Terence Chow, CEO, head, RBC Wealth Management Asia 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 has proven itself to be very resilient. When the need arose, the pandemic showed how quickly the industry can make decisions and implement technology solutions. It would be great to see this innovation continue.
Across the board we have seen higher levels of client engagement, with conversations becoming much more personal. We believe this trend will continue, as restrictions ease and there is a return to ‘normality’.
Like all businesses, RBC Wealth Management made a number of changes to the way we operate in response to COVID-19. Solutions were quickly identified and put into place to maintain service levels and operations and to strengthen client relationships.
Virtual meetings quickly became the norm and, in particular, we have found connecting with colleagues worldwide to be far easier, with everyone adjusting to technology and time zones to coordinate and serve our clients’ multi-jurisdictional needs.
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 Singapore, the industry and government have been making it more attractive for family offices to move their operations onshore. The point is not necessarily to bring all assets onshore, but to create a hub for family offices to operate and thrive. The industry and government have been very accommodative and innovative with new structures such as Variable Capital Companies (VCC), which attract capital that may have otherwise been used within an offshore fund.
A number of wealthy families from around the world have chosen Singapore and Hong Kong as their new or alternate home bases in the region in order to access local markets and talent and to benefit from preferential tax treatment.
Hong Kong is already an onshore market due to both domestic Hong Kong SAR wealth and the accelerated inflow of Chinese wealth from individuals who are coming to live in Hong Kong, and the outlook is extremely positive. Through the A share Stock Connect scheme, and as the GBA Wealth Management Connect scheme evolves, Hong Kong should thrive as a hybrid onshore-offshore 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?
A private banker can differentiate his or her value to a client by offering personalised service. During the pandemic, private bankers have had to be more creative in how they do so. This is particularly difficult for new bankers or those who have just moved firms, as they want to meet their clients face-to-face to show respect and build a personal relationship. The industry therefore needs to develop new ways to build trust with clients digitally.
A wealth manager’s ability to differentiate and specialise has been critical in order to stand out from the crowd during the pandemic. RBC Wealth Management specialises in helping Asia’s global families, which are families connected to Asia but also Canada, the US and UK for reasons such as education, business, property or lifestyle. As a result of the lockdowns, global families are facing even greater complexity when managing their wealth across borders. By helping them manage their affairs through the pandemic, we have been able to deliver true value beyond commoditised solutions.
By taking the time to understand our clients, their goals and drivers, conversations around wealth transfer and mortality have also come to the fore during the pandemic. This is allowing private bankers to offer a broader range of solutions.
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?
Both Chinese assets and alternative investments will be very important. First on China, the 14th Five Year Plan is putting China on a new path that is less dependent on exports and is internalising its supply chain dependencies. Equally important is China’s shift into green energy, which is creating a new ecosystem of companies and developments. We think China A-shares investment is paramount to tap into what is one of the most obvious secular growth stories in the world.
Secondly, alternative investments will play a major role as the search for yield has become increasingly challenging. We believe private equity in particular will be appealing to investors with a longer time horizon.
Investments | What key investment themes shape your bank’s 2021 outlook — and why?
Equity investment attitudes in 2020 were mostly shaped by the pandemic and by scepticism that life and the economy would ever be the same. In our view, the economic damage of COVID-19 will diminish greatly through 2021, while confidence in a return to a recognisable social and business landscape grows in parallel. Earnings, already in recovery, could surprise to the upside in 2021 and 2022 as some sectors and groups, crippled by the pandemic, return to life. The strong rebound off the deep March market lows suggests to us that investors have already paid in advance for some of that expected return to “normal.” For 12–18 months following the end of a recession, there is usually rapid catch-up growth in both GDP and corporate profits. Thereafter, GDP expansion settles into a trajectory more closely aligned to the economy’s longer-term potential growth rate.
The biggest themes that we see playing out in 2021 are, without a doubt, sustainability and the Greater Bay Area.
Investments | What important steps did your bank take to drive the sustainable investing agenda and to increase access to sustainable investing opportunities in 2020?
Technology has dominated the last ten years and we have seen a true transformation that has been accelerated by COVID-19. The arrival of 5G is supercharging the sector and it will set off a whole series of disruptions. The marriage of sustainability and technology, which we call SUSTECH, is where we see the most attractive opportunities, including in smart cities, electric vehicles, wind and solar power, waste management and water technology.
Technology | Where do you see the best application of data analytics/machine learning in private banking?
We see the most promising applications of data analytics/machine learning in the following areas of private banking:
Understanding client behaviours in order to improve client servicing, customised investment product offerings and investment product marketing
Making the most of the wealth of social media data available to deepen brand value
Improving investment risk management by utilising machine learning to predict market movements (e.g. asset pricing, volatility) and offer actionable insights that can enhance house views
Optimising portfolio management capabilities by using robo-advisory in asset allocation and portfolio monitoring / rebalancing, minimising the need for portfolio manager interventions. For example, in 2019, RBC Wealth Management incorporated sentiment analysis in portfolio management for our equity selection and ESG implementation. Following the inclusion of sentiment analysis from investors, portfolio allocators, brokers and economic influencers, we were able to position our tactical asset allocation through 2020 volatility.
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?
RBC Wealth Management Asia’s digital strategy is centred around delivering an unrivalled client experience, optimising our core technology and delivering world class business development.
Instead of viewing client touch points as discrete interactions with the bank, we believe that all front-to-back touch points combine to create an unrivalled client experience.
We have been modernising our technology over the past few years. Unlike some of our competitors — with complex legacy platforms which get in the way of a sustainable digital transformation — we have a simplified and nimble core system. This system sets the foundation for the next stage of our digital transformation, which is to embrace software-as-a-service to create an integrated financial services ecosystem.
Wealthtech and fintech are innovating at a rate that was previously unimaginable, and we want to capitalise on the innovation and speed-to-market they enable. For example, we are establishing social messaging channels to serve our clients and to market our offerings. We are developing strategic partnerships with select vendors who will support us to accelerate our front-to-back digitisation ambition.
Meet 2020’s industry leaders in the full round up of of Asian Private Banker‘s The Final Word 2020.