Issue 91 September 2015 Lite

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ASIAN PRIVATE BANKER september 2015 • ISSUE 91

STRAIGHT TALK BENJAMIN CAVALLI CREDIT SUISSE PRIVATE BANKING’S MANAGING DIRECTOR AND MARKET AREA HEAD, SOUTHEAST ASIA

REGULATION

CRACKING THE COMPLIANCE CONUNDRUM

What keeps CEOs awake at night?

SATYA BANSAL, CEO, BARCLAYS WEALTH AND INVESTMENT MANAGEMENT, INDIA

APB MANDATE

a look into the region’s most common types of hnw investors

august 2015

CONTENTS 4

Letter from the Editor A time for transition Editorial The Scoop: Change is constant

5

People: What keeps CEOs awake at night?

Satya Bansal, CEO of Barclays Wealth and Investment Management, India

6

Editorial Crow’s Nest: China to drive private banking in Asia

8

Allocator hub

9

House View: China shakes the world with pro-growth tools

3

10 A pre-hike diagnosis of Asian HNW idiosyncracies 14 MRF: Shifting through southbound strategies Straight Talk

15 Benjamin Cavalli, Credit Suisse Private Banking’s managing director and market area head, SEA Industry

17 Q2 results: Maintaining the status quo Regulations

19 Cracking the compliance conundrum Tech Talk

22 FinTech Watch People Moves

23 Movers & Shakers

PUBLISHER Andrew Shale EDITOR Shruti Advani ASSOCIATE EDITOR Vince Chong EDITORIAL Richard Otsuki, Priyanka Boghani, Tom Wan

MANAGING DIRECTOR Paris Shepherd OPERATIONS

Benjamin Yang, Sam Chan BUSINESS DEVELOPMENT Madhuri Chatterjee, Sonia Lam, Tristan Watkins, Michael Chan

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DESIGN Simon Kay PRODUCTION DG3 ISSN NO. 2076-5320

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letter from the editor

A time for transition

S

eptember is marked in most of our calendars as the time to discard holiday reading in favour of to-do notes, and shift gears from a frenetic summer into a more mellow autumn. Perhaps for these very reasons, September has traditionally been a time for transition - into a new school year, or season, or financial quarter depending on your age and stage. Fittingly, our September issue is the only guide you will need as you chart your course into the final quarter of the financial year.

We tally scores in Q2 results: Maintaining the status quo, a concise yet complete examination of second quarter results for the top private banks in Asia by revenue. APB Mandate - our dedicated platform for fund selectors at private banks - looks at issues ranging from China’s latest pro-growth tools to Asian HNW investor types.

Needless to say, after the headline-grabbing volatility of summer, we examine why – shaky

market mechanics and an inexperienced investor base aside – asset managers grab the opportunity and access presented by RQFII (Renminbi Qualified Foreign Instititutional Investor), MRF (Mutual Recognition of Funds) and Stock Connect. The MRF adds to these dynamics as Chinese asset managers will now challenge global players in Hong Kong to manage mainland investments.

Thank you for all the feedback on the last issue, some of it made me smile, some of it didn’t. All of it made me think. For those of you I have met before, it should come as little surprise that every time you make a suggestion, it is keenly debated at our weekly editorial meetings. For the uninitiated, join the debate by mailing your comments to editor@ asianprivatebanker.com. I look forward to hearing from you ...

Until we meet again,

Shruti Advani Editor

This online poll is now a regular feature on our website and we are very encouraged by the responses over the past three weeks of its launch. For that we thank you, our readers.

On-the-Spot features a new question every Monday and we look forward to your continual support.

Here are the results of the polls that were conducted prior to this issue going to print.

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editorial

Change is constant

I

almost did it. Write an entire edition of The Scoop without mentioning Julius Baer, that is. Almost. And then Boris Collardi dips into his Credit Suisse address book and taps Jimmy Lee for the bank’s most senior job in Asia - confirming what we suggested in last issue’s Scoop and I am compelled to write another few (hundred) words on Boris Collardi the bank that does not tire of the limelight. Indian markets have more than a fair share of volatility where risk management is as important as seeking returns. At times, we have to convince clients to let go of an opportunity which does not suit their risk profile or liquidity needs.

A Credit Suisse alum himself, Collardi is well-known for filling the ranks with men he “has a history and personal rapport with” as one Julius Baer staffer in Zurich puts it.

Certainly, the same can be said of many hirers.

And so it was perhaps inevitable that when the time came to find a replacement for Dr. Thomas R. Meier, who pre-dates Collardi at Julius Baer, a “friendly” Dr. Thomas R. Meier made the cut. Whatever the reasons for the change, it is far more likely that Dr. Meier was anxious to rejoin his family who moved back to Switzerland a few years ago.

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The more interesting question really is the one centred on the bank’s future leaders rather than those from its (albeit recent) past.

Kaven Leung North Asia CEO Kaven Leung has built up a considerable power base given that the region is contributing the lion’s share to regional revenues. Conspiracy theorists, on the other hand, have gone into overdrive speculating whether Lee’s move is a precursor to more formal arrangements between the two banks. To them, I will say this - it is far easier to get professional due diligence on a target than it is Jimmy Lee to place a veteran banker into the upper echelons of its management. Enough said on that front then.

For now, Lee’s impeccable credentials and his reputation as one of a handful of leaders still in touch with what clients want, are reasons enough for his job swap.

J.P. Morgan

Few brands in Asian private banking command as much cache as J.P. Morgan.

“Five years ago every candidate that walked into my office wanted to work for them,” explains one headhunter friend (don’t believe those that tell you the term is an oxymoron).

It was revered as much for the mountain of money it managed as its distinctive model for private banking. Few other private banks were able to make the distinction between high and ultra high networth clients with the clarity and finality of J.P. Morgan’s twin businesses - with one servicing high net worth clients with US$10 million to US$30 million in assets, and the other servicing ultra high net worth clients with over US$30 million. Furthermore, the bank’s unique model of a dedicated private client advisor for every single client servicing team, put it in a league of its own.

Then, earlier this year, the bank merged both units, putting the former CEO of its UHNW business - Andrew Cohen - in charge of the newly integrated platform.

Peter Flavel, erstwhile head of the HNW business, is now deputy CEO Asia for the private bank.

It is disheartening to some then, that the “experiment has not paid off ”, claims one ex-employee, now servicing ultra high networth clients at another bank.

Not everyone expects the transition to be seamless, with the history books strewn with stories of corporate integration headaches.

“Considerable effort had been put into creating two distinct verticals - one for HNW clients and the other for UHNW. Integrating the two is not as simple as changing the nomenclature on the letterhead,” says the same former employee. One of the bank’s fastest rising stars on the erstwhile HNW team, Salman Haider, has already found alternative employment as Citibank’s head of UK consumer bank and interna

editorial

tional personal bank, EMEA, based out of London.

