Raymond Ang, global head, Affluent Clients, 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, 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?
Indeed, despite the disruption brought about by COVID-19, we have seen strong asset growth in 2021 and proven that the nimble adaptation of processes has allowed clients to be onboarded remotely.
As vaccinations are still being rolled out in some parts of the world, a complete return to ‘normal’ remains uncertain for many countries. Even with the potential easing of restrictions for some countries, cross-border business travel will remain limited for now. This would mean that the traditional method of in-person networking will not fully resume, and we will have to rely on a range of complementary approaches, including client referrals, tapping on the bank’s network of clients, new hires and professional social media platforms. Our hiring strategy, which focuses on senior and more experienced RMs, has worked in our favour as new hires bring clients with whom they already have relationships.
The pandemic has heightened the impetus for us to challenge traditional assumptions about the effectiveness of digital engagement with UHNW/HNW individuals. From our experience last year, we found that clients adapted well to doing some banking activities online or via our SC Private Banking app. They were receptive to alternate ways of engaging with us – via virtual meetings instead of meeting in person and we believe that this hybrid model of client engagement and acquisition will be the way forward. As an example, in January 2022, we had over 7,700 clients register for our Global Market Outlook event which was held virtually. This is a strong testimony to how UHNW/HNW individuals are moving towards the new norms. The success of this hybrid model is however dependent on further innovation and our ability to deliver solutions, such as online trading capabilities, across all product ranges to clients.
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?
As an international private bank, the key differentiating factors which Standard Chartered brings include:
• a presence in 59 of the world’s most dynamic markets, with strong local presence in Asia, especially in key financial hubs such as Singapore and Hong Kong, which allows us to capture onshore wealth;
• an offshore network and presence which allow serving clients when they have offshore needs;
• the ability to help clients invest and diversify internationally;
• depth and breadth of product offerings, such as access to alternatives solutions, FX and structured products, ESG-driven investments and a robust and flexible credit offering (although the gap with local players is narrowing);
• the ability to provide wealth and succession planning advice and solutions; and
• the ability to offer solutions across multiple booking centres aligned to clients’ international wealth needs.
As onshore wealth grows, there has been a trend where international private banks have started (or are starting) to go onshore through partnerships or acquisitions to capture the growth opportunities.
For Standard Chartered, we are an international bank present in the key Asian markets. Our unique footprint, especially across many emerging market economies, is a key advantage. Our ‘One Bank’ culture enables the private bank to benefit from collaboration and cross-fertilisation amongst different countries and teams, taking advantage of the wide array of talent and expertise that ultimately benefits clients.
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?
We have to balance the rising structural importance of the Chinese economy and asset markets for investors on the one hand and the outlook for slower economic growth and increased regulatory scrutiny on the other. The way we achieve this balance is by looking for areas of the economy which are key priorities for the authorities and by trying to identify areas/sectors that are attractively priced.
In the current environment, we have two key themes relating to China.
First, our China Common Prosperity theme focuses on three major areas of the economy that we expect to benefit from significant tailwinds – high tech manufacturing, green energy and the internet consumer tech sector.
The second key area of focus is Asia high-yield bonds. While regulatory scrutiny of the property sector is likely here to stay, we believe the risks are now priced in and we see elevated yields as attractive to long-term investors.
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?
Our theme for 2022 is ‘A winding road to normality’. While we start the year with significant uncertainty regarding the Omicron variant, we still believe 2022 will be a year where we increasingly ‘learn to live’ with COVID-19.
This should help the still-strong growth in Developed Markets increasingly permeate the rest of the world. This will be matched with a gradual normalisation of monetary policy settings. Normally this is an environment of continued outperformance for equities and high-yield bonds and we see no reason for this to change in the current cycle. That said, returns are unlikely to match the performance over the past 21 months and volatility is likely to increase so it is important for investors to ensure that their portfolio holdings are consistent with their ability to absorb temporary losses.
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?
We have been advising clients to increase allocation to private assets, primarily private credit and private real estate. This is driven by our expectation that yields and returns in these areas are likely to be superior to similar assets in the public markets – for instance, we expect global high-yield bonds to generate returns of just 2.3% a year over the coming 7 years, while for private debt that number is 5.3% with only slightly higher volatility. Of course, these assets have some diversification benefits as well when added to an equity-heavy portfolio, although the hedge is less pure than for G3 government bonds.
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?
Governance and education are two key aspects in mitigating green washing.
In early 2020, we launched ESG Select, our enhanced due diligence framework to curate ESG solutions. Funds on our platform today are curated from most of the industry’s leading ESG players.
Last year, we launched our Sustainable Investments Classifications Framework to help clients easily identify what is in our sustainable investments universe, based on defined criteria and using third-party ESG data. The framework helps clients find products with lower ESG risks, giving them peace of mind. And to help clients better understand the solutions and make smarter decisions, we have introduced Sustainalytics ESG scores in our equity and fixed-income trade notes.
To help client build diversified sustainable portfolios, we have been expanding our sustainable investing offering. For instance, we added sustainable structured products to our product suite (funds, equities, bonds) in 2021.
