You are here
Preparing for a changing landscape
- Richard Lim, CEO, China Reinsurance (Group) Corporation Singapore Branch
- Edmund Koh, Head of UBS Wealth Management Asia Pacific; Country Head, UBS Singapore; Head, UBS Global Affluent
- Nicholas Hadow, Business Development Director, Aberdeen Asset Management Asia Limited
- Lee Wai Fai, Group Chief Financial Officer, United Overseas Bank
- Gan Kok Kim, Head of Global Investment Banking, OCBC Bank
- Frederick Chin, Head, Group Wholesale Banking, United Overseas Bank
Moderator: Francis Kan
The Business Times: How has the landscape in your segment of the financial services industry changed in recent years?
Richard Lim: Being in the reinsurance industry, we are in a global business landscape that is ever evolving. In recent years, we have seen two important developments that have a large impact on our industry. They are insurance-linked securities (ILS) and cyber risk. While ILS creates a new front of competition to traditional reinsurers, the issue of cyber risk poses a major exposure where we cannot yet quantify the true extent of the risk.
Frederick Chin: The banking sector in recent years has been experiencing significant regulatory changes and potential disintermediation by non-bank financial services providers, such as financial technology (fintech) companies. The advent of blockchain technology, for example, has reduced the role of banks as transactional middle parties, challenging them to provide value to clients in new ways as business becomes more borderless and markets become more connected than ever. However, there is much opportunity for banks to work collaboratively with fintech companies, such as in the fields of cloud computing, big data and artificial intelligence. These technologies enable banks to identify and to anticipate clients' needs better, as well as to monitor and to address risks more efficiently.
Gan Kok Kim: The capital markets in Asia have seen greater integration into global capital flows in the last five years and experienced both ups and downs arising from this. We witnessed the flow out of emerging markets in the second half of 2014 on the back of their slowdown in growth, which in turn led to fears of over-leveraging in the emerging market world. This resulted in a pullback from the strong growth seen in the capital markets in Asia up till then.
However, there has been some renewal of interest and risk appetite for emerging markets of late and volumes have improved, though this is not as exuberant as before. Meanwhile, the capital markets have seen the exit of some players, especially during the period when outflows were happening and volumes dropped. Fees have fallen generally due to lower demand and the increased sophistication of clients from both the issuer and the buy side.
Nicholas Hadow: It's become more competitive, as more global houses have come to Asia. There's also more focus on consumer protection, as regulators seek to prevent the next crisis. Well-intentioned as that has been, it has led to more form filling, which may actually be a deterrent to some investors. Meanwhile, amid prolonged low interest rates, everyone wants income: asset managers are getting adept at finding new sources, such as from less liquid assets like real estate. I worry such demand may mean prices do not reflect risks.
Edmund Koh: Firstly, tomorrow's client base will be more diverse, entrepreneurial, global, younger and with a higher proportion of females. We are seeing more wealth than ever being created around the world with Asia as the fastest-growing region globally at 8.6 per cent forecast wealth growth.
Secondly, regulatory change has led to a new capital regime for banks with more complexity and transparency, having great impact on the cost of doing business and requires us to focus more on advisory services for clients. At the same time, it is a huge opportunity for those of us who believe in the value of doing the right business the right way and have invested accordingly over the recent years.
Thirdly, the pace of technological change will only accelerate. Clients in Asia have stronger demands for digital offerings and want to interact with their bank wherever and whenever they want. Client advisers will need to have the latest technologies and insights - not just into markets - to complement their expertise and offer the best holistic advice.
Finally, as a result of the above trends, scale will be crucial. Apart from niche providers, only firms that can scale their offering while delivering customised advice and opportunities will thrive.
Lee Wai Fai: Following the global financial crisis, regulators around the world implemented a raft of new measures which financial institutions needed to meet. For example, there is now more stringent Basel capital and liquidity rules.
The advances in technology have also created opportunities for non-traditional players, such as Internet and telecommunications companies, to offer financial services to consumers directly and digitally.
Due to the growing share of digital financial services provided by non-banks, regulators are recognising the need for more oversight to safeguard customers' interests and to maintain financial stability. Such regulations and controls also help to ensure that there is a level playing field between banks and non-banks.
BT: How have these changes impacted the type of skills required to succeed in today's competitive landscape?
Richard Lim: We have expanded our recruitment from the traditional sources of actuarial and engineers to lawyers and financial analysts. Hence we are able to optimise these specialty skills to broaden our analytical skill when we underwrite the business.