But what of clients? Are they likely to be impacted by what is still largely an internal reorganisation?

“The cost of servicing a client is higher at J.P. Morgan than at other banks because

it has a dedicated advisor for each client servicing team. This works for the bulk of the bank’s clients because they are whales - generating tens of millions of dollars in revenue,” explains the former staffer.

With the bar now lowered to include both HNW and UHNW clients, the bank

may well have to re-examine the profitability of the model applied uniformly across all clients. Whichever course it chooses to chart, one thing is for certain - the industry is watching.

people

What keeps CEOs awake at night?

Satya Bansal, CEO of Barclays Wealth and Investment Management, India

“

I

ndia is one of the fastest growth markets not only among the emerging markets block, but also globally. This is attracting global investors to India and also making Indian businesses go global with renewed confidence.

India is still in the early stages of an ongoing global shift in wealth creation from West to East, but with significant rise in wealth and expanding families, the challenges around succession are visible. In our conversations with clients, we see this aspect as the ‘key gap.’

It is a crucial issue on their minds but often unattended partly due to insufficient knowledge and often due to an unknown fear of rocking the boat too early. We have been spending considerable time to share best practices around succession planning and to make various generations, through multiple sessions at times, understand and appreciate the need for this.

Indian markets have more than a fair share of volatility where risk management is as important as seeking returns. At times, we have to convince clients to let go of an opportunity which does not suit their risk profile or liquidity needs.

Last but not the least, is the need to balance traditions with technology. Indians are increasingly becoming more and more tech savvy but still need the personal touch a banker can bring in. We have been investing significantly in the best in class digital private banking platform to empower both our clients and the bankers.”

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EDITORIAL

China to drive private banking in Asia Private banking is now where investment banking used to be two decades ago, says the head of a global private bank over coffee with Asian Private Banker.

T

hen, investment banking grew very rapidly because of the tremendous need to import capital into Asia. It’s the same thing now in terms of processes in private banking, he says, except that instead of importation of capital, its exportation and management of capital. But you deal with the same issues regarding hiring, regulation, product set-ups, etc.

He is of course right, but we think there is something bigger behind the growth of private banking now compared to i-banking then, and it doesn’t get much bigger than China.

We all know now that when China sneezes, the whole world catches a cold.

Beijing’s policies permeate so much of the global economy that, as Goldman Sachs group chief executive Lloyd Blankfein recently said, he wished he was 40 years younger and Chinese.

Case in point: a joint report from China’s Industrial Bank and the Boston Consulting Group (BCG) recently set out that the communist country’s private banking sector will enter a new era over the next five years, as “the pace of financial reform picks up on the mainland and wealth management undergoes rapid development.”

Where there’s a will, there’s a way

Experienced China watchers will know that a report commissioned jointly by one of China’s largest banks very likely references Beijing’s political will to expand

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and develop its commercial banks into full-service outfits that can effectively compete with the UBSs, Credit Suisses and HSBCs of the world.

It also devotes about a quarter of its 36 pages to how private banks can piggyback on Chinese premier Li Keqiang’s “Internet Plus” project to stimulate productivity and efficiency through technology.

Written entirely in Chinese, the joint study “China Private Banking 2015: Sailing with the Wind” showed that across the board, private wealth on the mainland is expected to slow to 13% over the next five years as “China’s economy enters a new norm.” This follows burgeoning growth of an annually compounded 21% between 2013 and 2015.

It cites global banks like Credit Suisse and Bank of America turning in substantial earnings from their respective wealth management arms and asks the same question of Chinese institutions.

Certainly, the report adds the caveat that private banking in China must be of a nature exclusive to the mainland but clearly, Beijing intends to push its traditional banks to leverage on existing retail and investment businesses to help upgrade its wealth management and planning services to the high net worth crowd.

The reasons for this could be two-fold.

One, with the country going from a backwater economy to the world’s second largest market in just 30 years, Beijing feels that it is time its elite class changes

their money mindset from an all-out wealth generating machine – which comes with greater risk choices – to one that prioritises wealth preservation and financial stability.

Two, with investment products and allocations getting more complex and diversified on a global basis, China’s private banking sector risks being left behind if it does not evolve now. This has never been more obvious, with its economy slowing down and its currency made more flexible, and hence more volatile.

Yet still, survey respondents showed a “substantial increase” in risk tolerance compared to a previous poll, the report notes. Some 68% said they were willing to take “some risks”, while 14% were willing to take “high risks for high returns.”

Nearly half of all UHNWIs with investible assets exceeding 30 million yuan said they were invested in high-risk products – the biggest allocation for this wealth segment. This compares with some 38% of HNWIs, with investible assets between six million yuan and 30 million yuan, who were invested in such products. (See table on next page) In short, China’s high net worth individuals are in need of more global investment options, and its banks need an upgrade to hedge its risks to the domestic economy.

“In 2015, the Chinese private banking sector is facing macroeconomic restructuring, financial market reform, and more complex and diverse customer requirements,” the report says.

EDITORIAL

RISK TOLERANCE ALLOCATIONS OF MAINLAND HNWIs hNWIs with investible assets between 6-30 million yuan (n=1,027)

UhNWIs with investible assets exceeding 30 million yuan (n=238)

Main focus: Low- and medium-risk products

7% 20%

8% 13%

Main focus: Medium- and high-risk products

14% 18%

21%

ALMOST NO ALLOCATION

30%

35%

11%

NO SUCH ALLOCATION

7% 13%

8% 23%

39%

30%

21%

34% LOW ALLOCATION

49% 38%

48% 41%

38%

34%

HIGH ALLOCATION

Low-risk products

Medium-risk products

High-risk products

Low-risk products

Medium-risk products

High-risk products

Source: Industrial Bank, Boston Consulting Group

“This requires that private banks do more than just traditional wealth management but also investment business, wealth planning and various value-added services as a whole.”

With the needs of mainland HNW clients becoming “increasingly diverse and complex”, it added, “it is imperative that private banks provide a full range of financial and non-financial services, and this requires banks to improve in their product innovation, asset allocation strategies, tax and legal capabilities, as well as a strong grasp of global markets.”

Apt timing

Political will or not, the time appears right for China’s private banking sector to take the next step.

As the report sets out, private wealth sources are “shifting towards returns from financial markets investment”, from the more traditional origin of entrepreneurial returns. A quarter, or 25%, of all surveyed respondents said that financial investment

returns accounted for their main source of wealth – a “substantial rise” from a previous survey.

More private banking clients are also investing overseas, the main attraction being the perceived low-risk nature of more developed markets.

The poll notes too that more than 40% of investors are using overseas wealth managers this year, an “improvement over previous research figures.” Wealth management, it adds, will “remain one of the most important investment tools for individual investors.”

