What makes Asian private bankers different from European private bankers? It’s mainly to do with their clients, according to a new survey. Asian millionaires and billionaires have a higher demand for credit to leverage investments and business operations, according to the World Wealth Report 2015 by Capgemini and RBC Wealth Management.
In Asia Pacific ex-Japan, 25.5% of rich people’s assets are financed through credit, versus only 18.2% in the rest of the world. Compared to Europe, more private clients in Asia are business owners who made their own wealth rather than inherited it. And these entrepreneurs typically have a higher demand for credit.
If private banks want to crack huge markets like China and India, providing credit must be a crucial part of their offerings. This is fine for the likes of UBS and Credit Suisse, but it’s difficult for boutique banks that are trying expand in Asia by providing more traditional lower-return products.
“Balancing credit demand against the risks associated with providing credit in the region may be difficult for some firms,” the report said. “Asia Pacific wealth managers are not fully attuned to the…unique needs of the region’s high-net-worth individuals,” added David Wilson, head of the strategic analysis group at Capgemini.
The fact that boutique banks don’t have big enough balance sheets is also restricting their ability to attract the best bankers. “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,” Rahul Sen, head of wealth management at search firm The Omerta Group in Singapore, told us earlier this week. “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.”
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