wealth management in asia - webinar

1 1www.vrlfinancialnews.com www.timetric.com 1

Targeting the Private Banking Sweet Spot


22www.vrlfinancialnews.com www.timetric.com

VRL turns Timetric

• Editorial Excellence

• Private Banking

• Retail Banking

• Cards & Payments

• Leading Wealth Summit in Asia

• News updates on the latest developments in the industry

• In-depth research reports

• Leading provider of online data, analysis and advisory services

• Data & analysis includes:

• Risk assessments,

• Forecasts,

• Industry analysis,

• Market intelligence,

• News and comments

• Consulting

- 3 -

About Us

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SOPRA BANKING SOFTWARE – Fast Facts

Sopra Banking Software is a world leader in banking software. The company was born in 2012 as the merger of ‘Sopra Group’s banking software unit’, ‘Callataÿ & Wouters’ and ‘Delta Informatique’. Sopra Banking Software’s comprehensive product range, offers an end-to-end coverage of bank operations and aims to help financial institutions become faster, leaner and more efficient.



About me

Recent features on WM (available on PBI and BPA)• Taking the pain out of paperwork• Private banking 2022 – Moving towards an advisory fees• Changing investment paradigms• Changing skill profiles for private bankers • “Plug and pray” – Confessions of a technology vendor• 15 tips to build a successful private banking business• Outsourcing in private banking – a natural evolution• Empowering the relationship manager in the frontline

Recent research papers on WM: • Changing business models in PB• Evolving business models in Asian Wealth Management• Empowering the relationship manager in the frontline

Thomas ZinkAssociate editor/ content manager VRL Timetric

[email protected]+65 8272 3169



Top 10 Asian Affluent Wealth Trends1. Competition – New banking players (domestic and foreign) and non-bank players

2. Onshore wealth – following liberalisation and political stability in emerging Asia

3. Customer stickiness - Asian clients are multibanked and price sensitive.

4. Cost and efficiency – Compliance is a key driver of growing cost-to-income ratios

5. Digitalisation - Clients are mobile and demand improved relationship manager (RM) availability, multi-channel banking, real-time information.

6. Commoditisation - Products are cascading downwards from private banking (PB) to affluent banking (AB) and retail banking (RB).

7. Quality of advice – Mature players try to position themselves as ‘trusted advisor’

8. Frontline productivity tools – Improve RM efficiency, harmonising advice and minimise compliance risk

9. Client ownership - Banks seek to seize control of client relationships from RM by improving management of customer information, tracking discussions, and team work

10. Value proposition - Wealth management in emerging Asia has to shift from red carpet banking towards a customer-centric private banking value proposition



Key challenges in addressing the affluent segment in emerging Asia

Lacking value proposition• Little differentiation between PB and AB – mostly in form of red carpet proposition

competing on pricing, rewards, and vanilla services• Limited product availability due to regulatory constraints. Retail products dominate.• Lack of sophisticated services, such as succession planning, financial planning, tax

optimisation, trust and fiduciary, philanthropy.• Product-push mentality driven by remuneration and incentive structure focussed on

commissions, and product sales, new net money. Little focus on other KPIs.• Focus on execution-only with generic advice. Banks are loosing the advisory and

discretionary business to family offices, independent financial advisors (IFA), foreign banks

Human resources• Small talent pool, usually lacking experience, international certifications. • Poaching is a common method to acquire new customers.

Clients• Most HNW wealth moved offshore to SG and HK for asset diversification and illicit reasons.• Low investor education and focus on equity trading, term deposits and mutual funds.• Short-term, tactical investments. Asset allocation models are not deployed.



The lower end of wealth spectrum

Thaila

nd

Philippi

nes

Indone

sia

Mala

ysia

Singapo

re0%

20%

40%

60%

80%

100%

10 12 16

33

32

0.6 0.7 1.2 3.2

43

<10000 10000-100000100000-1m >1m

Ad

ult

s in

%

Distribution of adults wealth range (USD)

Source: Credit Suisse Global Wealth Databook

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

25,452.0

6,582.5 4,907.0

5,964.41,247.0

1,890.0

387.2 301.0

574.91,704.0



Affluent banking in Asia Pacific- A largely untouched territory

Banking penetration• Penetration of managed products in Asia’s

middle class stands at 5% of total financial assets on average compared with 15% in western countries. (Fitch)

• Less than 50% of the mass affluent formally manage their finances (budgeting, long-term planning or financial advisers. (Council of Financial Competition)

• Over 75% of the investment decisions are self-directed. (Scorpio)



Banks still dominate the provision of financial advice to the affluent

Have you set up a relationship with any of the following types of firm?