There has also been increased demand for family wealth planning, the report found, partly as a high proportion of HNW clients, at 84%, are married with children. Some 21% of these individuals have make arrangements for their children to inherit their property, while 37% have not yet begun, but will consider the matter in the near future.

Family wealth management, the poll finds, remains “in the early stages of

development” with general understanding still at a “shallow level.” On the other hand, over 80% of respondents are interested in learning more.

The number of HNW households is likely to exceed two million by end-2015, after growing nearly 30% annually over the last three years, the poll notes. This is expected to grow to almost 3.5 million over the next five years, even as the compounded growth rate slows by more than half to an annual 11%.

“Looking at the next five years, we believe that private bankers in this new era can form an industry unique to China by having sufficient insight into the new norm,” the report wrote.

“This means creating a differentiated business model based on solid professional management foundations and sustained industry competitiveness.”

Depending on who you talk to, for all that i-banking was a massive success in Asia, private banking might just surpass that in the next two decades.

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Allocator hub In the increasingly dynamic and volatile market environment, asset allocation continues to play a core role to ensure both risks and returns are prudently diversified across global markets. Join APB Mandate as we share with you the asset allocation strategies of private banks in Asia.

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House View: China shakes the world with pro-growth tools Bullishness in China quickly fizzled out after a breathtaking surge in the benchmark Shanghai Composite Index between 2014 and early June was brought down by a 40% plunge.

S

ince then, China has triggered a series of actions to support the market and reverse a nationwide slowdown in growth. These included deleveraging, halting trading and selling in various areas, devaluing the yuan and lowering rates in benchmark lending and the reserve requirement ratio.

Emerging markets are taking a hit from central banking moves in both China and the US. In addition to the prospects of the problematic servicing of dollar-denominated debt, China’s cheaper yuan is hurting the competitiveness of emerging market exporters - year-to-date, nearly US$1 trillion has fled from the asset class.

DBS Bank describe in a report chief investment officer Lim Say Boon painting a caricature of Fed chairman Janet Yellen and a thought bubble reading: “This will hurt you more than it will hurt me.”

According to Lim, “a world of inadequate demand and excess supply” hurts suppliers of all colours, be it in commodities or manufacture goods.

Julius Baer is advising its clients to sell low grade emerging market bonds, even in hard currency, and sideline cash for the time being.

“The fading super-cycle remains the headline story and structure cost deflation is expected to keep commodity

prices lower for longer,” says Julius Baer’s CIO and head of investment solutions group, Burkhard Varnholt.

“Therefore, we continue to stay away from investments in commodities for the time being.”

The underweight position on emerging markets is probably where consensus ends for global markets. Coutts call the panic in global equity markets as one “made in China.” Despite heightened volatility, the British wealth house believes there is little to worry about in the global economy and markets, and that recovery trends in the US and Europe remain intact.

Credit Suisse’s CIO office, led by global CIO Michael Strobaek and deputy CIO Giles Keating echo Coutts’ sentiments.

The Swiss wealth manager is particularly positive on the European recovery after the Grexit fiasco petered out; it recommends focussing on regional companies in the consumer-related sectors. It is also advising its Asian clients to invest in Japanese companies with strong cash flows and stable profit margins amid efforts to push national reforms in corporate governance. UBS and Barclays also mirror such positive outlooks on European and Japanese equities.

DBS’ Lim warns investors to brace not only for more slowdown in China

but also future volatility in developed markets. The Singaporean bank recently downgraded its global equities rating, advising clients to shift to quality.

Private banks are especially divergent in fixed income, where bond-buying recommendations sit across both ends of the spectrum. Julius Baer believe clients are better safe than sorry investing in high grade dollar bonds with five-to-seven years’ maturity. Meanwhile, Standard Chartered believe that despite volatility on the rupee, Indian local bond and their approximately 8% yields remain relatively attractive.

For now, all eyes are once again fixated on Jackson Hole, as the US Federal Reserve look increasingly unlikely to raise rates in September. General fund flows following a rate hike are expected to follow historical movements, but the old adage that the world catches a cold when the US sneezes will now also have to contend with what China does.

Fearmongering by mainstream media suggests a prospective currency war but most believe we won’t see another 1997.

Nonetheless, private banks will need to brace themselves for further volatility, and urge calm among its oft-capricious clients.

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A pre-hike diagnosis of Asian HNW idiosyncracies The wealth management universe has worked long and hard in recent years to convince clients on the benefits of diversification and delegation. Unsurprisingly, results vary widely.

A study into the region’s private banking portfolios reveals three common types of HNW investors: the Credit Addict, the Fence Sitter and the Fortified.

THE CREDIT ADDICT Despite a 30-year bond bull run - ending now with certain government bonds yielding below zero - some of Asia’s wealthy have not had enough of the asset class, particularly because of the ubiquitous need for yield. Private banks have advocated for delegation or sourcing yield through other asset classes, such as equities that pay dividends but still, many remain fixated on bonds.

“Within emerging market bonds, the quantity of inventory and market makers is thinner than pre-2008. In this environment, liquidity risk is a concern that has been raised by ourselves and our clients.

Garth Bregman, BNP Paribas Wealth Management’s head of discretionary portfolio management in Asia, sees such clientdirected investments, albeit sparingly, to some of its pure fixed income mandates. And even for buyers who make block trades, there are risks such as liquidity, he notes.

“Within emerging market bonds, the quantity of inventory and market makers is thinner than pre-2008. In this environment, liquidity risk is a concern that has been raised by ourselves and our clients,” he explains, underlining the difficulties for private clients to access certain bond markets directly. The French private bank’s discretionary mandates, he adds, mitigate such risks by buying block-sized trades through benchmark issuances with arrangers that commit to maintaining liquidity - something wealthy Asian single

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bond buyers will not be able to do easily.

“But if there’s a liquidity crisis, which could be caused by tail risks such as an unexpected acceleration in US wage inflation, there will be few places to hide.”

Standard Chartered echo the risks of direct trading in emerging market bonds.

“Similar to China onshore bonds, this is not an area that is easy for individual investors to access and we have onboarded funds to allow our clients to participate in the theme,” says Dany Dupasquier, the bank’s head of mutual funds and hedge funds.

“While we’ve seen volatility on the INR, the local India bond market remains relatively attractive even after adjusting for currency volatility, with yields of approximately 8%. In addition, there could be potential for capital gains on bonds if there is further central bank easing and market yields decline.”

It is as if the US Federal Reserve (Fed) tapering tantrum of 2013 was not enough to warn investors of the risks of actively trading high yield or emerging market bonds. The story, bankers say, is two-fold.

