Steven Lo, regional head, Citi Private Bank Asia Pacific 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?
To a certain extent, we were taken by surprise by how this pandemic would deeply alter our lives and the way we work. Although we do have WFH (work from home) systems set up, we had never tested them that widely and so we had to catch up fast — and we did. Admittedly it was awkward at first as VPN phones are a bit cumbersome and the availability of other equipment like laptops may have been low. But I am proud to say that our staff did an amazing job at adapting and making sure we were up and running quickly — to the extent that clients really didn’t see any interruptions to our ability to serve them.
I think being a large organisation enables us to be able to draw from built-in backup and resources that a small firm would not have. The most important lesson and observation made during this time is not to underestimate the value of the adaptability and dedication of your staff. Without that mindset, your business will always be at risk. I am grateful and also proud that our staff have that mindset to overcome challenges in their determination to serve our clients.
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?
Citi has an onshore setup in Hong Kong, Singapore, and India where we serve clients from around the region. Setting up operations onshore is a serious endeavour and not to be taken lightly. It cannot be a “hobby”. The challenge in making an onshore operations viable is to ensure that you have enough product and service differentiation to compete in that local space. For instance, take the Greater Bay area. We could look at a potential local setup there because we can draw on the strength of the insights and experience of our Citi network, which already has a presence there.
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 were fortunate that our capital markets business performed exceptionally well during 2020. We had anticipated strong single digit growth but we ended up with solid double digit performance instead. Despite the inability to travel and meet clients in person, our client acquisition efforts were still quite good. We were able to grow our AUM substantially as clients looked to consolidate their relationships and prospects were impressed by our ability to perform in such an adverse environment.
Although nothing beats in-person interaction, I believe our staff were quite focused on engaging prospects and clients virtually on an ongoing basis with advice and curated programming. We will monitor the situation and with some of the easing of measures happening, albeit slowly in some cases, I believe we will be able to resume some form of in-person interaction — within the guidelines and within the comfort level of both our clients and staff.
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 remain positive on China assets, and have seen strong interest from clients in the region in maintaining and adding to existing exposures. We see a shift from fixed income into equities, with a focus on technology and healthcare sectors. Alternatives, including hedge funds, private equity, private credit, and real estate, remain important components of our asset allocation, and continue to do an important job of mitigating risk and increasing diversification within well-managed portfolios. Clients are generally comfortable allocating a component of their portfolios to less liquid securities, and our strategic long term asset class estimates reinforce ongoing outperformance from private equity in particular.
Investments | What key investment themes shape your bank’s 2021 outlook — and why?
Our core positioning for 2021 is to ensure clients are fully invested, with a strong overweight to equities at the expense of fixed income. From a thematic standpoint, we are focusing on mean reversion for assets that have underperformed during the pandemic as the world normalises. We also focus on the evolution of the G2 world – China and the US – and its implications for investment opportunities elsewhere. From a thematic build, we retain our focus on “disruptive forces” in technology, healthcare, financial services and transportation.
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 continue to develop new capabilities on our platform, ranging from innovative capital markets trading solutions, third party manager capabilities, and within our own in-house discretionary portfolio management business. Investor education has been at the heart of many of our clients initiatives within the last two years, and will continue to be a key activity for us.
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?
We have to recognise that not every family office is the same. In the past, the focus was on a good product platform with an open architecture. Now we have to recognise that family offices are increasingly sophisticated and their needs extend beyond the investments product capabilities.
We have seen that the interest from family offices is not just in personal investments but in corporate activities as well. They are often quite sizeable and global in their outlook and requirements. We understand this trend and our extensive platform across the Citi franchise and our globality has allowed us to accommodate and work with these institutional-size family offices.
This trend is something the regulators should recognise — and also acknowledge that not all institutions will be equipped to handle the wider needs of this segment.
Technology | Where do you see the best application of data analytics/machine learning in private banking?
For us we believe the value will come from being more data-driven, especially in how we look at our client base. The data will help us understand how we can improve the client experience journey by spotting trends and/or situations more quickly and being able to react proactively and/or appropriately. In fact, we are undertaking a massive global project in a relationship management application. That is how important we feel data analytics will be to our business.
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?
Our plan has always been to invest heavily in technology as our client base transitions to a younger generation who prefer a high level of digital engagement. We view our approach to technology as a means of enhancing the client experience in this regard.
We have the advantage of looking across our extensive franchise and being able to take advantage of what has been developed in other parts of the bank. In fact our Consumer Bank has been recognised by the industry for their winning apps and our close collaboration with them will allow us to tap on what could also work for our client base.
Also, having had almost a year long experience in utilising digital tools, we now have the insight into the gaps — or what you might call “the less-than-perfect situations” — and what we need to improve upon with our future tech dollars.
Meet 2020’s industry leaders in the full round up of of Asian Private Banker‘s The Final Word 2020.