Wealth in Asia-Pacific ex-Japan will grow at 10.9% per annum over the next three years, faster than other high-growth wealth management regions such as the Middle East and Latin America, UBS estimates.
In light of this, all private banks have ambitious growth targets for their Asian wealth management businesses, including plans to double their assets under management and to significantly increase their headcount. UBS has set itself an aggressive target to grow at double the market growth, Kathryn Shih, chief executive officer of UBS wealth management for Asia-Pacific, said at a seminar arranged by the Swiss bank last week.
Many of Asia’s wealthy individuals are still using brokers and trust banks to manage their wealth. However, as their wealth grows through initial public offerings, generational wealth transfer and monetisation of assets, more of them are turning to professional wealth advisers, which is creating an opportunity for private banks.
Around 40% of the Asian assets UBS manages are booked in Hong Kong and Singapore. However, the Swiss bank reckons that 90% of the wealth of households with more than SFr250,000 ($270,600) of investible, liquid assets is to be found in domestic Asian markets. Specifically, China and Japan are the largest pools of wealth in Asia. As the largest provider of wealth management services in Asia, and with the biggest pool of client advisers, UBS believes it is well positioned to tap this wealth.
Is the amount of wealth UBS books in Hong Kong and Singapore a concern to the bank, Shih was asked, given that governments are starting to look more closely at capital fleeing their domestic markets. We abide by local regulations and operate within the legal framework, said Shih in her brief answer before moving on to another less-controversial topic.
UBS hires between 25 and 30 client advisers annually in the region and last year received 1,400 applications for its UBS wealth management associate program roles. Client advisers go through a year’s training, including classroom training and a rotation through various UBS businesses. Shih referred to these advisers as among the best talent within UBS. A presence across the largest wealth management centres in Hong Kong, Singapore and Australia gives UBS an edge in being able to tap into talent in each location, she added.
However, Shih acknowledged that the wealth management industry in the region is facing a number of challenges. Regulation in the industry is evolving and increasing. Basel III requires higher levels of provisioning by banks. Also, volatility across markets increased in the aftermath of the financial crisis, and again after the recent natural disaster in Japan.
The competition for talent in the region is also a challenge, with all private banks seeking to add people to bolster their business. Competition is driving up salaries in Asia, agreed Shih, as all players seeking to expand are chasing the same limited supply of people. However, she foresees consolidation in the industry, which she says will play to the strengths of a player such as UBS. The opportunity in the region has attracted a number of players. However, high operating costs, including personnel costs, rents and the expense of building information technology platforms, may cause a shake out.
With respect to specific countries, the stage of development is different in each market, she said. In India, the domestic wealth management business is new to UBS and given the fragmented nature of the industry, the bank faces competition from a number of local and international players with very small market shares. However, there is a big opportunity since a great deal of Indian wealth is still not managed by private banks.
Meanwhile, UBS does not have plans to enter the domestic market in Indonesia in the near term as the market size and dynamics are not yet conducive to the Swiss bank having an onshore presence.
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