Firstly, Asian HNWIs have become dangerously comfortable with the asset class. There is a poorly built school of thought that the use bond coupon is an effective means to manage returns and income precisely whereas equity returns are a risky bet. This is obviously a false assumption.

“If you gave a person a choice between having a 100% chance of taking US$100 and a 99% chance of taking US$1,000, most would take the former,” says Paul Stefansson, head of investment products and services at UBS Singapore.

“People tend to feel the pain of loss twice as much as they feel the pleasure of gain. This is called myopic loss aversion. Year-to-year, there is no factor with a higher than a 0.2 correlation with next year’s stock markets and when you think about those correlations, you realise why investors are tend to prefer bonds because of the idea of guaranteed returns.”

Secondly, and more worryingly, basic financial knowledge is lacking. A recent survey jointly published by UK asset manager M&G and global research firm Scorpio Partnership, asked 1,000 HNWIs if bond prices would go up or down when yields increase. The results were shocking, with some 71% of respondents answering incorrectly.

As much as private banks are promoting delegation, client-directed investing is still well and alive, especially as Asian HNWIs love to test their hand at the tables. And it doesn’t help that more than half of the same respondents who did not know how bond prices moved relative to yields also claimed to have good or very good financial knowledge

(39% even wanted to manage more money themselves).

But not all bond traders look amateurish, with an increasing pool of clients seeking esoteric sources of income through niche segments of credit. UBS has been advising clients to buy into senior loans issued in the US and Europe, given the strong yield, limited duration and priority in the capital structure. Deutsche Asset & Wealth Management (AWM) has had success raising assets from clients in alternative credit, such as private equity PE invested in global infrastructure.

“Our clients are still asking about Europe, specifically in global infrastructure,” says Deutsche AWM North Asia head Lok Yim. “They are interested in credit in the private equity space as fixed income yields continue to come off. We had a fairly successful launch looking one year back through a private equity product lending to SMEs globally. Spreads are actually very, very lucrative in SME lending and the tenures are not that long. Versus a normal private equity product where the legal entity is seven-years-plus, the product made three-five year loans, allowing much faster realisation of returns.”

THE FENCE SITTERS Understandably, uncertainty paralyses investors. Years of market wide bond buying by Asian HNWIs have generated a pool of surplus cash through coupons but a lack of market directionality has caused stagnancy - private banks tell APB Mandate that cash allocations are currently as high as 20% in certain client portfolios.

“According to the flows we observe and our conversations with private banking clients, the increased volatility has definitely caused people to sit on the fence,” says Andrew Hendry, managing director of Asia at M&G. “Investors have shifted from extreme greed to extreme fear, opting out and are taking profits, increasing cash positions and postponing decisions. This is very predictable and it is typical consumer behaviour.”

For most, the catalyst for inspiration will be sharp corrections that follow a rate hike by the Fed. “Our clients have a good chunk of assets in cash and have been sidelined for quite some time now. What are clients waiting for?” says

Arnaud Tellier, head of investment advisory, Asia at BNP Paribas Wealth Management.

“Higher rates. Higher yields. Better opportunities. And corrections!”

Deutsche AWM’s Yim agrees: “I think investors cannot afford to not be invested at this time but if the market dives 20%, they’ve got enough powder. If the Fed hike moves high yields or emerging market bonds, people will get scared after the first 5-6 points. But after that, the big investors will start piling in. It’s not so much the case that clients fear a correction. They want it.”

While buying after a correction is sound, expecting fair timing even for institutional investors is wishful thinking. 2013’s taper tantrum is a perfect case study: excessive over-reading of Fed comments caused iShares iBoxx USD high yield corporate bond ETF to lose 6.25%, gain 4.5% and lose 4.5% in just three months. The shortfall of attempting to time markets is a topic that UBS frequently covers to persuade

asian private banker 11

Asian clients of its dangers.

“Did you predict 9/11? If you can’t predict things like that, you can’t predict the future which means you can’t time markets,” explains UBS’ Steffanson.

“There is a global phenomenon where investors believe either they or someone out there can accurately time markets but if you can, you essentially don’t need asset allocation. What we are trying to do is to drive this message to our clients through the element of surprise. The one guarantee that I can give you in my thirty years in this business is that there is always a new crisis.”

For private banks worried about such risks, perhaps it would fare

better if clients were persuaded to wait even longer for a stronger bet.

“Sitting on cash is not so bad,” says Terence Bong, the Asia head of intermediary business development at Nikko Asset Management.

“The opportunity cost is not too large because interest rates are low anyway.”

THE FORTIFIED Over the past two to three years, private banks have collectively tried to address the inherent risks attached to Asian portfolios and investment policies.

Need yield? A full spectrum of flexible bond funds and multi-asset funds have been newly introduced at private banks. Fearing flat or volatile markets but wanting to stay invested? Opt from long/short and macro hedge fund strategies. Want sexier investment ideas to place satellite bets after being idle for too long? Private equity flows have experienced robust growth on the back of a diverse pool of investments in IT, healthcare, real estate and even select energy deals.

The results have yielded a pool of well-fortified portfolios that should withstand most scenarios, barring tail-risk events such as an US inflation rate that outpaces Fed tightening.

To be fair, Asian HNWIs also deserve credit. To be able to temper risk-return expectations following years of cheap money, falling yields and booming equity markets coupled with new knowledge of asset management and fund products, is worthy of praise.

“The growth in acceptance of new product types such as multiasset funds or liquid alternatives really demonstrates the graduation of investor sophistication,” says Virginia Devereux Wong, head of Asia wholesale business at Standard Life Investments.

“During the 80s, Asian investors only traded equities, not even

12 asian private banker

bonds, and it really wasn’t until 2000 that the trend of diversification took off following the launch of retirement schemes such as Hong Kong’s MPF.”

RESTLESSLY WAITING

For most of Asia’s HNWIs, the Fed rate hike can’t happen early enough.

Cash-heavy Fence Sitters are waiting for markets to normalise before deploying cash in more certain investment calls. Strongly positioned Credit Addict and Fortified clients are antsy to see fees pay off with superior performance. But the Fed continue to sound dovish and a September hike looks increasingly unlikely. China has furthered fuelled volatility as it is expected to continue weakening the yuan and cutting rates.

But few may be keener than private banks to see a rate increase.

After preaching for so many years about the benefits of delegation and the dangers of self-direct trading, the rate hike and its accompanying market frenzy will reveal the proof in the pudding.

Happy customers should return while clients who did not buy into private banks’ advice will find it opportune to rethink how they invest, namely by reducing trading and increasing holding durations, relying more on delegation to fund or discretionary managers and, most importantly, to realise the value of advice.

