This piece is the third instalment of The Final Word series, where top private banking and wealth management heads share their views on industry trends in 2017 and the year to come. Today, the theme is investment products and services.
Do you expect to see significant client adoption of pay-for-advice (flat-fee active advisory) offerings in Asia in 2018, and do private banks risk losing a significant amount of what was previously classified as execution only business? Furthermore, do you intend to roll out a flat-fee advisory solution in Asia next year (if you have not already done so)?
Pierre Vrielinck, CEO, Wealth Management APAC, BNP Paribas
“We are committed to working in the best interests of our clients. In response to client demand, we launched MyAdvisory last year. It is a contractual service which provides a high touch customised portfolio-based advisory service to clients by taking into account their individual investment and risk-adjusted return preferences with transparent fee models.
We offer the option under which clients will be charged a competitive all-in fee per year, while the opportunity exists to go for a hybrid fee model combining both advisory and brokerage fees. The response so far has been very encouraging, and we will be launching a digital version of this offering in the second quarter of 2018.”
Ron Lee, head of private wealth management, APAC, Goldman Sachs
“Our fee-based advisory business has been growing steadily in the past few years. Fee-based inflows hit a record last year, contributing to an overall increase in assets and reflecting our evolution to a business model more focused on becoming our clients’ trusted advisor.”
Michael Blake, CEO private banking Asia, Union Bancaire Privée
“We see a definite trend away from execution only to advisory services. The industry has been talking about such a transition for many years, but 2017 seemed to be the year of concrete action. I am not sure this necessarily means a wholesale move to flat-fee advisory services. Our approach has been to offer advisory clients flexibility in fee arrangements, from all-in-fees to a hybrid model.”
Ong Yeng Fang, managing director and head of private bank, UOB
“Clients who like to trade will prefer a flat-fee advisory model as it will be more cost efficient when they trade a lot. For banks, this model may also provide more stable and recurring income.
We expect that the flat-fee advisory model will gain wider adoption in Asia, but at a slower pace than elsewhere. This is because while Asian clients like to trade, they are also more willing to hold longer-term investment views or choose to be self-directed in their investment. For these clients, a traditional transaction-based model will still be preferred.”
Claude Haberer, Asia CEO, Pictet Wealth Management
“We’re a buy-side house and an investment-led house, so discretionary management will always be one of our key areas of expertise. Indeed, we have discretionary penetration excluding funds sold to advisory clients of about 20%. Even though we’ve practically quadrupled our AUM in Asia over the past seven years, we have kept the same discretionary penetration rate. Having said that, Asia is a region where advisory is very important, and we have of course more advisory clients than we do discretionary.
Generally, flat fee is something that is developing year-by-year. We do have a flat fee structured tariff for both discretionary and advisory. Flat fee is a win-win situation because it means on our side, we are assured of business, and we can, therefore, devote resources to clients on an ongoing basis. At the same time, it removes the transaction-by-transaction haggling on fees, tariffs, spreads etc. and makes life simpler for both parties. So flat fee is a much better expression of who we are at Pictet: we don’t go after quarter-by-quarter results.”