Gone are the days of easily-earned revenue from managing the money of wealthy Asian clients. In an exclusive interview with finews.asia, the founder of Singapore-based HP Wealth Management gives an overview.
«The sector is in a perfect storm,» says Urs Brutsch, who founded HP Wealth Management in 2009.
He chalks the wealth management sector turbulence down to several reasons: stiffer competition, rising regulation, increasingly price-sensitive clients, and difficult financial markets.
Locals Shake-Up
Local banks are increasingly tough competitors, according to Brutsch.
This is in part because of foreign deals: OCBC, which is the private banking arm of Bank of Singapore, recently bought Barclays Wealth in Asia and two years ago, DBS bought Societe Generale’s Asia activities.
European banks – led by UBS and Credit Suisse – still have a leg up, but domestic players are quickly catching up. To wit: DBS has lifted its assets under management to US$ 75billion.
Higher Costs, Crumbling Revenue
Asian clients have also changed their behaviour: «They have more investment knowledge than they have ever had, and they are acutely sensitive to pricing,» Brutsch said.
The pushback on fees puts an even bigger burden on margins already under strain.
Compounding this is the fact that Asia’s banks are under cost pressure.
«Feed» the Infrastructure
Having spent copiously on infrastructure and personnel, both have to be «fed» in order to generate profits.
But revenue is shrinking due to a higher regulatory burden and clients turning increasingly conservative in their investments.
The result is a thinning of firms and advisors, Brutsch says.
«Consolidation among domestic institutions will speed up, and the pool of client advisors will thin.»
One-Third of Advisors Superfluous
He estimates that of nearly 3,000 client advisors active in Singapore, approximately one-third is superfluous.
The shift in Asia’s wealth management sector also offers opportunities, especially for independent asset managers like HP Wealth Management.
So-called IAMs only manage roughly 3 to 5 percent of assets held in the city-state, compared to up to 20 percent in Switzerland.
50 Pct of Fees for Advisors
Brutsch, who has been in Asia for 30 years, hopes to be able to attract top client advisors. He is convinced that even top bankers won’t escape lower pay scales at major banks.
HP Wealth Management operates without taking retrocessions, but pays its advisors 50 percent of wealth management fees.
The firm mainly manages Asian client money, and Brutsch hopes to lift deposits to 2 to 3 billion Swiss francs.
«We’re on the right track to reach this,» he says, and he is open to acquisitions in order to reach the goal.
Acquisition Target?
«We scan the market regularly for potential acquisition candidates,» says Brutsch, who previously managed the Asian activities of Clariden Leu, which has since been integrated into Credit Suisse.
However, the boutique itself popped up on the radar of potential buyers, including a recent informal approach.
«A sale of HP Wealth Management is out of the question,» Brutsch says.
