China’s household wealth has grown with leaps and bounds over the last 20 years and that could translate into RMB 170 trillion (US$25 trillion) being addressable by wealth managers by 2030, according to Morgan Stanley estimates.
Since 3Q21, mainland China’s zero COVID policy has thrown up particular challenges, but that has not stopped some international private banks from beefing up their presence in onshore China.
Two international players — Morgan Stanley and Pictet — have shared with Asian Private Banker how they intend to tap into the burgeoning China wealth market.
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Morgan Stanley PWM Asia: Not just the private bank
Morgan Stanley has deep roots in onshore China, being one of the earlier investment banks to set up a presence there. Over the course of almost three decades, it has helped clients to secure over US$400 billion of equity financing in global capital markets.
Ernest Chan, head of distribution for PWM Asia at Morgan Stanley, told Asian Private Banker that the private wealth business in China has benefited from the bank’s long history and recognisable franchise in the Greater China region.
“We bring [Chinese clients] our research, sales and trading, investment banking and capital markets access, and firmwide global connectivity,” Chan asserted. Morgan Stanley has long been known for providing a strong integrated platform to clients, and in Chan’s view, the edge of Morgan Stanley is about “delivering the firm as a whole, and not just the private bank”.
Building relationships takes years
Chan acknowledged the significant impact on client activity and sentiment in 1H22 from the unexpected and prolonged lockdown in Shanghai, the ongoing geopolitical tensions and the global monetary environment. But the investment bank has drawn on the strength of its global and Asia research to bring ideas and solutions to clients.
“We have significantly ramped up our research content and webcasts in Mandarin,” he pointed out. “Because there is so much information and a lot of policies to be shared and digested and delivering it in the right language is key.”
With in-person client acquisitions still challenging, he believes face-to-face meetings are crucial to building relationships and trust with clients, especially in times of volatility. Instead of short one-city trips, Chan said bankers now tend to travel to multiple cities with longer stays, allowing them to spend more time with a larger number of clients to deepen relationships.
“Building relationships and business with entrepreneurs is a multi-year process,” Chan shared. He added that PWM Asia works closely with investment banking and capital markets colleagues on two-way referrals.
“We stand ready to help these clients as and when their respective companies or families need our help, now and in the future. The lull in IPO activity does not affect our strategy.”
Pictet WM: Investment-led private banking
Building responsible and long-term partnerships sits at the core of Pictet’s client servicing strategy, Alex Ng told Asian Private Banker.
“Our basic aim is to help our clients in Greater China by building on our core, historic strengths of investing for the long term in an independent way,” explained the equity partner, head of North Asia, and CEO, Hong Kong branch at Pictet Wealth Management. In doing so, he felt the Swiss pure-play provided clients with “unique and truly value-adding investment opportunities”, while advising them on managing wealth and wealth transfers.
In client servicing, Ng said the focus is on offering clients investment-led advice and supporting them in navigating different market environments.
“The priority of UHNW clients in Asia will be about asset allocation and portfolio performance,” he explained. “In the current market environment, we highlight the importance of active management even more and help clients find opportunities for capital protection and growth, for example in private assets.”
While the cross-boundary travel restrictions did hinder the business development of private banks to some extent, Ng shared that both existing and new clients have recognised and adjusted to the “new normal” brought about by the pandemic. “It proves that we can still do business with the aid of technology and without travelling,” he added.
“The biggest take-away from the COVID pandemic is the need to stay nimble and adaptive, and to maintain the entrepreneurial spirit regardless of the circumstances — in the same manner as Pictet has run and grown its business steadily for over 200 years.”
Most client focused
As a boutique private bank, Pictet does not have the advantage of being able to count on the support of other departments, like universal banks do. In Ng’s view, however, the benefit of not having those parts is the ability to stay highly focused on the same business — delivering superior investment services to clients.
Being a private company, Pictet is fully owned by its managing partners. Ng believes the governance model of Pictet is the best and the most client focused way to run an investment firm.
“The absence of external shareholders protects the firm from pressure for short-term profits and maintain its independence. Since we don’t do investment banking and don’t offer commercial loans, there is no conflict of interest,” he pointed out.
“Unencumbered by shareholder pressure, we can take a long-term view and our goal is never to maximise the short term at the expense of clients or the future.”