«It is a significant mistake to try and be all things to all men, or women,» Deutsche Bank's Mark Smallwood reveals in an exclusive interview with finews.asia.
Mr. Smallwood, Deutsche Bank has been through several calibrations in recent years. How do you feel the bank is currently seen in Asia today?
The main re-calibration affecting Deutsche Bank is the change in leadership of the group lead by John Cryan who was appointed last year, and the subsequent adjustments to the banks broader leadership team and structure which has included the separation of the Asset and Wealth Management groups.
Deutsche Bank Wealth Management has now been placed into its natural home as an independently run subsidiary of our existing and very substantial European based retail and commercial clients business to form Private, Wealth & Commercial Clients (PW&CC), with us forming the «Wealth» component. PWCC is run by Christian Sewing who sits on the Management Board. The Wealth Management business is run by Fabrizio Campelli. Clearly there are many synergies which can be exploited with this re-calibration.
Where is the focus in Asia?
From the perspective of the Wealth Management business in APAC, the «noise» has had little effect on our core momentum. The business has grown substantially in the last few years as a result of a disciplined focus on exploiting the key market segment that Deutsche Bank Wealth Management excels in, namely the UHNWI segment. This segment naturally fits with the advantages of our platform as a European centric global bank with a very powerful investment banking franchise.
«The Wealth Management business in APAC could not be in much better shape»
The leadership team is long serving and highly stable whilst we have roughly the same number of relationship managers (RM) as 8 years ago, resulting in considerable success for our RM’s combined with a disciplined management of our cost base. Wealth Management is identified as the core business of Deutsche Bank according to its growth strategy.
The bank has recently approved significant investments into the Wealth Management business with a strong focus on APAC. What does that mean?
It will enabling us to scale up the efficiency of our platform and to broaden our focus to the HNW client segment, which for us represents clients with $5 to $25 million of liquidity with us. In summary, the Wealth Management business in APAC could not be in much better shape. With the commitment of the Management Board we are now in a position to further improve our operating platform and client experience as we aim to substantially increase the size of our business over the next 5 years.
What might change the business over this period?
I see a growing importance for the larger families to address fiscal issues to ensure correct structuring including having a robust fiscal residency for «mind and management», which will include the re-positioning of family members into lower cost tax jurisdictions such as Singapore and Hong Kong.
«The biggest challenge is cultural»
Furthermore I see the possibility of further developments with brokers and with small to mid-sized banks. The provision of a fully tooled wealth management platform is prohibitively expensive to all but the biggest players. It makes increasing sense for the small to mid-size players to maintain the relationship and advisory engagement with their clients whilst contracting out the custodian, execution, product and (some) services capabilities to the larger platforms like ours.
What do you assume as your biggest challenges?
The biggest challenge is cultural in that the family office or External Asset Management (EAM) business is typically a transparently priced annuity model, whilst the Asian culture generally speaking has a preference for transactional pricing which is often opaque. Nevertheless there is a rapidly growing level of sophistication developing, in particular as the second generation are taking the helm and focusing on managing the family liquidity in an open architecture, independent and transparent manner.
And?
The second major challenge is to ensure that the EAM provides a holistic capability to their prospective clients and partners. Simply operating as a discretionary investment manager is not sufficient enough to differentiate and provide a competitive edge. Families are looking for a holistic platform enabling multi-custodian engagement and execution, products and services including investment banking access, account aggregation with associated portfolio analytics and co-ordination with external tax and legal advisors.
Asian clients seem less comfortable talking about death than people in Western markets. Is this impression correct?
There is a very significant intergenerational wealth transfer underway both in Asia and the rest of the world. If one looks to the developed markets the principal motivation for estate planning is not the thought of dying but the cost – it is simply too expensive to die!
«In Asia in general inheritance tax is not the norm»
This has motivated a significant estate planning industry where the cost of planning is deemed to be easier to bare than the cost of not planning given the high rates of inheritance tax in much of the developed world.
What is different in Asia?
In Asia in general inheritance tax is not the norm, but the awareness of the cost of dying without planning is rising significantly as the family disasters evolve for those who have not planned. A lifetime of building a business or empire can be destroyed very quickly not by the tax man, but by divorce, frivolous beneficiaries, unrealistic expectations on children to continue to run family businesses effectively and sibling/beneficiary conflict resulting from a lack of pre-emptive planning and expectation management.
The massive growth of the estate planning industry, in particular in Singapore, seems to be the consequence, right?
It is definitely a reflection of the fact that families do indeed have these concerns and are increasingly taking steps to address them. I certainly would concur that there is a growing trend towards families in Asia seeking to address their succession arrangements. We are seeing excellent examples of leading families whose succession arrangements and associated family offices have been mentioned in the public domain and serve as a good example for other families to follow.
The dynamics of Asian Wealth have evolved with new generations taking the reigns and transforming the original aims and directions of the founders. How are you engaging with them?
When talking of the «next generation» there is a psychological preconception which imagines 20 year olds and below, whereas in Asia where much of the significant wealth is first generation and has been generated in the last 30 to 40 years, the patriarchs and matriarchs are in their 70’s and 80’s, whereas their next generation are in their 40’s and 50’s.
This generation is typically engaged in current wealth and is sophisticated and engaged with bankers, both in respect of their current wealth and with a view to their eventual inheritance. Indeed increasingly I see this second generation making strides to engage with their parents and encourage them to take appropriate steps.
«Large families who have the bandwidth to invest in passion investments are best advised to make their own arrangements»
So the challenge which we rise to is to be one of the 4 to 6 custodians that these client’s utilize and then to ensure that we are viewed by the clients within this context as one of their leading bankers to whom they allocate a higher proportion of their wealth.
With Deutsche Bank being a worldwide institution do your Asian clients ask for access to global opportunities, such as passion investments, vineyards, art or rare Ferrari’s?
It is a significant mistake to try and be all things to all men, or women. Not only is this costly but one also ends up misrepresenting to ones clients where ones’ real competency lies and inevitably expectations are mismanaged at best and at worst client’s can be led down dangerous paths.
Again, the large families who have the bandwidth to invest in «passion investments» are best advised to make their own arrangements either directly or policed by their family offices who can spend time looking on an open architecture perspective at their options and undertaking appropriate due diligence.
«We provide clients in Asia with an Asian tailored European perspective»
As a global banking platform our offering is straightforward and focused. We provide clients in Asia with an Asian tailored European perspective which provides a core European centric platform to their diversified banking relationships with global market access. We have built the sophistication of our product and solutions platform to meet the expectations of the wealthiest and most demanding clients in the world – the Asian tycoons.
Mark Smallwood is Managing Director at Deutsche Bank Wealth Management, based in Singapore. In his current role he is responsible for several Singapore based coverage teams which report into the North Asia market team. Included within these teams is the EAM team which serves Family Offices, EAMs and Financial Intermediaries.
Smallwood has been with Deutsche Bank since 2003, he spent six years in Geneva as Global Head of Insurance Solutions before moving to Singapore where he spent five years as Head of Wealth Planning for APAC. From 2013 to 2015 he was based in Hong Kong as the Head of Franchise Development and Strategic Initiatives for Deutsche Asset & Wealth Management, and has returned to Wealth Management in Singapore post the demerger of the Asset and Wealth Management businesses. Prior to joining Deutsche Bank he owned a multi-family office in the Caribbean.
