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In it for the long haul
IN HIS extensive travels, Michael Blake, Union Bancaire Privee (UBP) chief executive of Private Banking Asia, often asks clients what they look for in a private bank. The answers, he says, are remarkably consistent. Clients want a long-term trusted adviser; a strong and stable financial institution; and customised advice.
Even as private clients seek similar values, the way advice is delivered has changed dramatically, he says, unlike 15 years ago when the majority of business was execution-only. "Today in Asia, about 65 per cent of UBP client assets are in advisory or discretionary accounts. It underlines the role of advice in today's private bank offering."
He adds: "One of the healthy changes over the last 10 years driven by regulation was the strengthening of the suitability framework in Singapore and other markets, emphasising the advisory nature of private banking."
UBP's Asian book of business has grown significantly since its acquisition of the Coutts (Asia) business in 2016, which expanded its Asian assets under management from US$1 billion to just under US$12 billion overnight. Since integration, the North Asia business' AUM has grown by 50 to 60 per cent, outstripping the overall Asian growth of about 25 per cent.
At end-2017, UBP's global private banking AUM grew marginally to around 95 billion Swiss franc (S$134 billion). Group profits were up 25 per cent at 220.4 million Swiss franc. Total private banking AUM in Asia reached US$14 billion, of which US$1.2 billion is in funds.
"Clients who joined us tend to have more than US$10 million and they tend to be looking for a specific solution", with the emphasis on advice. Customisation is a strength, he adds. This is particularly so at UBP where clients are largely business owners, founders of listed companies, professionals including lawyers and doctors, and family offices. The size of assets that warrants customisation varies.
An example of how the bank has met clients' needs is the crafting of liquidity solutions through single stock financing. One client, a founder of a listed North Asian company, has most of his personal wealth tied up in the company, a situation that parallels most entrepreneurial wealth in the region. UBP provided a liquidity facility to allow access to various asset classes, which helped to enhance income and diversify risk without diluting the family shareholding in the company. Another client is the founder of a South-east Asian listed company, who still controlled a large proportion of the firm's equity. "We assisted our client to develop a strategy to use the equity to support single stock lending and create a diversified investment portfolio. We provided liquidity and built a portfolio in a manner to cover its own costs and provide a surplus to support the client's philanthropic activities."
Some clients are family offices. For one such family office, UBP has undertaken to analyse all its hedge fund holdings, drawing on the bank's global expertise in New York, London, Paris and Geneva. "Where the client shares the names of the funds held, we are able to provide a qualitative view of each investment. A detailed understanding of the strategy, risk management and positioning of each hedge fund is key to understand the overall risks."
Analysis also extends to risk factors on the quantitative front, and the ability to simulate any new or redesigned portfolios.
Discretionary portfolio management is yet another area that is potentially rich in opportunities for customisation. For an account of about US$5 million, UBP can provide a customised mandate. For about US$50 million, the bank provides a team of investment specialists and forms a dedicated investment committee. An example of a dedicated mandate is a European mid-cap advisory solution developed together with UBP Asset Management's European equity portfolio specialists. The Europe team provided the model portfolio, stock rationale and trading ideas to the private bank's DPM team.
This portfolio was relatively concentrated with 50 to 70 stocks, managed on a predominantly bottom-up approach. Systematic risk was controlled via careful sector allocation, and ESG factors were an integral part of the process.
UBP Asset Management Asia also developed a "Libor-plus" solution for ultra high net worth clients in the Greater China region, providing an institutional solution. The portfolio's objective was to beat three-month Libor plus one per cent, and invested mainly in floating rate notes, incurring near-zero interest rate risk and moderate credit risk.
Demand for customised solutions has meant that relationship managers have to be attuned to client needs, and must jostle for the coveted position of "trusted adviser" - that is, the main adviser in a multi-banked environment. Says Mr Blake: "Every bank aspires to be the trusted adviser. On average, clients have four to five banking relationships, but they have one RM who has been with them for the long term. That is the relationship we aspire to have."
In 2016, the group stated its objective to expand its RM team in Asia from about 65 to 100. Mr Blake said recruitment was "comfortably on our way" to target. Training focuses on foundational technical skills which is an on-going effort, as well as soft skills. A programme called Experience vs Creativity aims to look into "further unlocking one's potential when interacting with clients, with the aim of further honing our bankers' skills to help them transition from a subject matter expert to a truly trusted partner and adviser to our clients". W