The wealth management business in Standard Chartered is very strong. Last year it had revenues just shy of $2 billion and grew 34% year-on-year. So the business is growing very strongly. And our clients are asking for a further degree of sophistication, as we push towards the high net worth individuals with between $1 million to $50 million. There are three million individuals in Asia and the Middle East with over $1 million of investable assets; and this segment is growing faster in these markets than in Europe or the US. The market is also very fragmented: the top 10 private banking players only command a combined 6% market share, and the predominance of the wealth is onshore. That all adds up to an attractive market in StanChartÆs back yard. We can leverage our network û whether it be in Korea, China, India or Indonesia û and bring the best of being an international bank, as well as a strong local bank. That means we can deliver both onshore and offshore private banking û as opposed to just flying in bankers as some other private banks do.
We have also set the private bank up as an integral part of the bank, rather than being a monoline division, that is run quite separately. We are seeking to bring the whole of the bank to our clients.
What does that mean when you say youÆll bring the ôwhole of the bankö?
The private bank lives within the consumer bank. In a monoline business, it would be run quite separately. In some of those instances you see the private bank and the mass affluent divisions actually compete internally. We donÆt want to do that. The analogy I have is with BMW 3 series, 5 series and 7 series. They are distinct, yet they complement each other.
We are seeking to create a distinctive private banking proposition that complements the rest of the bank. So, for example, our wholesale bankers will take along our private bankers to meet the longstanding client. We have a lot of clients with first and second generation wealth, that have been banking with us a long time û and to whom weÆve provided credit û and in turn they have created a lot of personal wealth. Now we are in a position to speak to that personal wealth, as well as bank the corporate at the same time. So the integration with our wholesale and SME business is a key part of the strategy.
StanChart doesnÆt have the track record of managing personal wealth of older, more established private banks. Will that be an issue?
I think we do. You can see how fastly the wealth management division is growing. We have always operated an open architecture approach to investments û by design, we donÆt have an internal fund management business. We have 14 global distribution agreements, where we source all of the best asset managers globally. On top of these 14 agreements, we have 50 local supply agreements. So while some institutions talk about open architecture - just look at how much internal product they sell. We really do have an open architecture.
The other thing is that we are able to see the world through Asian eyes. That means our asset allocation models are homespun. So, for example, in our aggressive portfolio, our asset allocation to Asian equities is 35% û as opposed to say the 15% that a Zurich or New York model would have. The Zurich or New York model would ask clients to put 20% into US equities. But actually a lot of clients in Asia donÆt want that exposure, but would rather invest more of their portfolios in places where they are more familiar. We are a homespun private bank for Asia û not something that has been retrofitted from Europe or the US.
When you speak of your wealth management business, you mean your Priority Banking business?
Yes, and international banking as well. That part of the business is for individuals with $100,000 to $1 million. This part of the business is for above that. Some of the products and services will be appropriate for both, such as equity-linked note structures. On top of that we have products and services that are particularly suited to the high net worth individual, such as trusts, estate planning, tax planning, private equity and so forth. So we see this as distinctive and complementary; rather than separate from the rest of the bank.
You just launched the private bank. So as of today you have zero clients and zero assets?
We are migrating some Priority clients over time, as well as international bank clients. Globally we have 150 client relationship managers. We will be adding on another 200-300 over the next 2-3 years.
There are, however, acres of diamonds in the bank. One source is the predominance of wealth in Asia which is still in cash. We see this as an underserved market; and we will target those people that donÆt yet think private banking is for them even though they have enough cash. Plus our wholesale bank has the relationships with entrepreneurs. We feel we are in the right markets at the right time, and this is a natural extension of our services. We will be in 10 markets in the next few months, and eventually in 20.
What are the incentives for the wholesale banker to introduce their client to the private banker? If the private banker loses the client money, then that will adversely affect the wholesale bankerÆs relationship with the client too.
This is one of the more difficult practical issues for all universal banks. You have to get alignment at every level in the organisation; from my level to heads of country and heads of business, the sales team leader heads, and individual relationship managers. For example, it has to be represented in the scorecard of the client advisor. If it isnÆt formally in there û and is just based on best endeavours û then the issue you raise is very real. We are saying to the corporate banker that their scorecard will be based on this degree of corporate banking, and this degree of private banking û and it is an integral part of what they do. ThatÆs why it is so important for the private bank to be integrated into the bank rather than be separate.