Source: Scorpio Partnership: Future Priority Report (2012)



Liberalisation and regulatory changeProduct availability• Indonesia: new products such as REITs, ETFs and index funds• Thailand: Opening to foreign products through Asean Trading Link• Philippines: Relaxation of REIT and ETF rules for domestic funds, new cross-selling

guidelines

Investor protection: Differentiation between retail and non-retail• Indonesia: Prudential Principles Regulation (2010) differentiation of investor sophistication.

Other features include KYC principles and product suitability• Philippines: Dispense the submission of product by product documentary requirements

Consolidation of regulatory supervision• Indonesia: Merge of regulatory bodies into a new super authority – FSA.

Protectionism:• Philippines: Raise of caps for foreign share owner ship in domestic corporates.• Indonesia: Introduction of cap on foreign share ownership in banks.• Malaysia plans relaxation of ownership caps for foreign banks

Islamic wealth management• Malaysia to enhance disclosure requirements in the Islamic capital market• Malaysia widens access for retail investors to bonds and Sukuks



What makes a sustainable business model?

Automation& efficiency

Industrialisation of products

Digitalisation

Team work

Profitability management

Customer onboarding

Communication

Relevant research

Quality of advice

Transparency

Sustainability Reduce cost

(Re)Build trust

Source: Timetric



How to improve quality of advice?

• Customer centricity– Custom-made products catering the client’s needs– Targeted and relevant research

• Training– Continuous training and certification of RMs– University degree in private banking?

• Teamwork– Generalist and specialists work in a team

• Clear KPIs and incentives– Align client interest with RM interest– Include KPIs such as client appraisal

• Tools and technology– Frontline tools allowing the RM to focus on customer, not administration– Alerts, reminders, project planning, task managers and single view of customer– Visualisation and simplification of information (product, KYC, research)– Data analytics and multivariate segmentation



Homogenisation of advice

• ‘Bad advice’ is a key source of customer attrition and reputational risk– Banks try to homogenise their overall investment strategy to align frontline

advice, research and product development. In some banks this can almost be described as the industrialisation of advice and product manufacturing.

– This enables fast time-to-market for new products.

– Products are customised to customer needs and leveraging synergies across the bank

– If advice aligned is aligned with product development and research, the entire bank speaks with a single voice providing a more consistent and reliable client experience.

• This increases the quality of advice, shortens the product development process, and accelerates our ability to provide targeted research to customers and increases transparency.



Dealing with increasing regulation efficiently

• Moving compliance towards the front-office (systems)– Frontline systems that integrate compliance checks, risk profiling, client

suitability, alerts, reminders, and task manager

– Standardisation of data entry and KYC

– Reducing the administrative hassle for the client and RM within the regulatory framework

• Automation and Straight-Through-Processing (STP)– Remove human intervention from the process architecture

– Increase frequency and accuracy of reporting and business intelligence (BI)

– Standardisation of data across bank, country, globally

• Banking in the “Age of the regulator”– There is no way around compliance

– Proactive is better than reactive

– Develop voluntary, yet progressive industry standards, practices and conducts



Balancing client portfolio transparency with high-level security• Reputational risk, including data breaches is seen as one of the biggest

risks in private banking.• Recent incidents of data leaks and cyber attacks on financial organisations

have brought tighter risk management to the fore.• Data security threats from mobile and online leaks could increase by 60%

for financial firms, but less than half intend to upgrade their investment in security. (E&Y study, 2011)

Key issues:• No information from the service is stored on the computer, mobile.• Implement in new encryption techniques, stronger identity and access

management controls.• Security needs to be a joint effort between bank, technology provider,

regulator and customer.• Deal with the “Bring Your Own Device” challenge



Digitalisation of the ‘client relationship’

Customers like digital and demand the convenience of interacting with the bank anytime, real-time and through a channel of their choice• While not all customers may be interested today, the next generation will demand a

comprehensive and functionality-rich digital multichannel capability bringing all channels together with:

– A common touch & feel and functionalities

– Access to the same information for clients, frontline, back office

– A real time capability

– A consistent experience across all channels

– Active and particularly interactive communication

• A higher degree of self-service providing access to products, advice and research as well as more efficient frontline technology, will likely maintain or improve service quality despite a growing number of customers per RM.



Aligning technology priorities with customer needs• Most banks’ spending is influenced by strategic intent and profit-drivers. The

client however looks at it from the angle asking how technology benefits him:– How do you manage my money? – How do you manage risk? – Can you provide a banking experience that makes me feel good, that is simple and

that is transparent? – How can I reach my banker through a channel that is convenient to me?

