Final Word 2021: Omar Shokur, CEO Asia, Branch Manager Singapore, Indosuez Wealth Management

Omar Shokur, CEO Asia, Branch Manager Singapore, 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, investments, regulations, and technology in 2021, as well as providing their predictions for 2022.

The previous 12 months have proved that private banks can draw in significant amounts of net new assets and client accounts as the industry has adapted to widespread travel restriction due to COVID-19. With the potential easing of these restrictions in 2022, new variants aside, to what extent will private banks return to their pre-pandemic methods of sourcing clients and gathering assets?

It is indeed remarkable that the industry has proven to be resilient in asset gathering despite the restrictions imposed by the pandemic. In a way, it has actually been easier to have extensive contact with clients as many of them have more free time to enjoy since they don’t travel and restrictions on social events are still in place in a lot of cities. Clients are keen on engaging regularly with their bankers to review their portfolio or hear investment ideas. By and large though, we believe that wealth management will remain a highly personal service with clients expecting face-to-face interactions with their bankers.

Given the majority of Asian wealth is located onshore, how should international private banks best target and differentiate themselves in these markets? For domestic regional private banks, what is the most effective strategy for competing with international players?

The sheer depth and breadth of the talent pool in offshore wealth centres such as Singapore and Hong Kong, their regulatory environment, technological infrastructure, availability of sophisticated products and structures and legal framework mean that the offshore model remains strong and attractive for wealth managers and clients alike.

Indeed, it is not a question of competition. Clients need both domestic and international banks because their needs are varied and multi-dimensional. While domestic banks have their strong value propositions offering deep local networks and presence, international banks offer clients access to international markets and booking centres.

As such, we see many HNWIs and UHNWIs choosing both domestic and international players to manage their portfolios.

The last 12 months have been volatile for investors in China, from the meltdown in the high-yield bond sector to regulatory actions targeting sectors such as technology. How are you advising clients to invest in the world’s second-biggest economy in 2022?

The roadmap for HK-Chinese equities will remain volatile during the first half of 2022. The fiscal and monetary easing highlighted in the Central Economic Work Conference (CEWC) held by the Chinese government in December 2021 will take time to filter through into the economy. Besides, investors’ confidence will not return until there are clearer signs of abating regulatory tightening on the tech and property sectors. The Omicron variant could hurt near-term sentiment, but its severity should be of lesser concern.

We expect market momentum to improve into the second half of the year. Higher credit impulse typically goes hand-in-hand with market momentum. We believe HK-China shares should see a modest rebound in the range of 8-10% by year-end. Any upside revision from there will depend on the magnitude of policy easing.

In terms of strategy, we see value in financials, especially the China banking stocks as they will benefit from higher loan growth guided by PBoC. Renewable names should see a further re-rating in view of the decarbonisation drive. Consumer staples are worth a revisit as they are expected to achieve higher earnings growth in the next two years.
Internet names should see further decline in earnings this year as tech giants like Alibaba have said they will ramp up investments while sacrificing profits. We believe there will be better times for the Internet sector in 2023.

What will be the key investment themes that shape both global markets and those in the region in 2022 and how is that feeding into how you advise clients?

The 2022 economic landscape, with an expected 4% global growth, sees some risks in 1Q22 due to the Omicron variant but the world at large is still benefiting from a generous fiscal policy. On policy rates, the Fed and the ECB are expected to end the tapering in March as inflation exceeds central banks’ target. Against this backdrop, earnings growth should normalise to a more reasonable level. Our bank predicts high single-digit growth in the developed markets and double-digit EPS growth in Asia.

At Indosuez, the top five investment themes for global equities are: rising inflation (value/cyclical & strong pricing power), secular growth trends (disruptive technology), ESG investments, infrastructure investments and increased M&A activity. While all financial assets currently have high valuations, relative to history, the higher equity risk premium suggests that, at least on a relative basis, equities remain attractive and are likely to provide a real return as inflation rises.

In terms of asset allocation, we continue to employ multi-asset portfolios tilted on a risk-on mode, favouring equities but we also maintain exposure in high yield and emerging debt. On regions, we focus on developed markets as a start but an exposure on emerging markets equities, debt and currencies could increase gradually.

One of the most-repeated views over 2021 was that the ‘60/40’ portfolio is dead, given the ultra-low to negative yields offered in many parts of the sovereign bond markets. From alternatives to commodities to private credit, how are you helping investors to allocate assets in what was traditionally the fixed income part of their portfolios?

Whilst the fixed income allocation in our model portfolios has reduced somewhat (ranging from 28% in conservative portfolios to 10% in more dynamic portfolios), it remains an important asset class. Clients can still achieve stable income through balanced and prudent selection in duration, sectors and regions, spreading the risk within their portfolios. Having said that, as mentioned above, we continue to deploy multi-asset portfolios and advise investors to add gold and private equity in addition to the assets mentioned in the previous question.

