While relationship managers (RMs) in Asia still rely heavily on advisory revenues, recent market volatility has highlighted the importance of RMs promoting discretionary portfolio management (DPM) as a source of stable income, according to DPM heads, who feel that the long sales cycle still remains a key challenge.

Grizelda Lee, Bank of Singapore

The adoption of DPM among RMs is influenced by factors such as firm culture, product offerings, and the RM’s understanding of its benefits. Concerns over losing control of client portfolios contribute to resistance in some cases.

To address these challenges, private banks have implemented training programmes to deepen RMs’ understanding of DPM and build their confidence in offering it to clients. While RM penetration rates are certainly increasing, translating this into actual business is another matter.

According to APB estimates, most banks in the region report DPM AUM penetration rates of just 5-10%, with some even lower at 0-5%. Private banks like Pictet Wealth Management, Julius Baer, LGT, UBS, and BNP Paribas Wealth Management, have higher penetration within the 10-15% range, however.

Culture and patience

“In general, there still appears to be a gap between pure-play private banks and the rest on the street,” said Grizelda Lee, head of discretionary portfolio management, Bank of Singapore (BoS).

“There has been a strong increasing focus being placed on recurring revenue across the industry,” Lee told Asian Private Banker. “Much of [RM] penetration and participation boils down to firm culture and versatility of product shelf.

Shafali Sachdev, BNP Paribas WM

“Legacy also plays a huge role as institutions with heavy transactional books will need more time to transition the revenue make-up,” she said.

Shafali Sachdev feels the very nature of the longer sales cycle for DPM means that RMs who have not had multiple successes in securing DPM mandates, may not have the patience to see a DPM pitch through to its conclusion.

“In general, while many RMs in Asia are still heavily reliant on advisory revenues, they have also experienced at firsthand the impact of an increasingly volatile market in recent years. This realisation also helps to encourage the increased adoption of DPM to broaden their base of recurring revenues,” the head of investment services Asia, BNP Paribas Wealth Management, told APB.

RM initiatives 

At Nomura, penetration among RMs has surged to 45%, up from 25-30% just two years ago, shared Gareth Nicholson, CIO and head of DPM for international wealth management.

Gareth Nicholson, Nomura

“We’ve prioritised ongoing dialogue with RMs, incorporating their feedback to refine our offerings and address real client concerns,” Nicholson told APB. “To further strengthen RM confidence in DPM, we’ve rolled out a series of targeted initiatives.” For example, regular strategy sessions and real-world success stories.

At BNP Paribas Wealth Management, the firm continues to conduct educational discussions with both RMs and clients, but finds that the most effective way to increase penetration is for RMs and clients to actually experience the service firsthand.

“Our in-house studies have repeatedly shown that once our clients invest in DPM, even with a small amount, they come to realise and appreciate the strength of the platform, and follow up their initial investments with increasingly larger amounts through adding to existing mandates, or signing up for new mandate strategies,” Sachdev added.

In the case of BoS, the focus is on a portfolio approach that emphasises asset allocation to ensure consistent performance with reduced impact from market volatility.

Common pushbacks

RMs face common pushbacks from clients ranging from loss of control to fees, to the belief of lack of active management, Lee has observed. “Clients may think that traditional advisory results in a more actively managed portfolio vis-à-vis discretionary management, because of higher trading frequency,” she explained.

“However, active management within a portfolio shouldn’t have to be defined by frequent trading activity. True active management is not about constant portfolio churn; it’s about making thoughtful, strategic decisions based on rigorous analysis and forward-looking insights,” Lee added.

Beyond training and processes, behavioural and psychological factors also play a crucial role in how RMs approach DPM adoption. For example, RMs who strongly identify as investment advisors may feel their role is shifting away from stock selection, according to Nomura’s Nicholson.

Additionally, fear of losing control over client portfolios and performance anxiety about outcomes they don’t directly control can also contribute to resistance, he said. “How are we addressing these concerns? We emphasise that RMs remain central to client relationships, with DPM enhancing – not replacing – their role. We also allow RMs to introduce DPM incrementally, building confidence step by step.”