Singapore has openly positioned itself as a private banking hub in Asia, aiming to tap into the region's population of approximately 2.4 million high-net-worth individuals (ie, people with at least US$1m-worth of fluid assets), who own an amassed fortune of US$7.6 trillion-worth of assets. With these figures exponentially higher than just a few years ago, personal assets within the region are set to further increase with the forecasted growth of China and India.
Many investors see Singapore as a stable centre for wealth management due to the island state's solid regulations and variety of available instruments and service sectors. This is matched by a diverse, highly educated and largely bilingual workforce which frames the important aspects of social and political diplomacy required for an influx of personal wealth investment.
Private banks themselves have nearly doubled in number since the year 2000, with headcounts having increased between 15% and 45%, steadily making Singapore the sixth largest offshore private banking centre in the world. But problems still plague private banking recruitment, largely due to a local skills shortage and the current market volatility.
Shortage of relationship managers
The country's central bank, the Monetary Authority of Singapore (MAS), has estimated that approximately US$200bn-worth of private banking assets are being managed in Singapore. With this in mind, and combined with an onslaught of boutique players setting up shop locally, private banks have ambitiously sought to increase market share in Asia, leading to a serious talent shortage.
The reality, however, is that the real lack lies in the industry's relatively small supply of seasoned and experienced relationship managers with existing portfolios and contacts. This is due to the relative novelty of private banking in the region, with a very limited number of genuine private bankers who have developed their careers from the 1990s, when private banking first started in Singapore.
While banks are willing to offer attractive packages to senior private bankers with access to high-net-worth clients, these private bankers are usually difficult to move because they are loath to persuade clients to switch banks - a practice that might be detrimental to client relationships if practised too often and within too short a time frame.
With the economy buoyant between 2005 and 2007, many senior private bankers who have moved within the last two to three years are generally not likely to consider moving again for the next few years, leaving the industry relatively stagnant in the crème de la crème of its upper tiers.
Creative approaches to hiring
In view of the region's shortage of experienced individuals, private banks are becoming increasingly creative in their efforts to bolster the ranks of wealth managers in Asia.
Some larger private banks, such as UBS and Credit Suisse, are looking to human resources initiatives such as intensive in-house training programmes. These involve the mass recruitment of private banking trainees with no private banking experience, sourced from varied backgrounds (though largely from wealth management institutes or those with degrees in finance and/or accounting). There has also been an increase in in-house training programmes designed to retrain corporate and retail bankers for the private banking sector.
However, such hiring strategies have drawbacks, as many junior private bankers under-perform to a point where their employers incur losses by investing more in their training than the bankers contribute in revenue. And despite these training measures, the private banking industry in Singapore (and within the region) still lacks local experience and expertise.
A selective and cautious strategy
Towards the end of the second quarter of this year, growth momentum has slowed, and it is expected to further decelerate next year amid concerns about market consolidation and diminishing hiring budgets.
The impending US recession and consequences of the ongoing sub-prime crisis have tarnished the confidence of bankers and clients in the wealth management sector and many are assumimg a 'wait and see' approach to investment.
Together with excessive losses from under-performing junior private bankers and costs running high on the overheads of many private banks, we might be bracing ourselves for some major upheavals in the private banking sector for the next few years. The hiring of private bankers will develop to become increasingly selective and rather more cautious.
This year marks the start of an even more competitive phase within the industry and 'survival of the fittest' looks set to be its guiding principle. The market will weed out under-achievers by mere competition alone.
Sicilia Lim is a senior consultant at executive search firm Robert Walters (Singapore). As part of the company's banking front-office division, she specialises in placements within wealth management, with a focus on private banking. Contact her at email@example.com or +65 6538 3343.