Sustainability is higher up the agenda for investors than ever, with last year’s United Nations COP26 event underscoring the scale of effort needed to achieve global net zero emissions by the middle of this century. How are you helping your clients to remove ESG risk from their portfolios and embrace sustainability in their investment strategy?

At Indosuez, we were early adopters of the ESG theme: it has been one of the top priorities when we interact with clients. We have designed a clear and comprehensive range of solutions, taking into account ESG criteria in the services proposed, its processes for developing and selecting financial products (e.g. directly-held securities, investment funds, structured products, private equity) and its credit policy.

We are convinced the 2020-2030 decade is critical and that it is the duty of financial industry players to propose solutions and encourage clients to support a more sustainable development and a more responsible economy. Indosuez is stepping up its initiatives in this area. We have adjusted our offerings to promote more sustainable growth and a more responsible economy through a wide range of ESG products in financing and asset management. We have pooled our strengths to act in line with our raison d’être and encourage clients to share our convictions.
Over the coming years, ESG will surely play a bigger role in the investment world as already evidenced by the vast increase in flows seen over the past year. As a bank, ESG plays an essential part in our client portfolio construction and we have a strong conviction that investors need exposure whether through equities, bonds or other investment solutions.

The past two years or so have accelerated the rate of technological and digital adoption at private banks across the region, given the restrictions imposed by the COVID-19 pandemic. From hyper-personalisation to digital onboarding and KYC, what will be the biggest focus in terms of tech deployment for the industry in 2022 and where do the gaps lie?

Our digital initiatives will grow and develop with diverse experiences to enable Indosuez to develop new products and services that best meet the new expectations of its clients around the world. We always look at the future while not losing sight of our fundamental customer-centric approach: 100% human and 100% digital.

The paradox is that those tools were first deployed in retail banking due to the sheer breadth and scale of retail customers. We have to admit that many wealth managers are still playing catch up and 2022 will be an important year for us to fill this gap.

While investment tools allow bankers and advisors to produce more systematic and regular investment ideas for clients, such investment tools are, as their name suggests, merely tools. Such tools are only successful if used by the right expert. We expect our wealth managers and advisors to personalise and tailor every proposal to their clients’ needs and to engage regularly with the clients on the suitability and performance of each investment proposal. That is the wealth management differential.

On KYC / onboarding tools, we are still assessing these tools and the idea to integrate such tools. Every client is more than a number and it is important that we assess new clients personally with a human touch. We will ensure that should we choose to adopt such digital KYC / onboarding tools, they will be in line with the potential guidelines and respective frameworks of local regulators.

Sourcing talent in the region’s private bank industry is becoming tougher than ever, pushing up hiring costs across the region. How can private banks ensure they have adequate access to the talented relationship managers and other front-line staff over the coming years? What is the key to attracting the right candidates?

There are quite a few factors at play with regards to talent attraction and retention.

Given the wave of consolidation that has taken place in the sector since 2009, stability and commitment to the region is an important element in attracting the right people.

While remuneration ranks as one of the most important factors, there are many other factors that are equally important when retaining talents. At Indosuez, this includes the importance of giving staff ownership of their projects, providing them with a certain level of independence and entrepreneurial spirit.

How important is governments’ support to ensuring family office industry prospers in the region? What is at the top of your wish list for how governments in Hong Kong and Singapore can support the private wealth management industry’s development (e.g. less travel restrictions, more tax incentives, review/relax on a particular regulation)?

Both Singapore and Hong Kong have been rather forthcoming in welcoming family offices in particular, and wealth management in general. Our expectation is that both cities will continue their supportive stance for the industry and that cooperation and consultation between the governments, the regulators and the industry will develop and improve, as it has over the past years.

In the course of 2021, many private banks have grown their business presence in Singapore as the industry saw more business opportunities among Greater China clients in the city state. What is your private bank’s business split across Hong Kong and Singapore now compared to 12 months ago? Do you think the shift of gravity in business across Hong Kong and Singapore has reached an equilibrium?

At Indosuez, we firmly believe in the successful growth of both Singapore and Hong Kong as offshore wealth centres, each with its unique characteristics. Both have access to a deep talent pool, highly-regarded regulators underpinned by solid regulations. Hong Kong will remain the main hub for access to mainland clients and Greater China clients in general, whereas Singapore has the edge in terms of South Asia and Southeast Asia clients.
In relation to Greater China clients, we have indeed seen an increase from this region who are either relocating to Singapore or considering opening a family office here.
This trend will certainly increase the weighting of this geographical segment in Singapore-based banks.

Meet 2021’s industry leaders in the full round up of of Asian Private Banker‘s The Final Word 2021.


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