Sponsored Statement

High yield floating rate bonds – a new tool for a rising rate environment Providing investors with exposure to high yield credit spreads, but with materially lower interest rate risk

The extended period of loose monetary policy is starting to draw to a close. Investors are now bracing themselves for the first interest rate rises in many years, initially in the US, and subsequently in the UK. Having benefited greatly from falling yields and tightening credit spreads, the move to a more hawkish cycle will create many more headwinds and challenges when it comes to delivering returns in fixed income.

Consequently, any product or instrument that can help investors navigate this environment has rightly been receiving a lot of interest and attention. Here, we focus on one such instrument, the high yield floating rate bond. In recent years, this instrument has gained popularity with many issuers and the market has grown in size to more than US$40 billion.

High yield floating rate bonds A high yield floating rate note (FRN) has the following defining features:

• floating

rate coupon automatically adjusted in line with changes in interest rates;

• relatively high credit spread that reflects the additional credit risk of a non-investment grade issuer;

• an interest rate duration close to zero.

It is the combination of these three features that enables investors to receive an attractive, growing income stream without associated loss to capital when rates rise.

The coupon, usually paid quarterly, is made up of a variable component, which is adjusted in line with a money market reference rate (e.g.

Libor) and a credit spread, which is fixed for the life of the bond.

In terms of credit risk, the high yield floating rate market is similar to the traditional fixed rate high yield market as there is a great deal of commonality between the two, in terms of underlying issuers.

However, high yield FRN spread duration is on average lower than their fixed rate counterparts, which means it is less sensitive to movements in spreads. In times of risk aversion and widening credit spreads, the negative impact on prices for the high yield floating rate

market should be comparatively lower. This was especially evident towards the end of 2014, when conventional high yield bonds sold off sharply as spreads widened, while high yield FRNs held up reasonably well (see figure 1).

However, while the traditional high yield market contains an interest rate duration of around 4.3 years, the high yield FRN market has an interest rate duration which is very close to zero. This limited exposure to moves in the broader yields means that the high yield floating rate market tends to be much less sensitive to any wider interest rate-inspired volatility in the market. Indeed, during the so-called ‘taper tantrum’ of 2013, when former Fed Chairman Ben Bernanke first introduced the idea that QE would begin to be phased out, the high yield floating rate market was much more resilient in terms of price impact than the other major bond markets as investors adjusted to the concept of tighter monetary policy. The high yield floating rate note market demonstrated similar resilience during the sudden upturn in yields during the second quarter of 2015 as investors adjusted to the prospect that US interest rate rises are looming (see figure 1).

Figure 1: Fixed income total returns 116 114 Total returns (rebased to 100)

A new era for interest rates in the developed world

Global HY

Global FRN HY

US high yield sell-off as oil prices plunge

Global IG

112 110 108

Volatility caused by ‘taper tantrum’

106 104

Government bond sell-off in Q2 2015

102 100 98 96 Dec 12

Mar 13

Jun 13

Sep 13

Dec 13

Mar 14

Jun 14

Sep 14

Dec 14

Mar 15

Jun 15

Source: M&G, Bloomberg, BofA Merrill Lynch indices, 30 June 2015. Rebased to 100 at 31 December 2012.

A new tool for a rising rate environment High yield floating rate bonds offer investors exposure to high yield credit spreads without the interest rate risk found in traditional fixed rate high yield bonds. Not only do they mitigate the headwinds of higher interest rates, but they actually provide a growing income stream in the next phase of the interest rate cycle.

In November’s edition of Asian Private Banker, we expand upon this introduction and compare high yield FRNs to more commonly known floating rate bank loans.

The above materials and/or information is for general guidance only and should not be relied upon as, or treated as a substitute for, specific advice. Neither M&G Securities Limited nor its affiliates accept any responsibility for any reliance on any of the information contained in these materials or any direct or indirect loss which may arise therefrom. If you are in any doubt about the contents above, you should seek independent professional financial advice.

MRF: Sifting through southbound strategies

T

he Mutual Recognition of Funds (MRF) scheme between China and Hong Kong was met with much fanfare as the Middle Kingdom continues to liberalise its capital markets. And it is no more relevant than right now.

northside furore, southside precision The Shanghai and Shenzhen Composite indices have plummeted more than 40% over the last three months and any remaining investor with an appetite for equities are looking at global assets.

No doubt many Chinese investors are paying keen attention to which of the more than 400 northbound MRF product applications the Chinese Securities Regulatory Commission (CSRC) will approve. These products - containing global assets - are expected to be snapped up the moment they hit the figurative shelves.

Southside however, at least for the gate keeping private banks, the response is far more methodical even though the same enthusiasm burns bright.

As APB Mandate understands, private banks in Hong Kong like Citi, UBS and BNP Paribas are closely monitoring potential incoming products.

For now, most of the more than dozen funds to be approved in the first southbound MRF batch are believed to be broad Chinese equity strategies, which global wealth houses say are adequately covered via A-share ETFs, RQFII quotas and the Shanghai-Hong Kong Stock Connect scheme (the latter in limited amounts).

But future batches are expected to yield applications for esoteric products which could draw greater interest from global wealth managers, say players like Terence Cheng, deputy general manager and chief investment officer at HuaAn Asset Management. His firm is expected to launch its Enhanced MSCI China A Index Securities Investment strategy as one of the first batch of approved products in the southbound channel.

“Global private banks tend to be more conservative before onboarding new kinds of products,” he tells APB Mandate.

“We have engaged in initial dialogue with this set of clients but I expect most of them to roll out MRF funds only after the second batch has been released. For now, most southbound applicants are focused on broad equity strategies, but I expect future batches of approved funds to include much more granularity and diversification, such as thematic equity strategies and yield products.”

PUTTING THE PIECES TOGETHER Chinese fund houses will have to convince global distributors of their operational robustness, especially those that require

14 asian private banker

home-based approval in places like Geneva, Zurich, London and New York. Undoubtedly, Chinese managers that have partnered with foreign players will have an upper hand in knowing how foreign fund platforms work.

“In China, there are some very professionally-run fund houses but quite a handful are lacking, particularly when it comes to meeting global operational standards,” says Steven Seow, head of Asia wealth management at Mercer.

Naturally, Chinese banks and private banks with local consumer arms will have first-mover advantage in Hong Kong - because of their access to Chinese funds and ability to spread costs. These include names like Bank of China, Standard Chartered and DBS. “We are actively talking to a few Chinese fund houses and expect to onboard two to three new products in the near-term,” says Rocky Cheung, DBS head of investment advisory, wealth management, Hong Kong.

Asset managers such as GF International are standing ready to distribute.

“We’ve already approached more than ten banks including several large retail banks and if our funds were approved today, they would be on the shelf ready for distribution tomorrow,” says Nathan Lin, CEO of GF International Investment Management, whose Guangzhou-headquartered fund house has two products awaiting approval.

