Tan Siew Meng, regional head, Asia Pacific, HSBC Global Private Banking 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?
The COVID-19 pandemic has prompted private banks to adapt and innovate across all aspects of their business and operations and I do not expect the industry to simply revert to how it was doing things once that disruption recedes. Quite the opposite. This experience has, in fact, accelerated our progress along a path that we were already travelling and to which we are deeply committed.
Throughout, we have been laser-focused on ensuring that we remain as close to our clients as possible, that we have a clear and holistic understanding of their needs and objectives, and that we are providing them with the most optimal advice, insights and solutions. And, as a result, we have continued to see strong net new money inflows driven by new and deepening client relationships.
Where we’ve been unable to meet clients in person, we’ve ensured that we have the digital tools to empower our bankers and clients to engage virtually, and in a convenient and secure manner. That includes enabling new-to-bank clients to sign and exchange documents electronically during the onboarding process, and providing a suite of digital solutions that allow our clients to manage their wealth, anytime, anywhere.
As a truly universal bank, we benefit from a strong internal referral pipeline, particularly from Commercial Banking where our relationships with entrepreneurs and families in the region are deep and enduring. We have been increasing our investments in ASEAN markets and onshore in Greater China where wealth creation is so pronounced and where much of our growth will come from. And, as part of a global Group, we are uniquely equipped to connect our clients with international opportunities and help them with their diversification needs.
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 latest investment outlook presents three long-term structural changes that we believe bring with them important investment considerations — and opportunities. The first, what we call “Remaking Asia’s Future”, looks at how Asian economies have responded to the pandemic, taking advantage of their growing technological expertise and expanding wealth, and ramping up reforms for a more sustainable and resilient growth model.
Our second long-term theme is “Digital Transformation” and, within that, our four high-conviction themes of Smart Mobility; Automation & AI; Biotechnology, Genomics & Devices; and Total Security. Our focus is on where we see that transformation has picked up momentum such that we are seeing the emergence of real, tangible benefits — and where that innovation is positively transforming business and the global economy.
Our third theme is “Investing for a Sustainable Future”. We are unequivocal in our belief that now is the time to take action and the Group has taken a number of decisive steps aimed at stemming climate change. As an investment theme, we believe sustainability should feature in the core portfolio strategy and thematic satellites — both to manage risks and capture opportunities that arise given that all companies will be affected by new regulations, the vast investments and opportunities, and changing consumer choices stemming from the sustainability revolution.
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?
It is imperative for investors to find new portfolio diversifiers among a broader universe of alternative asset classes. Introducing alternatives such as hedge funds or private assets into a portfolio can deliver better risk-adjusted returns than a portfolio of public markets alone. In 2021, HSBC Global Private Banking concluded another record year in Alternative Investments by raising US$3.2 billion in private client commitments globally, with US$1.9 billion from Asia, an increase from the US$2.3 billion raised in 2020.
Volatility is trending higher and rising rates are limiting the ability of low-yielding bonds to diversify risk. As rates rise, investors need to change tack to stay on track. More companies are choosing to remain private and for longer periods than ever before, providing a growing universe of private market opportunities. Our private market solutions have proven resilient and delivered strong risk-adjusted returns in spite of market dislocations. We believe private markets are complementary to clients’ public market holdings, and expect the private market illiquidity premium to keep attracting investors and fundraising momentum to remain strong.
For 2022, we see a broad opportunity set for alternative investments and consider them to be a key portfolio diversifier, providing downside risk protection and uncorrelated returns.
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 HSBC, we are committed to sustainable growth and invest to further enrich our broad suite of wealth products within the ESG universe, powering new solutions to the climate crisis and supporting the transition to a low-carbon future.
There is a greater need to position portfolios for structural growth trends that relate to the sustainability revolution. Growing evidence has shown that incorporating strong Environmental, Social and Governance (ESG) considerations can improve portfolio resilience by mitigating risk. In other words, putting a sustainability lens to your investments does not necessarily mean sacrificing returns. In fact, companies that mitigate risks and capture ESG-related opportunities outperform over the long run. Our preferred way of incorporating ESG into investors’ portfolios is through a multi-asset approach, that actively manages risks and harvests new opportunities.
Sustainable investing is about investing in progress, and recognising that companies solving the world’s greatest challenges can be best positioned to grow. It is about pioneering better ways of doing business, and creating the momentum to encourage more and more people to opt into this green future.
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?
We’re investing significantly in new technology and digitalisation as a core growth enabler. In fact, over the next two years, around US$100 million of investments in Global Private Banking in Asia are earmarked for technology and digital upgrades. And we’ve made major progress. Last year, we reached a number of important milestones that laid the groundwork for our ambitious agenda. We launched Online Trading; GPB Chat, which enables our clients to communicate instantly and securely with their Relationship Management team using their preferred native social media source; a revamped Investments & Research portal; and an e-Signature solution which allows new-to-bank clients to onboard by signing, submitting and receiving documents digitally, whether via mobile or desktop.
In 2022, we will continue to focus on building a rich digital ecosystem of integrated digital tools and solutions that complements our high-touch, expert-led service model. Our clients lead busy daily lives and are increasingly regional, international and global in nature, so they want convenience, flexibility, simplicity, and personalisation in the way they interact and bank with us. The experience we are designing is shaped by these expectations.
Meet 2021’s industry leaders in the full round up of of Asian Private Banker‘s The Final Word 2021.