Private Banks Losing Out As Wealthy Asians Turn To Managing Their Own Money

Wednesday, August 01, 2012 23:20
Private Banks Losing Out As Wealthy Asians Turn To Managing Their Own Money

As wealthy Asians have become disillusioned with private banks who push investment products that fall short of expected returns, many are opting to manage their assets themselves. This means that top wealth management firms who have opened branches in Asia are suffering from lower profits even as the amount of assets they manage grows.

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Wealthy Asians usually make their money in hands-on types of enterprises such as real estate. They are more hands-on in their investing, too. Many became greatly disillusioned with private banks during the 2008 crisis.
Before the crisis, wealthy Asians were sold derivatives products that went up substantially as markets went up and fell precipitously—even lower than the markets—when they went down. Asians also build their portfolios using Asian-based companies who have grown faster than their global counterparts.
Wealthy Asians also like to negotiate fees down, creating a double hit for bank profits. Income requirements at banks and client interests are definitely not aligned with each other.
Asians have come to view private bankers as nothing more than facilitators of trades they have already decided to make. They tend to want complete control over their portfolios. Over 40% of Asian millionaires are 45 years old or younger. In Europe, less than 20% are in that age group.
Asians are also fairly inexperienced when it comes to investing. Their fortunes are not as old as their European counterparts so their time horizon for gauging acceptable returns is much shorter. They also like to invest in the same investments the banks do, checking to see if banks are willing to put their own money in the products they recommend.
Trust is the operative word when working with Asian clients. It is hard to earn but once earned, relationships with Asian investors can be highly rewarding.

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