Alongside the Bank’s Net Zero commitments, we declared net zero commitments to integrate ESG considerations in our Wealth Management advisory process and double our sustainable investing AUM by 2025. We aim to fully embed ESG when discovering client needs, portfolio construction, monitoring and portfolio review.
We ensure our frontline staff are kept abreast of the latest sustainable trends and solutions through a series of training and workshops on sustainable investing.
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?
The past two years have brought about key behavioural changes in investors, primarily in how they perform banking services. Today, we are seeing more UHNW/HNW individuals using digital services offered by banks.
This trend has prompted banks to focus more on digitisation of processes, improving access to information and enabling online transaction and trading capabilities. Indeed, hyperpersonalisation will remain important in 2022 in order to offer what clients need. This highlights the importance of using data to better understand clients in order to provide personalised advice and solutions that meet their needs.
At the same time, we recognise the increasing role of the RM in complementing the client experience. While many basic transactions can be digitally fulfilled, the human touch remains crucial in private banking, which is a high-touch and personal business. Yet, we see equipping RMs with better digital tools as equally essential to enable RMs to respond quickly to event triggers, share personal ideas with clients and interact easily and effortlessly with clients through the same digital communication channel.
Nonetheless, we see gaps and intense pressures especially coming from large technology companies that are eating into traditional wealth channels with their super apps. Many private banks also have some way to go to fully take advantage of the data they have.
In 2022, I expect to start seeing an expansion on the use of data, possibly in partnership with vendor platforms to draw on the strength of their expertise in better data analysis and AI. There are equally opportunities for partnerships in areas such as insurance, legal and lifestyle services through a digital integration of platforms. Closely related to technology would be the ability for private banks to offer cryptocurrencies as a wealth product, in a safe and trusted way.
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?
In general, it is imperative that the bank has a convincing employee value proposition that resonates with potential new hires. People are attracted by strong people leaders and this has helped us in the past few months to attract talents, who might otherwise have chosen a different employer.
Transparent performance management is key where the RM knows what the expected metrics and targets are (e.g. revenues, net new money), how they will be assessed and what reward they can expect based on their performance.
One-dimensional hiring from private banks won’t be sufficient and must be complemented with a bench of own talent. It is therefore essential for a private bank to build its own talent via development opportunities, provide growth opportunities within the platform and reskilling opportunities for individuals with adjacent skills to become a banker.
At Standard Chartered, affluent RMs have the opportunity to grow across the affluent continuum into Private Banking. Our investment in the Wealth Academy, launched in partnership with INSEAD, is testimony to our commitment to our people’s career development and charting a progressive career path for them.
Additionally, our network, franchise and brand name recognition in certain markets stand us in good stead against other more established private banks.
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)?
Government support to establishing and growing any part of an industry is crucial. The support — which often comes in the form of regulations and governance framework — facilitates the setting up of the industry, and quite importantly, incentive programmes often help to attract players to enter the market.
Singapore has established itself as one of the leading private banking and wealth management centres globally and in Asia. Singapore is reputed for its strong governance, sound financial regulations, political and economic stability.
The government has a critical role to play in supporting the growth of the industry, and in particular, providing incentives to attract individuals to invest in Singapore. The Singapore government has been very supportive and has implemented several initiatives and schemes to welcome potential investors to use Singapore as its base to manage their wealth. Recent examples include the Global Investor Programme (GIP), 13X and 13R schemes to attract funds of non-Singapore investors.
To support the growth of family offices in Singapore, the Monetary Authority of Singapore and Economic Development Board jointly established the Family Office Development Team (FODT) in 2019 to lead and coordinate initiatives that will enhance Singapore’s position as the Global Family Office Hub in Asia. As at 2020, 400 family offices have been established in Singapore (https://www.edb.gov.sg/en/our-industries/family-office.html). I would expect that this number has grown further in 2021.
Hong Kong is another established financial hub in Asia and more recently positioned itself as the global offshore RMB Business hub. The Wealth Management Connect scheme aims to unlock wealth potential from the Greater Bay Area and give Hong Kong a competitive advantage towards the private wealth and family office sectors.
The family office business in Hong Kong has flourished in recent years and is one of the vital growth segments in the wealth and asset management industry.
The various government agencies have extended their partnership with industry players in several ways. Standard Chartered has collaborated with InvestHK, FSDC and HKMA on holistic marketing and promotion campaigns to facilitate family office setup. InvestHK acts as single point of contact to provide one-stop support services while the SFC recently clarified the licensing requirements for family offices, which should attract more family offices to Hong Kong.
To be even more successful at attracting family offices, the Hong Kong authorities may want to consider using tax incentive programmes.
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?
Both Hong Kong and Singapore are still growing where the Greater China business is concerned, although we do see a strong trend of Greater China clients preferring Singapore as an investment location and booking centre.
Many Chinese clients have a nexus in Singapore, be it business, family or more personal reasons. Singapore is a neutral and safe haven location and is one of the most preferred wealth management hubs in the region. Besides a strong governance framework and a pro-business approach, the Singapore government’s incentive programmes such as the 13R/13X family office incentive schemes and the Singapore Global Investor Programme (GIP) are attractive considerations for these clients as they, together with their families, can potentially get residency in Singapore.
Meet 2021’s industry leaders in the full round up of of Asian Private Banker‘s The Final Word 2021.