Private banks in Hong Kong are in an expansionist mood – but because their growth is fuelled by China, they are finding it hard to source enough staff with mainland client networks. Meanwhile, relocating relationship managers (RMs) from Asia's other private banking hub, Singapore, to plug gaps isn't always an easy option because China-coverage bankers based there are typically reluctant to move to Hong Kong.
Financial markets liberalisation in China and the growth of private wealth in the country are driving demand for private bankers in Hong Kong, a city where rich Chinese typically park a proportion of their assets.
“Most private banks are expanding and their emphasis is definitely on mainland clients. For example, if a bank wanted to hire 100 Hong Kong-based RMs, roughly 60 would cover the mainland and the rest would cover Taiwan or Hong Kong itself,” adds Rahul Sen, a former private banker and director at search firm Sheffield Haworth.
The launch of Shanghai-Hong Kong Stock Connect on Monday, which directly links share trading in the two cities, is expected to encourage even more Chinese nationals to use Hong Kong as a platform to invest internationally. Meanwhile, the amount of high-net-worth people (those with more than US$1 million to invest) in mainland China is on the rise – it increased by 17.8% between 2012 and 2013 to 758,000, according to the World Wealth Report 2014 by Capgemini and RBC Wealth Management. The wealth of these Chinese millionaires shot up 20.5% to reach US$3.8 trillion during the same period.
“Demand for relationship managers is strong in Hong Kong as private banks are not only going after a bigger wallet share of existing Chinese wealth, they are also targeting newly created wealth,” adds Clarence Law, a business advisor in private banking.
BNY Mellon, which last month launched a wealth management unit in Hong Kong, is the newest entrant to the city’s private banking scene. Meanwhile, Deutsche Bank, an established player in Hong Kong, is moving Ravi Raju, its managing director and regional head of asset and wealth management in Asia Pacific, from Singapore to Hong Kong in a bid to capitalise on growth in the Chinese market.
However, reports earlier this week that Deutsche Bank is also relocating its Asian wealth headquarters to Hong Kong from Singapore are unfounded. “There is no intention of moving headquarters to Hong Kong. Both Singapore and Hong Kong are important to Deutsche Asset & Wealth Management,” a spokesperson for the German firm told us.
The stock of mainland-coverage private bankers in Hong Kong is limited and most career moves involve “a talent merry-go-round among banks”, says Sen from Sheffield Haworth. Private banks have been forced to hire corporate bankers and investment bankers with Chinese client networks to help tackle skills shortages. “Occasionally they move onshore mainland private bankers to Hong Kong if they have strong enough relationships and can speak good English – but the onshore industry is immature and the products are limited, so it’s not a common move,” says Sen.
Sourcing talent from Singapore generally isn’t a solution either – primarily because many private bankers there cover Southeast Asian (or even Indian and European) clients. “Given this, the two cities largely complement each other rather than compete with each other for high-net-worth clients and bankers,” says Law.
While most private banks in Singapore do also employ mainland-coverage bankers, most of them are reluctant to relocate – unless, like Deutsche’s Raju, they are in senior-management rather than client-based roles. “Bankers have Chinese clients who have deliberately chosen to base part of their wealth in politically-stable Singapore – sometimes out of a growing concern that China may meddle in Hong Kong’s private banking industry. They risk losing clients if they move to Hong Kong,” explains Sen.
He adds: “Older private bankers are particularly reluctant to move from Singapore to Hong Kong as it’s generally easier to raise a family in Singapore. In fact, there are more moves the other way – Hong Kong-based RMs going to Singapore – and these are mainly for family and lifestyle reasons.”