Next generation of wealth holders want efficient banking ties: BNP Paribas

Singapore

WITH Asia primed to undergo a significant wealth transfer over the next decade, competition among banks to serve the region's ultra-rich families looks to intensify, with the next generation of wealth holders expected to further consolidate their banking relationships.

Unlike their parents, "next gens" engage with banks differently and expect to work with only four to six banks, down from an average of eight, fresh data from BNP Paribas' wealth report showed on Thursday.

The average family-led firm in the study uses three private banks, one investment bank, three commercial banks and one universal bank.

But as the next generation assumes greater control, there will potentially be "substantial consolidation" to come with rising expectations for more holistic banking services.

Over 100 next generation ultra-high net worth individuals in Asia - with an average age of 38 and a mean family net worth of US$640 million - were surveyed in the report.

Even as the most important criterion in selecting a bank is the family's existing relationship with it, this is only the starting point.

"Next gens are discerning customers - well informed, interested in specific services, and go with banks based on edge," said the report.

Over 70 per cent have a framework for selecting financial service providers and do not rely on corporate resources.

While next gens in Asia are grateful to banks that have supported their family enterprises - and also acknowledge the hassle of changing banks - they ultimately want more efficient relationships.

About 11 per cent of respondents said banks' ability to offer a wide range of services and advisers is the top criterion in choosing a bank, while 8 per cent said the technical proficiency of advisers is top concern.

"Having everything in one place, or a few places that are easy to access, is helpful. To have someone you can call when you need to," said a respondent in the report.

Other factors include transparency on lending rates, fees, amount of credit available to lend, a bank's primary geographic risk profile, and their commitment to Asia.

Some 38 per cent of next gens said their family audits their bank's performance, fees and charges annually. If auditing is not being conducted now, most said this will change once they take over the business.

Though fees and transparency are evidently relevant, next gens are not especially fee-sensitive.

Their core concerns are clarity on products and services, the satisfaction of expectations, and the value-added, according to the report.

When asked about their top expectations of a bank when considering a business expansion or sale, about 35 per cent of respondents want strategic reviews of acquisition targets, while 17 per cent want mergers and acquisitions advisory. The majority use or plan to use banks to arrange or directly finance acquisitions and finance business operation.

Overall, over 80 per cent want proactive forecasts and to be treated like institutional clients.

"Banks need to provide all kinds of support, including having a strong geographical presence and a platform for connections. We will be consolidating a lot - using a smaller number of banks that focus on providing relevant, detailed and quality advice than the hard sell," said a respondent.

As investment focus among Asia's next gens shifts away from public markets to private equity, venture capital, and direct investments, most said banks will play a limited role in generating private market deal flows.

Banks will remain one of many providers, but it will not be easy to gain market share. Next gens prefer sector specialists who also have skin in the game, and rely on their own capabilities, said the report.

Against this backdrop, banks will need to further build up tailor-made research, private investment capabilities and financing solutions as well as versatile connection platforms, said Arnaud Tellier, chief executive officer of BNP Paribas Wealth Management in the Asia-Pacific.

Banks would also have to rejig their operating platforms to better serve the goals of next gens. "Next gens want some of the heavy lifting to have been done - the due diligence - and they want the work available in order to make their own assessments."