“I firmly believe that from an asset allocation perspective, the whole A-share space is definitely worth a look. To be frank, based on my conversations with banks in Hong Kong, I’ve realised that there is still a knowledge gap regarding the A-share market and China’s economy.”

A market plunge which has caused China’s market to trade below its five-year average forward PE ratio of ten could be a blessing in disguise for the first movers; these banks can use this opportunity to persuade Hong Kong-based investors to buy low and perpetuate inflows from positive performance.

A successful MRF scheme would obviously raise Hong Kong’s competitiveness as an Asian offshore private banking hub, banks add. But this remains part of a broader project that relies on Beijing’s further liberalisation of its currency and markets, among other things.

As Chinese president Xi Jinping noted when he took office in 2012, “China needs to learn more about the world, and the world also needs to learn more about China.”

A perfectly apt sentiment when it comes to global asset management.

people

Straight Talk:

Benjamin Cavalli, Credit Suisse managing director, market area head Southeast Asia and Singapore location head Private Banking Asia Pacific It was an auspicious start when Cavalli stepped into his present role ten months ago, with 2014 being arguably the best year ever for Credit Suisse Private Banking’s Southeast Asia franchise. For one, net new assets (NNA) grew by 72% year on year while assets under management (AUM) rose by as much as 24%. Asian Private Banker talks to the 42-yearold on how he plans to build on this.

APB: What helped drive growth and, perhaps more importantly, do you think you can sustain this pace?

BC: As you know, 60% of our business is UHNW-based. It is public information that there were a number of liquidity events taking place in the market which we have capitalised on – quite simply, that is the basis of the NNA growth that you mention.

The uniqueness of Credit Suisse is our integrated banking model and this will continue to be core to our offering.

We have numerous UHNW clients who have resulted from investment banking transactions and becoming private banking clients, or the other way round, ie existing PB (private banking) clients who thanks to our strong investment banking platform become a “One Bank” client.

We have a very long history in the investment banking arena in Southeast Asia, that has definitely helped us build a very strong value proposition and branding in that client segment.

Mind you, not all UHNW clients need investment banking solutions per se, but there is obviously a very large growing population in terms of new businesses that will ultimately require that service.

But if you mean sustainability from a profitability point of view, let’s also look at how we have grown. We have doubled our AUM base since 2011 but our RM (relationship manager) population grew by only 14%. So as you can tell, productivity at the bank is very high. Whilst NNA is a good indicator of client satisfaction, profitability combined with NNA is the most important measure for us.

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people

Singapore has been a key NNA-generator for the region. The RM population has grown by 47% in the past four years and we have built a very strong team of senior relationship managers. In parallel, we have more than tripled the Singapore market asset base during the same period

APB: Having said that, the bank has been one of the more aggressive in the market during that period, especially in terms of attracting senior bankers?

BC: We have had a larger increase in our RM population in North Asia than Southeast Asia over the last 24 months. As far as Southeast Asia is concerned, we have added selectively to the team - we look at individual hires as they surface [in the market].

In the last few years, we have taken a lot of pride in the fact that we have a very stable front office organisation and have definitely managed to keep our best talent in the firm. Not just in the RM population but even within the leadership of Southeast Asia, we have been a very stable firm over the last few years, and this is one of the reason why we have been such an attractive employer.

APB: Within the Southeast Asian business though, one could argue that the RM population has grown significantly rather than selectively?

BC: Singapore has been a key NNA-generator for the region.

The RM population has grown by 47% in the past four years and we have built a very strong team of senior relationship managers. In parallel, we have more than tripled the Singapore market asset base during the same period.

APB: A few banks that have demonstrated good growth in Southeast Asia have done so by putting credit at the front and centre of their offering.

BC: Southeast Asian clients are not the most aggressive investors when it comes to leverage to begin with and this differs from market to market, but leverage is modest.

16 asian private banker

Our skillset is to help clients expand their business by providing financing. Our balance sheet has been deployed very selectively mainly to help UHNW clients grow their core business. We work very closely with our Emerging Markets Financing group in the investment bank, which has historically been one of the key players in the region, this has given us a tremendous edge in providing holistic solutions for some of these clients.

We see ourselves as the entrepreneur’s bank which sounds like jargon but the truth is a number of clients in this part of the world have grown because of the balance sheet that was made available to them.

For example, over a year ago we helped a client de-list from the Singapore exchange. That in itself requires us to provide financing. I’d say the difference is that we approached that particular client from a very holistic angle, and the balance sheet we provided from the investment bank was instrumental in capturing this liquidity.

APB: Which banks do you benchmark against? Who is the competition?

BC: All I will say is what you already know – our assets have quadrupled over the last four years.

If you look at our NNA growth, it is the equivalent of building a small private bank every year

APB: Do you think the bank will acquire again? The integration of HSBC’s private banking business in Japan* was successful by most metrics and yet the bank has not bought again in Asia, despite some significant opportunities over the last two years.

BC: If you look at our NNA growth, it is the equivalent of building a small private bank every year.

If you stack up NNA against our RM population, we already have one of the highest asset base per capita. I cannot comment whether we will acquire again, but growing organically is the model that has worked particularly well for us.

In December 2011, HSBC sold its top-tier Japan private banking business to Credit Suisse. No sale price was given though gross assets were said to be worth US$2.7 billion at end-October 2011.

*

industry

Q2 results: Maintaining the status quo Last issue, we started looking into the toplines of the big private banks with a presence in Asia, as a barometer of growth. That, we admit, was a belated move with regard to first quarter numbers, but as they say, better late than never. We now continue with a dissection of Q2 revenues.

T

here was little change with the rankings of the top 11 global private banks by revenue for the second quarter, showing that it was business as usual mid-way through the year.

UBS Wealth Management towered over private banks once more, ranking at the top of the list with global revenues hitting US$4.3 billion. The biggest gainer however, for the second quarter in a row, was Deutsche Asset & Wealth Management. The German lender’s revenue jumped by 25% year on year, following a similar Q1 rise of 23%.

We await keenly the outcome of restructuring plans at various banks such as Credit Suisse, HSBC and Standard Chartered. We can almost hear the gears grinding midway through this third quarter but it is unclear if effects will be manifest come Q3 reporting. Let’s see.

IN A NUTSHELL UBS Wealth Management UBS Wealth Management’s revenue fell slightly by 2.9% year-onyear. The slight dip came from a fall in total operating income following the sale of its Belgian domestic business in the first quarter. Globally, the bank’s assets under management totalled US$1.16 trillion, from US$1.13 trillion in 2014.

Morgan Stanley Private Wealth Management Net revenues were US$3.9 billion, a slight increase from Q1, while total client assets totalled US$2 trillion at the end of the second quarter. Client assets in fee-based accounts rose 7% to US$813 billion compared with the same quarter a year ago. Fee-based asset flows for Q2 2015 came to US$13.9 billion.

