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Published 15 August 2012 06:51, Updated 16 August 2012 04:16
Look but don’t touch ... Cultural differences are only part of the reason a divergence is emerging between how European and Asian millionaires manage their money.
Asia has bad news for the world’s top private bankers – their services are no longer required.
That’s the message from Bloomberg, which has spotted a trend in private banking in the region that has led to a weakening of the already limited grip global banks including Credit Suisse and Citigroup have on the Asia’s private wealth.
It’s also taking a toll on investment banking profits in a region that is minting new millionaires at such a rapid clip that it’s pulled ahead of the old wealth centres of Europe and North America in numbers, if not in total worth.
Bloomberg draws its conclusions in part from the findings of a Boston Consulting Group (BCG) report, issued in late May, that delves into challenges wealth managers face as developed economics struggle and the world’s new economic powerhouses move to the fore.
Titled Global Wealth 2012: The Battle to Regain Strength, the report notes a stark divergence between how the world’s new rich manage their money compared to the old bastions of wealth in Europe.
In Asia, managers now have full discretion over just 4 per cent of the assets in their clients portfolios, down from 7 per cent in the mid noughties. In contrast, that figure for Europe is at 23 per cent, up from 18 per cent six years ago.
“Asia’s wealthy lost a lot of trust in their private banks and private bankers during the 2008 financial crisis,” Bloomberg quotes BCG partner and managing director Peter Damisch as saying.
But that’s only part of the story. Cultural differences also abound, including skews towards real-estate investment in Asia that requires on-the-ground knowledge and the large number of self-made millionaires in the region who are hands on by nature and demand high returns.
This has created some paradoxes, including a conundrum for HSBC whose private bank last year had 25 per cent more assets in Asia-Pacific than in 2007 but earned less than four years ago, Bloomberg notes.
Private bankers also potentially face the challenge of having to put more skin in the game if they want to benefit from Asia’s burgeoning wealth.
Businessman Clinton Ang tells Bloomberg: “They [wealth managers] need to be joint stakeholders ... Otherwise it’ll be like selling me a vitamin that you don’t take yourself.”