Frederick Chin: The emergence of new technologies and the provision of quasi-financial services by non-financial players have influenced banking relationships. Above all, bankers must remain focused on clients' needs - helping them to overcome their challenges and to deepen their capabilities - and on building meaningful relationships that will last over generations.
They should be open-minded, agile and able to make swift and sound decisions. Bankers must also be discerning in adopting the right technologies to serve client needs.
Gan Kok Kim: The changes have resulted in the need for a clear strategy and a greater scrutiny of costs. The current environment and its challenges mean that banks will have to be precise about their areas of focus where they can best drive productivity. Banks have to determine where their competitive advantages lie and decide how to leverage these to create better traction with clients. This may translate into greater sector or industry specialisation for some - such as those that sell their industry expertise and research - while others may become more generalist but provide other value propositions that clients demand, such as a strong balance sheet and proven execution capabilities supported by deep local market knowledge.
Nicholas Hadow: The task of asset managers can be boiled down to trying to buy cheap and sell dear. The investment disciplines here don't change. What has changed is the evaluation. The industry used to focus almost exclusively on relative performance - beating the benchmark. Now a lot of investors, institutions especially, are focusing on absolute outcomes - how to return more than inflation, say, or meet a minimum Libor-plus target.
Branding has become more important, too. When it's difficult to gauge which managers are doing well, those that are most transparent and insightful will be perceived most favourably.
Edmund Koh: Until now, wealth management's personalised response has relied on human effort. We need to attract, retain the best talent, and increase the quality of client advisers. As millennials grow in economic power, we will be courting a tech-immersed generation that has grown up in a world of economic instability and who are, as a result, highly adaptable and restless in their choices of brands and service providers.
We need to digitalise our business and service model to transform the way we interact with our clients. It empowers our clients, giving them better access to knowledge and expertise from across the bank, customised to their portfolio, which they can then act on.
Lee Wai Fai: Banking professionals need to be enterprising, to acquire digital skills and to be agile in harnessing their expertise to anticipate and to meet the needs of customers who are increasingly tech-savvy. For example, professionals who are able to harness and to analyse complex data sets effectively and draw out deep insights into customer preferences and needs will be in demand as banks seek to stay relevant to their customers.
However, beyond skillsets, banking professionals must also have the right mindsets - the courage to keep trying and commitment to make decisions in the customers' and organisation's best interests.
BT: What are some of the challenges you face acquiring and developing talent?
Richard Lim: The industry has always faced tough competition from the other financial services sectors when it comes to recruitment. It appears that the insurance and reinsurance sectors are generally not the first choice of a career for fresh graduates.
To overcome this challenge, we encourage new entrants by broadening the job scope to make it more interesting for them. We also participate as a sponsoring institution on the Insurance Management Associate Programme (iMAP) General Insurance that is organised by the Singapore College of Insurance and the Monetary Authority of Singapore. As a sponsoring institution, we provide the platform for new entrants to learn the business in a structured manner under the mentorship of our experienced managers. Hence, we can show the new entrants their prospective career path for their next 10 years.
Frederick Chin: Our clients are growing their business across the region. As such, our people must understand the local sensitivities and nuances of various business environments to be able to advise clients effectively. We offer our people international job exposure through cross-country assignments for them to gain a range of expertise and new perspectives.
Recruiting talent with digital skills and experience is also a challenge for banks today. This is why we focus on people with creativity and critical thinking ability, and who are willing to keep learning and improving themselves, whether they are from the financial sector or another industry.
Gan Kok Kim: I feel that people in the industry are not averse to hard work and generally have the knowledge and expertise in their fields. The challenge is to hold their interest in the role and to avoid fatigue. We look for opportunities and new ideas to keep ourselves engaged and challenged. Regardless of market conditions, I believe that there will be opportunities. It is those who can uncover ideas that unlock value for their clients who will be able to do well and continue to develop in this or any industry.
Nicholas Hadow: In the past, asset management used to attract a spectrum of people, as much from the Arts as the Sciences. Now that it has become more professional, with degrees available in investment management, wealth planning and so on, we find identikit candidates wanting to enter the industry. But we need curiosity as well as numeracy. As for staff retention, there's no magic formula. Some people you have to train, others need to unlearn things first. If you believe in teamwork, as we do, the most important thing is to create inter-dependence and common purpose. This applies across functions, not just to the investment managers.
Edmund Koh: Grooming and nurturing talent will be at the forefront for a competitive advantage for Singapore and something I strongly believe in.
To succeed in the long run, it will be important for a wealth manager to have the scale and resources to invest in infrastructure and talent development in the Asia-Pacific. This is a strategic priority for us at UBS.