Credit Suisse Private Banking Revenue for the Swiss private bank rose by 6% quarter on quarter and 3% year on year. This reflected high net interest income, high transaction and performance-based revenues, even though these were partially offset by lower recurring commissions and fees. In Q2 2015, assets under management came to US$1.45 trillion, with

net new assets totalling US$15.1 billion.

Deutsche Asset & Wealth Management Revenue increased by 25% year on year to US$1.6 billion, boosted by favourable foreign exchange movements. The growth was also attributed to the positive performances of various product categories, managing fees, performance and transaction fees. The division did see its expenses increase by 6% year on year, due to said foreign exchange movements, higher revenue-driven and business volume costs as well as litigation costs. Compensation costs also increased due to regulatory and strategic hirings. The bank jumped a spot to fourth place in the table, following two stellar quarters.

Goldman Sachs Private Wealth Management The unit’s revenues, which includes investment management services as well as wealth advisory, rose to US$1.5 billion. This was a 14% year on year increase due to higher incentive and management fees as well as transaction revenues. Asia accounted for a higher portion of commission fees as client activity, consistent with higher listed cash equity volumes. During the first half of 2015, firm and client-related securities borrowing activity also rose, along with lending activity with corporate and private wealth management clients.

J.P. Morgan Private Bank J.P. Morgan’s global wealth management revenue increased to US$1.5 billion in Q2, from US$1.4 million the same period a year ago. This is roughly the same as topline for the first quarter of 2015.

Assets under management rose to US$1 trillion globally, from US$992 billion in Q1 2015.

BNP Paribas Wealth Management The French lender’s global wealth management division, which includes its asset management arm, saw revenues increase by 5% due to strong performances in domestic markets and Asia. Its global assets under management stood at US$376 billion, up from its Q1 results of US$359 billion.

asian private banker 17

industry

Citi Private Bank

ABN AMRO Private Banking

Private banking revenues rose 13% in Q2 from the prior year period to US$746 million, driven by increased loan and deposit balances and growth in investments and capital markets products. In the first quarter, the bank saw its global revenue increase due to greater client volumes as well as growth in the capital markets.

The bank’s revenue dipped by 3% quarter on quarter to €336 million (US$383 million), from €341 million in Q1. Revenue rose by 15% year on year due partly to the sale of premises in Guernsey in Q2.

Client assets fell by €2.9 billion in the second quarter to €206.1 billion due to lower market performance, with stock markets hurt by geopolitical developments.

HSBC Private Bank Topline for HSBC’s global wealth management unit fell 4% year on year to US$561 million as costs from its ongoing business restructuring was offset partly by a rise in client volumes and net new money.

It continues to tackle legal issues. Globally, it held US$370 billion in client assets - mainly funds under management and customer deposits - for the half-year ended 30 June, down from US$384 billion a year ago.

18 asian private banker

Standard Chartered Private Bank Quarter on quarter, the bank’s topline remained unchanged in Q2 2015 at US$304 million. This was a dip of 3% against Q2 2014, mainly on the back of its Geneva business exit and client transfers in Jersey. Assets under management rose to US$61 billion, a 9% year-on-year increase, excluding the Geneva exit and client transfers. It also increased its global relationship manager headcount by 40. Profits fell by US$68 million year on year to US$3 million due to exceptional impairment provisioning.

REGULATION

Cracking the compliance conundrum Striking a balance between keeping pace with an evolving regulatory landscape and rising costs borne from staying compliant is increasingly becoming the norm. With many banks facing multi-million dollar fines for non-compliance, they are quickly realising the need to respond fast and in a more strategic manner.

L

aws and regulatory regimes are constantly updated or enforced, keeping private banks on their toes. The next immediate regulatory event to take note of is the extended deadline for Model 2 IGA jurisdictions, like Hong Kong, to file non-consenting US accounts under FATCA. On a daily basis, it has become part of corporate life such as lengthier onboarding procedures.

“The whole infrastructure costs for financial institutions are going up,” says Nigel Rivers, global head of private clients, TMF Group, a firm that focuses on providing financial and administrative services to high net worth individuals including management of costs, compliance and risk.

“We know that it’s more complicated and it takes much longer and the costs to go up. If you look at opening an account with a financial institution, you used to be able to do it in a few weeks, now you’re lucky to be able to do it in three months.”

A recent On-the-Spot poll on this publication’s website showed about a third of respondents, or 34%, spend 40% or more of their time on compliance-related issues.

Some 41% put this at 20-40%, and 25% indicated 20% or less.

As a result, insiders tell us, banks are turning away up to 20% of new business, not least because fines are now a very real thing, unlike, as one veteran banker recalls, a “slap-on-the-wrist gesture that shows more than anything else that someone is simply on the case.”

For example, HSBC Global Private Bank is under intense scrutiny after reports surfaced claiming that it helped clients dodge taxes and laundered money for wealth individuals, including 984 Hong Kong and 246 mainland Chinese clients in February 2015. HSBC said it made nearly US$3 billion in provisions for legal proceedings and regulatory matters in the first half of 2015, from US$1.8 billion the same period a year ago.

The Hong Kong Monetary Authority adds that it has taken

measures to ensure that banks have effective anti-money laundering (AML) and counter-terrorist financing (CTF) controls. These include “increased number of on-site examinations and desk-based reviews; increased number of AML seminars to compliance officers and money laundering reporting officers; high-level seminars for banks’ senior management to foster a stronger AML/CTF culture; and circulars on topical AML/CTF issues and guidance papers.”

These follow the enactment of the city’s Anti-money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (AMLO) in 2012.

“In the period since the commencement of the AMLO, the range of supervisory measures taken following our on-site examinations has included issuing examination reports with directions for remedial actions and the use of powers under the Banking Ordinance to appoint an external auditor to conduct examinations of bank’s AML/CTF controls,” HKMA tells Asian Private Banker.

Measures

The obvious thing is to hire more compliance professionals.

“With fierce competition to hire experienced compliance professionals in Asia, many financial institutions are seeking expertise from consultancy services to better respond to regulatory changes across jurisdictions,” says Michael Blake, CEO of Coutts’ international private banking operations.

Ron Lee, head of Goldman Sachs Private Wealth Management in Asia Pacific, agrees, citing that the private bank’s compliance headcount has increased over the past year.

Indeed, the ratio of compliance offiMichael Blake, Coutts cers to relationship managers has changed from 1:10 to 1:5, say insiders. While private banks focussed on hiring compliance generalists in 2014, they are now looking into more niche areas such as financial crime, sanction audits and anti-money laundering, says one Hong Kong-based headhunter.

asian private banker 19

regulation

Another strategy has been to tackle compliance costs by changing the business model of the bank or wealth management firm.

“The best way to address the increasing role compliance is playing in private wealth is through changes in the business model,” Lee says.

