A string of smaller private banks have recently announced ambitious hiring plans in Asia – BMO, BNY Mellon, Bordier, Nomura and Vontobel all want to expand their ranks of relationship managers (RMs) in Singapore or Hong Kong.
But these emerging private banks are finding that recruiting in the two cities is trickier than in their home markets. Their size and status hinders their ability to attract new clients and new RMs.
In the current talent-short job market the best private bankers “wouldn’t go to a Bordier or a BMO compared to a UBS or even a Standard Chartered,” says a Singapore headhunter who asked not to be named. “If you’re willing to talk to them, you’re probably not working for a top-20 firm. And if you do move, you would need to be paid a risk premium, a higher salary.”
The recruiter adds: “Too many emerging banks have the mindset that ‘we will come to Asia and just replicate what we did in Europe and clients will have to accept it because we’re a blue-blooded private bank’. But that won’t work.”
Private bankers’ trump cards in the job market are the clients they can convince to move banks with them. But Asian clients are typically more sceptical about boutique firms than their counterparts in Europe are. “Rothchild’s private bank, for example, had been relatively unsuccessful in attracting talent because it primarily offered long-only European funds with equity returns of around 4%. Why should Asian clients go for this when they’re getting 10% to 20% returns from their own businesses?” says the headhunter.
Compared to Europe, more private clients in Asia are business owners who made their own wealth rather than inherited it, says Rahul Sen, a former Merrill Lynch private banker, now head of wealth management at search firm The Omerta Group in Singapore. And because many of them are entrepreneurs, clients in Asia generally like to take more risks with their investments.
“The Asia private banking model is different to the European one. To service these type of clients in Asia you must have a big balance sheet, so they can take positions to invest,” says Sen. “Some clients want a huge FX portfolio or 20 to 40-times leverage, for example. You can’t do that in a smaller bank, so the boutiques can be less attractive to clients and candidates in Asia than they are in the West.”
BMO Private Bank, the global wealth arm of Bank of Montreal, is a case in point. The firm announced last month that it would hire an undisclosed number of new RMs in Asia – it currently only has 20. “It’s come to Asia with deep pockets and support from head office, but it’s a firm which only Canadians associate with and the private bank has deliberately kept itself quite small,” says a private banking consultant who asked not be named.
He adds: “Many Asian RMs have very strong aspirations and would find it challenging to grow their careers in BMO if its ambition remains small. The bank might also end up operating in the high-net-worth segment rather than the ultra-high segment [clients with liquid assets of US$30m or more] which might appeal to small RMs but not to the big fishes. Plus the platform isn’t state of the art.”
The Singapore headhunter says clients in Asia can be “snobby” about the size, brand value and even office location of private banks. “Take Bordier – it’s moved into a beautiful new office in Singapore, but it’s slightly away from the main private banking strip along the Singapore River to Marina Bay Financial Centre. That matters to some clients – they want to show off the address – and what matters to clients matters to RMs.”
Nomura is somewhat of an outlier among the smaller private banks with expansion plans in Asia. Although outside the top-20 private banks for Asian assets under management, it boasts a huge investment banking arm. Some banks in Asia are trying to cross sell more capital markets products to business-owning private clients. “Capital markets coverage is key to unlocking the wealth potential of an ultra-high client. The only challenge is that Nomura’s wealth division isn’t as connected to investment banking as it should be,” says the private banking consultant.
Nomura is trying to bridge the gap, however. Earlier this month it appointed Lee Chee Pin in new a financial products role aimed at fostering closer collaboration between wealth and IBD. “UBS, Credit Suisse and the big American banks have perfected the model which Nomura is still struggling with,” says the consultant. “RMs find the flexibility of Nomura quite attractive but their marketing is not attractive as not many clients associate Nomura with a wealth business. RMs therefore have to work very hard to convince clients to move to Nomura.”
Despite the downsides, there are still reasons to join emerging private banks. While your assets under management may be lower than at the larger players, your bonus percentage will be higher – a lot higher in Nomura’s case. “They’re running their private bank with a brokerage-like bonus percentage of around 30%,” says the Singapore headhunter. “I know I guy there generating $10m in revenue who gets to keep 30%. If he joined UBS he could probably manage $13m, but only get an 8% to 12% bonus.”
Sen from The Omerta Group adds: “Most people who join an emerging bank want to move into higher management and don’t see an avenue for doing this at their current firm – they need a new challenge.”
A “good working culture and a small family-like environment” are among other potential benefits, says the private banking consultant. “Just don’t expect an aggressive return on your business and efforts.”