Some examples include the set-up of the UBS University Asia Pacific in Singapore and the Wealth Management Master's programme for senior client-facing professionals to acquire in-depth expertise. Preparing for a digitised business, UBS also invests in the UBS Human-Centred Design programmes where skills and culture are made relevant from within.
Lee Wai Fai: With customers expecting more convenience and customisation, we need to be able to strike the right balance between creating innovative solutions and upholding the robustness and security of our systems and services. To do so, we are focused on attracting and retaining professionals who are enterprising and have the right values to ensure that we continue to build upon the trust our customers have in us.
BT: How do you personally try to stay abreast of the changes taking place in the industry?
Richard Lim: Personally I stay abreast by reading newly published materials by experts and participate in seminars and forums on related development to keep pace with the changes.
Frederick Chin: Keeping abreast of global economic and industry developments through the media is a daily requirement. I also interact with industry peers, colleagues and clients proactively to understand better what drives success or leads to failure.
Being actively involved in UOB's partnerships with innovators, such as the fintech accelerator The FinLab, equity crowdfunding platform OurCrowd and venture debt joint venture InnoVen Capital, also enables me to stay attuned to trends that matter. I also participate in internal and external discussions around government- and industry-led banking initiatives. Such engagements enable me to be more effective when leading the team to develop solutions for our clients.
Gan Kok Kim: I keep my finger on the pulse by reading a lot and by talking to market players and clients to understand issues and concerns. This is not confined to finding out what is happening within the industry in the local market but includes other markets and regions as well. In addition, I keep an eye on developments in other industries to see if there are lessons that can be gleaned that would also apply to capital markets.
Nicholas Hadow: I'm involved in conferences and public events from time to time. As chairman of the Investment Management Association of Singapore it's my good fortune and privilege that we are a connection point of the industry with the regulator and government. So we have access to people with insights, to the data backing, plus an international perspective. As people here have done stints around the world, they are very attuned to what's going on elsewhere.
Lee Wai Fai: I read widely and interact with experts in various fields to gain wider perspectives and knowledge which are important given the pace and breadth of change in the industry. For instance, it is important to have a strong understanding of Basel capital and liquidity rules and requirements as the fields of risk management and finance have become even more intertwined. Being familiar with the language of technology and the application of its concepts, such as artificial intelligence, Internet of Things, cloud computing and blockchain, are also imperative in today's age of digitalisation.
BT: What other plans do you have to upgrade your own skills or that of your employees?
Richard Lim: My organisation sets aside training funds for employees, encouraging and sending them to courses, seminars and forums that are held locally and overseas.
Frederick Chin: I encourage my team to have a thirst for information and knowledge so that they can constantly improve together. We must also be open to change and to learning from others, including from colleagues, competitors and clients.
Gan Kok Kim: We do many things to promote continuous learning. These range from the in-house and external courses, the teach-ins conducted by industry experts, to lunchtime talks we host. The value of learning on the job cannot be overstated. Through interactions with colleagues, clients and professionals involved in the transactions, practitioners in this field will be able to hone their skills and steadily gain expertise and experience.
Nicholas Hadow: I'm nearer the end than the beginning of my career so my experience is probably of more importance than whether I pass another exam. But what I like about Singapore, and why it has progressed so fast in what is still a young industry, is its emphasis on continuous education, as well as formal qualifications. There are always new developments to watch out for: risk management is changing constantly; fintech is potentially disruptive, good or bad; ETFs and passives are upsetting fee structures. Without the knowledge of all that's going on you can't bring the judgement to bear that will earn clients' trust.
Edmund Koh: I have learnt several important lessons during my career as a banker. First, I always do my best to understand the strengths and weaknesses of the organisation, how it stacks up against the competition, and then develop a core strategy to take it to the next level.
Keeping up with technology is vital. We need to understand the game-changing role of technology and use it as a key differentiator. Similarly, UBS WM has been committed to technology investing.
Finally, understanding that entrepreneurship is about creating a need and not just satisfying the needs of your client. You must be able to drive new growth by creating a product or solution that creates real value for your client.
Lee Wai Fai: At UOB, we believe that the pursuit of knowledge should not stop. It is only through continuous learning and on-the-job training, understanding and application that we will be able to keep improving. For example, we are strengthening our capabilities in enterprise data and advanced analytics to serve our customers' needs better and to optimise our business performance. Enhancing our people's digital skillsets is integral to harnessing these new technologies.
In addition, we nurture key talents and potential leaders through mentorship programmes and place them on job rotation to ensure that they have holistic business perspectives and competencies.