“We’ve been growing our fee-based business compared to the brokerage business, and that’s one way of mitigating risks for us and for our clients. It would minimise volatility in clients’ portfolios as well.”

For example, while a 90% brokerage-based business would result in higher transactions, it would require much more aggressive risk monitoring.

recover information as well as receive notifications in an event of a request for onboarding a high-risk client. It can reduce re-work on documentation by 80% and speed up new account opening processes by 70%, Appway says.

Also, most recently, DBS upgraded its integrated anti-money laundering strategy by implementing NICE Actimize, a provider of financial crime, risk and compliance solutions for the financial industry.

Coutts have also been swift to use technology to monitor reporting standards, Blake says, with the bank continuing to “make significant investments in our risk-control systems as well as in training for staff.”

Balancing act “tricky”

Ron Lee, Goldman Sachs

Another key way, Blake says, is through backlighting the route of assets and funds.

“The conduct agenda remains a key focus for regulators in the wealth management space, with specific emphasis on the prevention of money laundering and tax evasion, and the strengthening of customer safeguards through, for example, suitability regulation,” he says.

And just as banks need to be transparent, clients need to report, says TMF’s Rivers. After all, he adds, the big picture should not be affected by factors such as stringent regulations.

“For instance, clients will have families in different parts of the world and they’re not going to cut them off just because they’ve gone to live (somewhere else). It just needs more sensible planning, taking appropriate advice and looking to rely a bit more on external service providers to make sure that they keep compliant,” he explains.

Technology

Perhaps the key to this conundrum is technology. For instance, vendors such as Appway have automated the onerous process of onboarding clients, which involves mounds of paperwork and cumbersome procedures.

What this does is provide the ability to digitally store, share and

20 asian private banker

Then there’s always the problem of what is too far in terms of impeding business.

As one veteran private banker says: “Our compliance team takes to heart something one of our senior leaders said - ‘You all play a very important function which is to protect the reputation of the firm. But if you do too good a job of preventing us doing business, then there will be no business to protect!’”

Firms that succeed in maintaining this balance will be those that execute innovately, Coutts’ Blake adds.

“The challenge for the industry is how to turn compliance obligations into a competitive advantage,” he says.

“The winners during this important period of change will not simply respond piecemeal to new regulation but will think carefully, creatively and radically about how new regulations are transforming business models and how this can be translated into a positive customer experience.”

tech TALK

FinTech Watch

Asian Private Banker delves deep into the fintech wealth management circuit and selects three more to watch in the second part of our fintech watch.

F

intech fever has hit Asia. If the recent appointment of an ex-Citi veteran as Singapore’s Monetary of Authority’s (MAS) fintech head - and MAS’ pledge to commit US$225 million to a fintech scheme over the next five years - is little evidence of this trend, the increasingly prominent role of private banks playing fintech nannies will be.

In July and August alone, three banks unveiled their fintech programmes. Most recently UBS launched its global fintech competition “The UBS Future of Finance Challenge” for entrepreneurs and fintech startups, with rewards worth up to US$300,000.

DBS also named ten fintechs for its accelerator programme to help foster the growing number of fledgling fintechs in Asia, based out of Hong Kong. The project is a collaboration between DBS Bank (Hong Kong) and Nest, a Hong Kong-based startup incubator and will take place in “The Vault”, a workspace in Hong Kong’s Wan Chai district where participants will also get commercial mentoring from DBS executives.

The news arrives shortly after Citibank also launched its Citi Mobile Challenge programme to foster Asian fintech development early August. That will involve virtual hackathons, incubation, exposure to a network of fintech experts and the backing of Citi’s

sponsors and clients. Solutions developed will be used for Citi’s digital platform globally and finalists will receive a cash reward.

Events for the Citi Mobile Challenge were scheduled to be held in Bangalore, Hong Kong, Singapore and Sydney.

The growth of fintechs in Hong Kong and Singapore is justified by its ability to provide innovative solutions at affordable prices, observes Janos Barberis, founder of FinTechHK, an independent organisation dedicated to track and build Hong Kong’s fintech community.

“The number of fintech start-ups has grown exponentially year on year. When an industry is cheaper by 50-fold, it will surely cause a disruption. It’s just a matter of when,” he says.

The introduction of such disruptive technology will undoubtedly keep private banks in the region on its toes, particularly as wallet size for digital spending widens and focus shifts towards efficient ways of communicating with clients.

“Technology creates an opportunity to drive costs to a price point where it’s economically viable to provide banking services to the working class and the high net worth individuals,” Barberis says.

Which brings us to what we think are another three fintechs to watch:

Dragon Wealth

Mesitis’ Canopy

Enhance

Founded in: July, 2013 Founder: Bert-Jan van Essen, Co-Founder and Managing Director Function: An app for private banks and independent wealth managers that combines a bank’s data with social media and news websites to empower relationship managers.

Customer assets: N/A Venture capital: SG$500,000 (US$356,000) Clients: Caidao Wealth, Meyado Private Wealth Management Location: Singapore

Founded in: 2013 Founder: Tanmai Sharma, founder CEO of Mesitis Function: Canopy is a cloud-based account aggregation tool, allowing its users to upload bank statements from various banks. The software extracts and crunches the data to provide a report with details such as portfolio performance and allocation, transactions, bank statements, cash flows and other analytics features. The software-as-a-service can be accessed from any internet connected device including a computer desktop, tablet or a mobile phone.

Customer assets: US$900 million assets under reporting Venture capital: None; raised US$3 million Series A funding in June 2015 from private investors Clients: Over 30 clients including high net worth individuals and wealth managers/multi-family offices Location: Singapore

Founded in: 2005 Founder: James Painter Function: To provide wealth structuring in international life assurance contracts, life assurance protection products and pension schemes.

Customer assets: £20 billion (US$31 billion) Venture capital: US$20 million Clients: Fiduciaries, high net worth clients, family offices, pension funds Location: Jersey, Cayman Islands, Singapore

22 asian private banker

PE O PL E MO V ES

MOVERS & SHAKERS

Movers & Shakers is a monthly compilation of the private banking industry’s key talent moves.

For the full version of Movers & Shakers, login or register at:

asian private banker

SELECTORS...

MAKE THE MOST OF YOUR MORNING fUNDs sELECTION NEXUs 2015

to meet with Ăžve hard-to-access fund managers.

These selected fund managers will present a series of 35-minute presentations in a group round-robin or speed-dating format.

Save the date and reserve your spot in the most For attendance reservations and details, contact Madhuri Chatterjee at +852 2529 5577 or madhuri.chatterjee@asianprivatebanker.com

Hong Kong | JW Marriott 13 Oct 2015 Singapore | The Fullerton 15 Oct 2015 Participating Fund Houses: