Several international private banks have pulled their business from Asia in recent years, despite the growing HNW investor base in the region.
One of the main factors behind this realignment has been the difficulty in achieving AUM growth, leaving many banks with uneconomical client books. Private banks in Asia need to be able to gain the primary wealth manager role or content themselves with a minor mandate from their investors.
HNW investors have big enough portfolios to spread their business around, and a lot of them do so. This may be to gain access to specialist products and expertise, such as a particularly exclusive private equity fund or the services of a star investment manager. Or it may simply be a desire to spread the counterparty risk over a number of institutions. This means that any one wealth manager is unlikely to be managing all of their clients’ wealth. The extent to which this occurs varies considerably by market, reflecting different local conditions and investor preferences.
When analyzing a selection of key wealth markets from our 2016 Global Wealth Managers Survey, the disparity between markets becomes starkly apparent. US HNW investors keep the bulk of their wealth with just one wealth manager, and only use the services of a few additional specialists. Meanwhile in developing Asia, Indonesians only keep half their wealth with their primary bank and spread their risk across many wealth managers.
Markets where this high degree of promiscuity holds – which is true of much of Asia – are harder to grow in unless you gain the lead position. A lot of international banks entered Asia Pacific, gained some business, but generally failed to capture the lead position and so could not grow their AUM fast enough. A regional market with HNW liquid assets that grew by 7.4% in 2016 (according to our Global Wealth Markets Analytics) becomes one in which gaining sufficient AUM is a struggle. Until outside private banks are able to secure the main bank role, or expand in the region while maintaining tight control on costs, Asia Pacific will remain the graveyard of global ambitions.
By Andrew Haslip, Head of Content Analyst, Asia Pacific