Union Bancaire Privee Chief Executive for Private Banking, Michel Longhini, contends that private banking models in Asia and Europe are converging. What does this mean?
In a commentary on the wealth management market Longhini says that the business models for private banking in Asia and Europe have traditionally been viewed as very different. Today however this no longer rings true.
Longhini argues that while there are and always will be local market idiosyncrasies, the core constituents of the industry are now closer and are becoming tightly aligned. He also uses the recent consolidation in the wealth management industry in both places to highlight his opinion.
Onshore Competition
He points out that in all private banking tables in Asia, including the one recently published by finews.asia, the top of each chart looks the same as it does in Europe. The UBP CEO says this is partly because the local retail banks in places such as India and China do not yet have a regulatory framework flexible enough to support them exploit the wealth management business. He says it is a matter of time before the onshore leaders are diluting the business of foreign banks, as large European banks are now doing.
Asian clients have traditionally been seen as traders, and while that trait will remain a strong characteristic of Asian UHNW’s, clients across Asia are now focusing more on long term investment and diversification, not unlike their European counterparts.
Asia Ahead
Products and services too are more aligned than before and while European and Asian clients will always prefer a familiar local offering, there is little difference in the overall structures.
On regulations with the major economies in Asia signed up to FATCA and ready for the automatic exchange of information according to OECD standards Longhini sees Asia ahead of Europe.
Europe to Follow
In Asia and Europe private banks are struggling to control their cost income ratios. Client facing front line wealth management professionals in Asia are some of the best paid in the world and combined with escalating risk management and compliance costs, as in Europe only the banks in Asia with sufficient scale will be able to endure as leaders in the wealth management space.
In summing up Longhini emphasises the closeness of todays European and Asian wealth management models. However, with the Asian market now the largest and predicted to continue growing will European private bank models begin to follow the Asian lead.
