Refocusing on talent in private banking in Asia

THE Credit Suisse Research Institute projects that household wealth in Asia-Pacific will grow at an annual rate of 8.3 per cent to reach US$111 trillion by 2019, with the regional share of global wealth increasing to 30 per cent. The number of millionaires in Asia-Pacific is also expected to rise by around 9 percent per annum or 68 per cent to 11.7 million, faster than the global growth rate of 53 per cent. China could see its number of millionaires nearly double to 2.3 million, while markets like South Korea, Indonesia, Hong Kong, India and Singapore should also post strong growth in millionaires of 50 to 70 per cent.

The steady expansion of private wealth in the region bodes well for Singapore as it continues to be strongly positioned as a key regional management hub. Indeed, assets managed by Singapore-based asset managers including private banks, grew by around 13 per year between 2008 and 2013, according to official statistics.

However, the robust asset growth masks some of the challenging business and operational conditions for some private banks. The heterogeneity of the region's diverse markets makes wealth not easily accessible; combined with a low interest rate environment, an increasingly complex and demanding global and local regulatory landscape, significant investments required in technology and platform, regulatory compliance and front talent acquisition, this has elevated operating costs and added formidable pressures on profitability.

A recent study estimates that in 2014, the average operating cost-to-income ratio for private banks in the region was around 75 per cent. While major players with scale may be operating with ratios in the low 60s, many smaller private banks could have cost-income ratios in the 80s and above.

Industry consolidation leads to more stable talent pool

Many private banking players have come to the realisation that Asia-Pacific has to be a growth region not just in terms of volumes but more importantly, profitability and long term sustainability. Consolidation among private banks in the region has continued unabated, with at least five major mergers and acquisitions having taken place in Asia in the last five years.

One of the major cost pressures in this relatively nascent business is the premium for talent. While there are an estimated seven million millionaires across Asia who might be potential private banking clients, and this number is expected to grow at around 8 per cent annually, there are only around 10,000 licensed relationship managers in Singapore and Hong Kong wealth management hubs. There is a significant gap between market opportunities and the availability of resources to capture them.

After the initial flux that inevitably comes on the heels of mergers, the spate of musical chairs and job changes of the earlier years has somewhat stabilised. For the major players that are left standing, now is the time to refocus on quality rather than sheer quantity of talent, and work together to build a stronger and more sustainable human capital ecosystem for the private banking industry in Singapore.

Refocus on three pillars of talent development

We believe in three key strategic focuses in further developing a robust private banking talent pool: strengthening the competencies of frontline employees particularly in the areas of client services, "growing your own" and leadership development.

Aligned with the national accreditation and competency framework established by the Institute of Banking and Finance as well as the Client Advisor Competency Standards under the Private Banking Code of Conduct, industry players need to invest more in inhouse training competencies for frontline staff. Particularly in Asia where the industry is still young and fast-growing, and financial markets and the regulatory environment are rapidly evolving, there is an urgent need to make sure that all client-facing staff are well-equipped with the latest knowledge on products, markets and regulations, and are able to interact with their clients through a consistent and structured advisory process.

Eventually, as our front and support staff force continues to expand, we also need to enable relationship managers to grow in their roles over time, from a junior banker, to an expert relationship manager or a manager and leader. This requires a long- term, modular and state-of-the-art training curriculum and development model that captures the career cycle of each relationship manager.

Even more imminently, we have seen the rapid advent of "disruptive technologies" from non-banks and "fintechs" as well as "robo-advisors". Recognising this will be a long-term transformational trend, the more forward-looking private banks have reckoned that digitalising their wealth management platform and client user interface is a massive investment that has become a "must have" rather than a "nice to have".

In this digital era, clients are pulling information, capturing intelligence tailored to their investment portfolio anytime anywhere, and have a much higher degree of self-actualisation. All this is redefining the private banking business, its service delivery model and the role of the relationship manager, while completely reconfiguring processes. Fundamental education and training of frontline staff needs to go hand in hand, to fully equip them with completely new skills and culture required in this fast changing multi-channel digital age.

Developing future leaders and grooming young talent

As private banks continue to grow their business and teams, this requires a fundamental paradigm shift to more institutionalised and professional frontline team management. While this may sound basic, in the relatively nascent private banking industry where there is a very limited pool of managers who have typically advanced in their careers as top bankers and producers, this is only an emerging phenomenon.

We need to provide continuous and dedicated leadership training that will help to nurture deeper professional team leadership and management skills, effectively supported by an organisational model that defines distinct management and client tracks for relationship managers as they evolve in their career lifecycle.

The professionalisation of frontline management in private banking can be especially critical for Singapore as it continues on its trajectory to become a leading global wealth management centre, while aiming to deepen the pool of local talent in the financial sector.

Increasingly, private banks will also need to develop a "Grow Your Own" strategy that will attract promising young professionals early, nurture them through formal and structured training programmes to be certified as relationship managers, retain them with attractive career opportunities to develop the skills and institutional commitment that will result in long-term career success at the organisation.

Longevity pays in private banking

Ultimately, if a private bank has a compelling platform, mobility of talent will reduce as clients tend not to move their assets. The best talent in the industry will always gravitate back to the few players that have a strong platform and have made significant investments in talent, products, technology, compliance and risk management.

The most senior talent the private banking industry would generally have between 15 to 20 years in an organisation. With the majority of clients in Asia being high-net-worth and ultra-high-net-worth entrepreneurs who have globally diversified investment portfolios and businesses, to really be successful, a relationship manager has to know the entire platform of the bank across divisions beyond private banking, and the bank's capabilities not only locally, but regionally and globally. Building the necessary network across an institution and depth of knowledge of its broader capabilities and competencies takes time, and the longer a relationship manager stays with the bank, the more successful he or she will become.