20 May 2020 |

Beyond next-gen programmes: How PBs appeal to the up and coming HNWIs

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In Asia, an estimated US$15 trillion of wealth will be passed down to the next generation by 2030. Finding ways to engage that next-gen — and building substantial client relationships with them — has long been a challenge for private banks in the region. Asian Private Banker spoke to those who are leading the charge on next-gen specific business strategy and what it takes to establish sticky relationships with this emerging group of clients in Asia.

Harnessing next-gen strategy with clients mapping

Anton Wong, BNP Paribas WM

“The traditional focus by banks around the next-gen programme as a client event is so outdated,” Anton Wong, head of key client group, APAC at BNP Paribas WM told Asian Private Banker. “Next-gen needs to be formalised as a proper strategy, or a ‘banking practice’.”

To bring efficiency in resources allocation to existing next-gen client relationships, Wong said BNP Paribas WM is using a robust way to review stalled accounts with little or no balance, mapping them and making justifications to keep a handful of accounts with better business prospects.

“Beyond creating relevant networks and contents, we need to cater to next-gen as a unique client segment, which includes tailoring business solutions to address their needs, and setting up special internal KPIs for the bank and the RMs who are serving them,” said Wong.

Jan Boes, head client strategy office Global Family Office APAC at UBS Global Wealth Management echoes the need to establish a next-gen strategy. He told Asian Private Banker that in order to better understand the bank’s position on connecting with wealthy families and their next gens in the region, UBS GWM would first map the landscape of knowledge about existing wealthy families clients — down to the detail on who is in the family, the next gens’ role in the family, the bank’s existing relationship with the family and which needs the bank can serve.

Jan Boes, UBS GWM

According to Boes, the PBers in the region will be in close contact with the next-gen and their family while communicating any client needs with the global team where necessary.

The bank’s commitment to making this segment into a strategic focus across UBS GWM was illustrated recently by the appointment of Mara Harvey, he added. Her promotion to Head Client Services for UBS GWM puts her in the role to look after all topics that related to family governance, philanthropy and next-gen.

Standard Chartered Private Bank too looks at next-gen relationships strategically, at the level of a family, and connects it to the succession planning discussion, emphasising the connection between two generations.

Eugenia Koh, Standard Chartered PB

“By managing the bank-client relationship strategically at the family level, we look at both meeting the client’s existing financing needs and building the relationship for the future,” Eugenia Koh, head of sustainable investing, Standard Chartered Private Bank told Asian Private Banker.

“Nurturing the next-gen is important to all parents and being the banking partner that supports our clients in the grooming of their next-gen allows us to grow our depth of relationship with our clients.”

Exclusive next-gen programmes still mainstay
Invitations to exclusive events still form the mainstay of establishing the connection between PBs and next gens. Such events and programmes provide “a safe ground” for these aspiring younger generations to network and connect and can support and inspire them to capitalise on their influence in the world.

In most PBs, these events emphasise the exclusivity of both the attendees and the speakers. They are carefully handpicked next gens from around the world, who bond through a bank-operated digital platform or an alumni network.

Standard Chartered PB runs an exclusive programme with access to some of the most influential people in the world, including members of the UK royal family, former prime ministers, CEOs of global conglomerates and leading philanthropists. Only 20 participants are admitted to each event in either the global or regional programmes.

“Our flagship global programme takes place annually in London and we have started a programme for our alumni which is organised on the sidelines of the World Economic Forum in Davos,” said Koh.

“We don’t pay for speakers or for the flights and accommodation of the participants. As a result, these programmes can be organised at a relatively low cost. This speaks volumes about the bank, because distinguished speakers usually charge a considerable fee.”

She highlighted that the bank doesn’t talk about finance or wealth management at these events and while the bank has a stringent review on the participants, it can accommodate both client prospects and existing clients’ next-gen in the programme.

“It is our deliberate intent not to discuss finance or wealth management so that existing clients (the parents) and their next-gen participants do not feel the obligation either way. There are other events we hold for clients such as investment seminars which can educate clients on wealth management,” said Koh.

“Although I can’t refer to exact numbers, we have a good number of next-gen clients who have built trust with the bank through attending the next-gen programme.”

Prepare next-gens for different family responsibilities
In UBS Global Wealth Management, the content of these events is tilted more towards developing entrepreneurial skills and financial knowledge, combining both the bank’s expertise with academic institutions leading this field.

“What we try to do is making sure that we differentiate ourselves in the way we try to empower these next-gens for their future responsibilities,” said Jan Boes. “There are quite a few motivated, entrepreneurial next gens within some wealthy families and they are really intrapreneurs. That is good for the family business over the longer term.”

“However, sometimes the next-gen may have other plans instead of joining the family business, or they are probably better suited for other careers, which is natural. What we try to do is to make sure that we can prepare the next-gen in the way to be the best custodian of wealth, because even if a next-gen is not going to take over the family business, he or she will still inherit wealth. I think for whatever roles next-gens have in the family, we can support them in different ways.”

Success of next-gen strategy hinges on better understanding of clients

The insight of Boes into how next-gen could take up different roles in the family and have different needs for financial advice demonstrates the importance of having a thorough understanding of each client, regardless of what types of clients the firm is targeting.

“There are obviously similarities and things we could learn from each other. But no family is identical to another. Every family has its own values and therefore it is important for wealth managers and advisors in the region to be close, and to have regular interactions with these wealthy families in order to build the long-term trust,” Boes asserted.

To get a better understanding of this client segment, Boes added that the bank would invite next-gens to attend panels in training for their client advisors, providing first-hand advice on how to interact with this emerging tier of clients. He pointed out that a key message he remembered from these discussions would be a next-gen voiced his hope for bankers to respect them as a real client and to include them in the wealth management conversation.

Boes went on to suggest that a wealth manager could be a catalyst in a conversation with a wealthy family, for the next-gen to demonstrate to the patriarch/matriarch that they have their perspective in managing wealth.

Catering to the next-gen need for credit
Going a step further in tailoring financial services to the needs of next-gens, BNP Paribas WM is looking at the possibility of offering clean loans to next-gens by measuring their likelihood of default, taking into account their public profile as well.

Wong of BNP Paribas WM pointed out that while next-gen can be in their early twenties to well into their forties, one of the common characteristics he observed is that many of them have a real need for lines of credit and while they are well educated and sophisticated, they are lacking bankable assets.

“Often, a good credit relationship remains the quintessential means for a bank to engage with a client because it requires a lender to home in on the borrower’s risk profile and financial management practice or behaviours. It’s the type of knowledge you want if you were to become business partners,” said Wong.

“Bank financing remains a meaningful source of liquidity for many next-gen entrepreneurs. Financing via other public and private means could be relatively pricey in comparison. In recent years many have turned their attention to crowdfunding and other newer approaches for capital, but they are not necessarily low cost and you generally need to start with a brilliant and eye-catching equity story. Not every situation is conducive to that.”

Not only the services on offer need to be customised according to next-gens liquidity needs. Wong suggested that, for RMs serving this segment, the bank is considering introducing KPIs (other than the size of AUM brought into the bank) to recognise the RMs’ efforts in forging new relationships with next-gens.

“We aim to both cement relationships with the first generation, and to develop traction with the next-gen. This is necessary for both the bank’s sustainability and growth,” he said.

“Plus this presents new opportunities to establish relationships with wealthy families who aren’t our clients yet,” explained Wong. “We have examples where it’s simply too late in a family’s generational lifecycle for us to prospect its matriarch or patriarch, and purposeful dialogue with the next-gens is exactly what seals the deal.”

In short, as wealth in Asia is being transferred to another generation, it is becoming increasingly important for PBs to develop traction among next-gens. PBs may take different approaches to accessing this client segment, but the need to better understand the next-gens is universal, as is the requirement to explore business solutions that cater to the specific needs of the various pursuits of next-gens.

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