December 2013

Private Banks Winning the Wealth War
Asia has been a major focus for the world’s private banking industry over the last decade, and there are compelling reasons why.

According to the 2013 World Wealth Report from Cap Gemini, the number of High Net-Worth individuals in the Asia-Pacific grew 9.4 percent to 3.68 million last year.

With those kind of demographics it is easy to understand why the private banking industry has been investing heavily in its Asian operations, with Singapore now a major regional private banking hub.

But has the private banking industry been able to persuade Asian High Net Worth Individuals to use its services, or are these people continuing to self-manage their wealth or use other banking services, such as those of their business bank?

In May this year East & Partners launched the Asian Wealth Index, interviewing just under 1000 C suite executives in ten Asian markets, ex-Japan.

One of the questions was on how they manage their wealth, a question devised partly to understand the extent to which the private banking industry had penetrated the High Net Worth market in the region.

The responses are both sobering and encouraging. While private banks may not have penetrated as deeply as they would have like, the growth prospects show that the industry is developing significant momentum.

In May 2013, for example, 10 percent of the HNW sample East interviewed said they were using the services of a private bank. East then asked how they would be managing their money in one year’s time, and the response was that by May 2014, 15 percent said they would use private banks.
In November, East was in the field again interviewing for the index, and the research showed that the momentum for the private banking industry continues to build.

By November, 13 percent of the HNWI’s said they were using private banks to manage their money. East asked the same follow up question, and asked how their wealth would be managed in a year’s time – by November 2014 – and 17 percent nominated private banks.

The East research forecasts 70 percent growth for the Asian private banking industry in less than 18 months, between May 2013 and November 2014. Already, the index shows that the actual – not forecast – growth is 30 percent in six months.

Private banks have had some difficulty getting their message through to Asian HNWIs, many of whom are entrepreneurs with much of their wealth in family or start-up businesses.

These people have traditionally maintained close control of their financial affairs, or have used the services of their business banker.

Where Europeans, in particular, are comfortable with the private banking model it has taken some time for HNWI’s in other parts of the world to understand the benefits it can bring.

Singapore is now home to a roll call of some of the biggest names in global private banking, all of which have invested heavily in the belief that – ultimately – Asian HNWIs would see value in the private bank service proposition.

East & Partners Asian Wealth Index shows that the heft investments the private banking industry has made in Asia are starting to yield results.

Asian HNWI’s use of private banks

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