless client experience is no small feat. Basically the industry, globally, has readied itself to be operating fully functional according to the most extreme backup plan for prolonged periods of time.
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?
In terms of wealth management in Asia, we continue to firmly believe in the offshore markets model, predominantly served by the offshore hubs of Hong Kong and Singapore. The laws and regulations in place, the presence of solid regulators, and the depth and breadth of the available talent pool are all important ingredients for clients to choose these markets. Whilst clients may opt to do their day-to-day banking onshore, we believe that for their long-term wealth planning and structuring, they will continue to flock to these well established offshore centres.
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?
Interestingly, in terms of net new money and new account openings, 2020 was a relatively good year for us. The strong relationships with our existing clients have played an important role with regards to client referrals. As a result, we have seen a growth of our UHNWI clients, directly and via our EAM business.
We have been working on fewer deals but larger ones. These transactions take, on average, longer time and need more adapted and complex solutions (single share financing, tailor-made mandates, etc).
Thanks to the strength of the Crédit Agricole Group, we have been able to meet the requirements and achieve some sizeable transactions.
We will continue with this approach throughout 2021 — travel restrictions may remain in place for a while — and we expect that a successful vaccine deployment will lead to a normalisation at the end of the year. For us, it has also meant that we are accelerating our work to automate client onboarding processes.
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 continue to believe that Chinese assets, equities in particular, are increasingly important within investment portfolios. On the fixed income side, Chinese government bonds are one of the very few nowadays that offer positive yields. This is supported by the expectation that the Chinese currency will appreciate further in the foreseeable future. As such, we will continue to be enticed on dips by the record all-time positive real yield advantage offered by unhedged Chinese government bond exposure over and above US credit.
As for alternative investments, most notably private equity, we strongly believe these will become increasingly important in general and over the next five years in particular. 2020 has proven that private equity is, to a certain extent, less exposed to shocks such as the current pandemic, and the long-term nature of these investments provides a buffer against short-term volatility.
Investments | What key investment themes shape your bank’s 2021 outlook — and why?
For equities, we have adopted an overweight view around the US elections and reinforced that view with the perspective of a vaccine being distributed in 1H21.
We remain positive on secular growth, but are progressively rebalancing portfolios towards a barbell approach with a greater exposure on cyclical and value stocks. We are increasing our conviction on high beta regions such as Europe and global emerging markets and China.
With regards to fixed income, we anticipate a moderate steepening of US yield curves, notably as we progress towards a vaccination. However, the absence of a blue wave, and less fiscal stimulus needed if a vaccine is distributed should limit the magnitude of steepening. EUR curves should remain close to current levels with low inflation and strong action by the ECB. We remain constructive on carry strategies on investment grade and high yield. We remain constructive on emerging debt — we keep a preference for Asia, but highlight that flows could positively affect Latin America and Eastern Europe, as well as local currency bonds in 2021.
On currencies, we expect moderate dollar weakening against EUR, a constructive long-term view on RMB, more momentum on EM currencies, but more visibility and probably a better risk adjusted trade on Asian currencies.
Gold weakness should remain strategically supported by our expectation of a weakening US dollar. Acceleration above US$1,950 seems unlikely in this constructive environment, but any movement towards the 200-day moving average US$1,800 could be exploited.
Lastly, we expect a moderate rebound of commodities in general.
Investments | What important steps did your bank take to drive the sustainable investing agenda and to increase access to sustainable investing opportunities in 2020?
This is at the forefront of our investment philosophy and has been the case well before this became a global trend. We believe it is for that exact reason we were the proud recipients of Asian Private Banker’s ‘Best Private Bank – Sustainable Investments’ award in 2019! 2020 saw the creation of a new division for our UHNW clients and family offices, cooperation between Indosuez Wealth Management and our Crédit Agricole Corporate and Investment Bank (CACIB). This division will focus heavily on socially responsible investment solutions, green finance and philanthropy.
Moreover, we have set ourselves the goal of working towards a 100% ESG product range in our managed mandates by 2022. We are launching a specific ‘People & Planet’ mandate and we have significantly expanded our clients’ access to green structured products. Moreover, we are actively working on the integration of ESG criteria in our credit processes. Lastly, we have significantly expanded our fund offering in this area, covering the themes of ecological & energy transition, sustainable development, preservation of natural resources, etc.
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?
In Hong Kong, the Hong Kong Monetary Authority (HKMA) has actively been promoting the city as a family office hub and is working with the industry through a three-pronged approach: talent development, platform building and outreach. With regards to outreach, the regulator is working with the Private Wealth Management Association (PWMA) and other industry stakeholders and government agencies to increase efforts showcasing Hong Kong’s attractiveness as a family office hub.
Meanwhile, the Monetary Authority of Singapore (MAS), together with the Singapore Economic Development Board (EDB), have formed a family office development team. As such, the development of a professional and family office friendly environment has the attention of the highest authorities in both cities with a strong focus on long-term development of their countries’ development and competitiveness as a family office hub. In other words, there’s not much more in this area we can ask for from the regulators as they are making all the right moves. (This is in line with the continued development of Singapore and Hong Kong as leading offshore wealth centres, as alluded to earlier.)
Technology | Where do you see the best application of data analytics/machine learning in private banking?
In terms of client onboarding it can be helpful in name screening and the general KYC process and on the advisory side it can help identifying investment proposals. Having said that, one of the main reasons for clients to make use of products and services offered to them by private banks is actually the human and relationship elements. We strongly believe that by combining these new applications and tools together with the human capabilities of our teams, we can build the best service and offer to our clients.
In no other area of banking is the human-to-human relationship as important as it is in private banking, and this is exactly what sets up apart as an industry. We firmly believe that this will remain the single most important element that sets us apart from other areas of banking.
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 have a clear digital strategy in place supported by sufficient resources to improve digitalisation of our client onboarding processes and to continuously improve the selling process of the front line. The pandemic has underlined the importance of a high degree of digitalisation when staff are working remotely and when face-to-face contact with clients is not an option.
In addition, we are strengthening our efforts to introduce transactional capabilities in our e-banking environment and we will enhance our mobile banking capabilities as part of the ‘MyIndosuez’ suite of products. Although most contact with clients takes place by phone, we are reviewing the addition of video capabilities as a means of communication.
In a post-pandemic environment, we will be working more with external fintech technology providers in specialised functional areas through the completion of our API infrastructure around the core banking system.
Finally, it is important to note that in 2020, we increased the number of virtual events with our clients. The purpose of these events was to share our views on the markets, as well as on other topics such as private equity markets, the post-COVID world, etc.
These initiatives were very well received by our clients and we will therefore continue to propose this in the future.
Meet 2020’s industry leaders in the full round up of of Asian Private Banker‘s The Final Word 2020.