Rethinking private banking in Asia-Pacific
Growing trends requiring new thinking
Although wealth is growing fast in Asia-Pacific, the region is challenging for private banks, with a wide array of rapidly evolving international and local regulatory requirements, very high customer expectations, an outdated sales and service model and fierce competition
When it comes to KYC compliance, Asia-Pacific’s multiple jurisdictions often present private banks with difficult dilemmas. For example, Korea’s privacy regulations say that data cannot go outside the country.
But this presents a problem for HNWIs domiciled in Korea trying to provide a bank in Hong Kong with their information. Similarly, in Japan, a bank cannot share information between its own internal entities.
This extra layer of complexity will only get worse as other markets implement new privacy laws. In March 2014, the Australian Privacy Amendment Act came into effect, stipulating that all banks, pension funds and asset managers must obtain express consent to use personal information at the point of collection.
On the tax transparency front, FATCA has expanded the customary requirements for client due diligence under KYC protocols, necessitating ongoing, not periodic, review.
The net result is that client due diligence now includes, not only identifying and verifying the customer, but also identifying their beneficial ownership and control — and conducting ongoing due diligence and scrutiny, via transaction surveillance systems, throughout the course of the business relationship.
Higher expectations of sophisticated HNWIs
With the growing Asia-Pacific wealth market seeded by an unusually high proportion of self-made, first-time HNWIs, private banks must adapt to meet the broader product and higher service expectations of this entrepreneurial new customer segment. HNWIs across the wealth bands are demanding tailored advisory services, alternative investments and a multi-channel experience.
Outdated advisor service model
Traditionally, staff and front office costs have been a private bank’s biggest expense. Today, this expense is weighing the banks down with low productivity and high cost to serve. Put simply, RMs are not paying their way.
Private banks lagging in digital services
At a time when Asia-Pacific customers lead the world in their preference for digital contact, private banks can no longer get away with legacy systems that provide a poor understanding of customer data and inconsistent information across channels. They need a world-class digital offering.
Private banks need a world-class digital offering
The move to digital is presenting traditional private banks with massive challenges, as RMs face customers who are often more digitally sophisticated than they are. As the custodian of a customer’s wealth and source of advice, a private bank cannot be seen to be a step behind its customers.
New competition from non-traditional players
The evolving digital landscape and development of new technologies has also enabled new, non-traditional competitors to emerge, including online investment platforms and peer-to-peer (P2P) lending.
Online trading and brokerage and investment platforms offer HNWIs low-cost, automated solutions for services such as investing, asset allocation and portfolio management. Interest is being driven by recent developments in China, where e-commerce players are partnering with asset management companies to offer fund products online.
Asia-Pacific clients prefer digital to direct contact
Source: CapGemini, RBC Wealth Management and Scorpio Partnership Global HNW Insights Survey 2014×