Global wealth

Move over Europe, Asians are richer now

That's why private banks have been tripping over each other to set up offices, reorganise and poach talent, in an effort to woo the increasing number of wealthy in Asia.
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Only the US, Japan and Germany had more rich people than China in 2010 (AFP)
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<div style="text-align: left;"> Only the US, Japan and Germany had more rich people than China in 2010 (AFP) </div>

Asia-Pacific is now home to more rich people than Europe, according to the 15th annual world wealth report published by Capgemini and Merrill Lynch’s wealth management arm.

In 2010, the region boasted 3.3 million high-net-worth individuals (people with investable assets of $1 million or more, excluding their primary residence and collectables). Europe, meanwhile, was home to just 3.1 million wealthy individuals in 2010.

This is not news to the wealth management industry, which has long been building teams of relationship managers across the region in hopes of cashing in on this growing population of wealthy people.

Wealth in Asia-Pacific rose by 12.1% during 2010 and, collectively, HNWIs have a whopping $10.8 trillion to invest, more than Europe’s $10.2 trillion, which rose by 7.2% in 2010. That means Asia-Pacific is now the second-largest region for both the number of wealthy people and what they’ve got on hand to invest; second only to North America.

In terms of individual countries, the US leads the pack with the most number of rich folks, followed by Japan and Germany. Those three countries account for 53% of the world’s high-net-worth individuals. Coming in fourth is China and then the UK. This year, India joined the top 12 global ranking, replacing Spain, which dropped to 14th. That gives Asia a strong showing.

Market response
“Asia-Pacific’s continued strong performance cements the region’s strategic importance to every wealth management firm with global aspirations,” said Michael Benz, head of Asia-Pacific wealth management at Merrill Lynch global wealth management. “Now the world’s second-biggest high-net-worth-individual market in terms of population and wealth, it is more pertinent than ever for the wealth management industry to keep enhancing their service to this diverse region.”

Indeed, private banks have been doing just that. In January, UBS established a regional family services unit to cater to the needs of its ultra-high-net-clients predominantly based in Hong Kong and Singapore. The unit bundles family advisory services, philanthropy, wealth planning and global custody. Ultra-high-net-worth individuals are typically defined as those having investable assets of $30 million or more, once again excluding primary residence and collectibles.

In the same vein, in January, Citi’s private bank established a global family office and institutional business for North Asia. And, in the same month, BNP Paribas announced a new coverage plan for wealth management in Asia-Pacific under Mignonne Cheng, which called for each country or region to have its own market head, and also unveiled a dedicated ultra-high-net-worth individual unit for the region.

In February, Sameera Anand wrote about the push by private banks to build their businesses in the region. Three had recently hired new Asia heads — Stephan Repkow joined Union Bancaire Privée, Vincent Duhamel started at Lombard Odier, and Pictet hired Claude Haberer. All three of these bankers are in leadership roles charged with building the Asia-Pacific business at their firms.

Bringing in the heavy hitters has certainly been a trend throughout the past year. In March, Credit Suisse created a new position to improve its Southeast Asia private banking coverage by transferring Francesco de Ferrari from Italy to take on the role of market area head for Singapore, Malaysia and Indonesia. That was the latest move by Credit Suisse to fine-tune its Asia coverage model. In 2010, it put in place a pan-regional structure that called for 10 heads of markets or regions to report directly to veteran banker Marcel Kreis, who heads Credit Suisse’s private banking business in Asia-Pacific.

Barclays Wealth has also been on a hiring spree. As of March it had made 12 new director-level hires in Singapore and Hong Kong during the first few months of the year. And Clariden Leu hired a senior team from HSBC Private Bank to cover the Indian subcontinent and non-resident Indians in Asia for the first time, which helped it fill what had been a gap in its global platform — and clearly go after a growing business.

Of course, as people join firms, they also leave them — often to start new boutiques that also aim to cash in on the region’s growing private-banking wallet. In May, Andrea Benenati, Julius Baer’s Hong Kong chief executive and North Asia chief executive officer, announced he would be leaving the firm to set up as an independent asset manager. Rising star Alexander Floersheim, who was part of the investment advisory services group in Hong Kong, went with him.

While the fight for talent is on, so is the fight for client loyalty. The market environment has been reasonably stable during the past year, but the recovery has been uneven, so many relationship managers in Asia were pushing three key themes: equities, commodities and real estate. By the end of 2010, high-net-worth individuals held 33% of all of their investments in equities, up from 29% a year earlier. Allocations to cash and deposits dropped to 14% in 2010 from 17% in 2009, and the share held in fixed-income investments dipped to 29% from 31%. Among alternative investments, commodities were favoured. They accounted for 22% of all alternative investments in 2010, up from 16% a year earlier.

Not surprisingly, real estate remained another favourite investment option for Asia-Pacific’s wealthy, outside of Japan. Real estate accounted for 31% of their aggregate portfolio at the end of 2010, up from 28% a year earlier and far above the 19% global average.

With similar investment solutions being pursued, what matters above all is how well a client gets along with, and believes in, the advice of his or her relationship manager. And that means the industry will likely continue to wage a war of talent in an effort to try to pursue the bankers with that magic touch.

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