July 2015

Uncertain Times to Test Private Bankers
Asia’s High Net Worth Individuals are increasing their wealth, but their wealth is growing at a slower pace and their sentiment is less bullish than two years ago.

According to the most recent round of the Asian Wealth Index (AWI), conducted by East & Partners Asia, HNWIs saw their personal investable wealth, outside of the family home, reach US$5.39 million, up from US$4.22 million in 2013.

Although this signifies a dramatic leap of nearly 28 percent since the first round, the rate of increase has slowed significantly each time the HNWIs have been interviewed.

At the same time, the measure of sentiment has become less bullish. The AWI explores levels of optimism, and in the most recent round the average result was indifferent, with the figure edging closer towards the pessimistic side of the scale.

Their sentiment reflects the regional and global economic outlook. The spectre of the “Grexit” – a Greek departure from the Euro zone – added to concern over the Chinese share market and a corruption scandal in Malaysia playing havoc with the exchange rate, are all having a negative impact on optimism.

In this context, these HNWIs may be losing a small amount of confidence in their own ability to manage their wealth.

Increasingly, they are looking to professionals to manage their funds and the major beneficiary of this trend is the private banking industry.

Around half of the HNWI sample are currently managing their own wealth, but this figure has been falling steadily in the last two years, down from 70 percent.

Over the same period, the proportion of HNWIs engaged with a private banker more than doubled to 24.1 percent, and is predicted to increase in the next six months.
One of the big themes for wealth managers in Asia currently is risk management and compliance. Most conversations with private bankers in the region touch on this subject.

It is an expensive and time consuming process, but it does position the industry well for difficult times and make it more resilient.

In previous periods of volatility, such as the 1998 Asian Financial Crisis and the Global Financial Crisis of 2008, the wealth management industry attracted an amount of criticism for its performance.

No-one likes to lose money, but when a HNWI is paying for advice and service which result in falling balances then confidence is seriously undermined.

Perhaps the wealth management and private banking industry has taken some learnings out of those recent experiences, and is focusing as much on wealth preservation as on accumulation.

HNWIs will only engage private bankers if they feel they are doing a better job than they can do themselves.

Wealth is hard earned but easily squandered and East’s HNWI sample also say they are largely “self-made” people who have created their own wealth, without much help from family inheritances.

Private bankers therefore need to earn the right to manage this wealth, and perhaps – after several false starts – the industry is starting to understand this, and achieve some significant traction.

The big test will come if and when there is another downtown, and how the private bankers perform in protecting their customers from the volatility.
HNWI’s Average Investable Wealth and Engagement with Private Bankers

Source: East & Partners Asia Asian Wealth Index June 2015
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