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Eye on Asia
WHEN Julius Baer began to build a presence in Singapore some 11 years ago, its name was not one that high net worth individuals would immediately recognise.
In recent years, however, Julius Baer is ranked among the top fve private banks in Asia according to a league table published by Asian Private Banker.
The latest 2016 table puts Julius Baer at ffth spot with US$82.4 billion in assets under management (AUM). Based on the bank's global AUM of about 336 billion Swiss franc (S$475.1 billion), the Asian business comprises a share of nearly 25 per cent.
Torsten Linke, the bank's head of private banking for South-east Asia, says the group is determined to grow in Asia – its "second home market" – amid a wave of consolidation that intensifed last year. "In that consolidation we try and play an active part. We hired quite a few colleagues last year. Our headcount went up 10 per cent in a not-so-great labour market. Our commitment to grow our base in Singapore is very strong. Our emphasis is now on organic growth."
More than half of some 200 wealth managers hired last year were based in Asia. The senior hires included Bhaskar Laxminarayan who joined last September as Asia chief investment offcer.
Julius Baer itself had been in acquisition mode. Its milestone was its purchase of Bank of America's Merrill Lynch private bank business outside Japan and the US for US$880 million in 2012. The acquisition at that time expanded Julius Baer's AUM by an estimated 20 to 25 per cent.
Julius Baer is a pure play private bank, where wealth management and advisory are its sole business. Unlike other full service banks, it does not engage in investment banking. This was seen as a positive following the 2008 fnancial crisis when public confdence in banks plummeted as their businesses were perceived to be rife with con?icts of interest. Since then a slew of regulations and clients' demand for transparency have spurred banks to downsize or divest their investment banking activities.
Mr Linke, a career banker with more than three decades of experience, joined Julius Baer in 2016. He started in Deutsche Bank as an apprentice in 1985. He took up an internship, and eventually worked on a project to segregate retail and private bank businesses.
He began his advisory career in investments, a feld that he found fascinating. "I loved it, dealing with clients, looking at investments, equities... In investments you have to watch markets, read up on economics and politics, form views, discuss with clients. It's never at a standstill, always on the move and learning."
He rose through the ranks, and eventually was looking after Asian markets while based in London. In 2001 he moved to Singapore and was in charge of growing the Indian subcontinent market. He has lived in Singapore for 13 years and was in Credit Suisse prior to joining Julius Baer.
Mr Linke believes there are a number of trends that will shape the industry in the years to come. One is technology. "Private banking will continue to be advisory focused and relationship managers (RMs) will continue to play an important role. But fntech will help to deliver services that clients expect, and it all comes back to your commitment to this business. The next generation of clients will not thank you for digital banking. They will expect it."
Julius Baer has embarked on a "renewal" of its IT platform globally, a process that has begun in Asia. The group said that Asia, a dynamic region where business volume is close to 25 per cent of group business, "serves as an ideal template for future implementation in other regions". The upgrade in Asia is expected to be completed this year.
Wealth creation in Asia, he says, is likely to remain strong despite the relatively muted economic growth in some markets. "I remain optimistic. The pace of global growth was slower over the last couple of years, but it has gained some momentum, and that will feed through the region. I expect that in the next two years, wealth creation will accelerate."
Yet another trend is the unrelenting pressure on fees. In a market where products are increasingly commoditised, Mr Linke says the onus is on wealth managers to be innovative and add value. "Private banking is not just about managing assets. It's also about advising families on succession and the next generation. Even if we may not be able to execute, we have strategic partners who can support families when they think about launching an initial public offer, or raising funds.
"RMs need to talk to clients holistically. Then clients will be willing to pay for the service because you add value."
Discretionary portfolio management (DPM) is a service where clients do pay fees. In a DPM account, clients authorise the wealth manager to make decisions on their behalf on investments, including asset allocation and security selection. Mr Linke expects this service to gain traction – a double-digit growth this year especially as younger generations of wealth owners begin to take charge of wealth. Some may also consider an advisory mandate.
"Now there is more openness to (DPM), to at least look at it and do it... We're starting to see progress on fee advisory but it's still not that common." The bank, however, is revamping its investment management platform.
Wealth planning is another advisory service that banks must have, even if the service may not be a major revenue source. "One of the big things is that clients are consolidating their bank relationships for various reasons. As a bank you need to have a signifcant share of wallet. You want to be the number one or two wealth manager so that you know what is happening with a client, his family and business. As a banker you need to make sure you have signifcant relationships and the client trusts you."
He says Julius Baer's share of wallet among clients is "good". "When I look at our client base, the target clients, we have good penetration and share of wallet. Every bank has a purpose and we're seen as pure wealth management." The bank's target market is broadly defned as entrepreneurs and professionals. W