• Key IT requirements in private banking:

– Scalability

– Automated regulatory and client reporting,

– Proactive advice across all asset classes,

– Efficiency and speed through straight-through processing,

– Consolidated single view of a customer across business lines, borders and banks.

• There is no golden bullet. Banks need to decide their business strategy based on client needs and align the IT strategy. The banks that have made the most significant progress are those that have aligned their business model with their clients’ needs.



“In a modern PB, everything should be conceptualised for STP”• From product focus to process focus

– Straight-through processing

– Modularisation, centralisation and decentralisation

• Investment gears to the front-end– With regulation a key driver of cost, banks try to increase the efficiency in the

frontline, while downsizing middle and back office

– Information from the back office are pushed towards the frontline

– But the frontend can only be as good as the core system and data available in the back office

• Technology put larger banks at an advantage, but with better and more affordable off-the-shelf vendor solutions this gap is narrowing – Larger banks still benefit from synergies across business lines, such as

consolidation of operations or shared platforms

– IT outsourcing for new entrants and smaller players who do not seek differentiation (eg. platform sharing)



Conclusion

1. Affluent banking in emerging Asia has huge potential and given the pace of these markets is a key building block for the onshore private banking business.

2. Banks in emerging Asia still struggle to build a private banking value proposition that goes beyond red carpet banking. With the liberalisation of regulation and foreign banks entering the landscape, domestic players will have to get moving.

3. Competition will move away from execution and products and move towards quality of advice.

4. Technology will be instrumental to build scale and deal with increasing regulatory requirements and changing customer demands and behaviour.


Targeting the Private Banking Sweet Spot

Thomas ZinkAssociate Editor and Content Manager

VRL Timetric

[email protected]

mailto:[email protected]

E X C E L L E N C ED R I V I N G

Scaling Up your Wealth

Management Business

About Me

22

Anselm de SouzaManaging Director for Asia [email protected]

Spoken at:• VRL Wealth Management Round Table – Malaysia,

Indonesia• Wealth Management Round Table – Philippines• TOAP Convention – Philippines• Wealth Management Boot Camp – Philippines• Hubbis Wealth Management Forum – Malaysia,

Indonesia

Key Developments in Asian Private Wealth industry

Growth Challenges to the Asian WM Market

A fully integrated front-to-back approach to scaling up the WM business

23

Agenda

Changing Environment in Asia : Demographics

“ The Future belongs to those who prepare for it today” – Malcom X

Asian entrepreneurs

are contributing over 70% of

HNWi

Well Informed, Opinionated and

Transactional

Technically Savvy High level of

mobility

New ways to communicate and interact with their Relationship Mgrs

Younger investors – 41% of HNWI

are 45 years and younger

25

Changing Environment in Asia : Offshore vs Onshore

Outlook

• Better Economies

• Improved Product & Services

• Improved Regulation & Efforts

Tax & Regulatory Compliance

• Cross-border Taxation

• Disclosure/ reporting standards

• Changes in Capital and liquidity requirements

• FATCA

Financial Crime Prevention

• Know Your Customers procedures/anti-money laundering

• Risk management systems

Key Developments in Asian Private Wealth industry



26

Agenda

Common challenges in Wealth Management

Managing risk?

Facing regulatory changes?

Knowing and serving my client?

Streamlining operations?

Aligning Technology priorities with client needs

Conceptualising for STP

28

Key Focus for Today

Client Servicing : Person to person vs Automation

29

Source: Gartner

30

Clients get what they want, how they want it

• Identify and tailor segment of clients

Client Relationship Officer

Client Relationship Officer Call

Centre

Call Centre

InternetInternet

otherother

Re

tail B

an

kin

gR

eta

il Ba

nk

ing

Products & Channels

TRADITIONAL MODELOrganisation-Centric

Dis

co

un

t Bro

ke

rag

eD

isc

ou

nt B

rok

era

ge

Fu

ll-Se

rvic

e

Bro

ke

rag

eF

ull-S

erv

ice

B

rok

era

ge

Inv

es

tme

nt

Ma

na

ge

me

nt

Inv

es

tme

nt

Ma

na

ge

me

nt

Priv

ate

Ba

nk

ing

Priv

ate

Ba

nk

ing

Tru

st a

nd

fidu

cia

ry

se

rvic

es

Tru

st a

nd

fidu

cia

ry

se

rvic

es

TrustsTrusts

Advisory Advisory BankingBanking

Mutual Funds

Mutual Funds

Products

MultiChannels Insurance/

Pensions

Insurance/Pensions

NEW MODEL Client-Centric

Integrated service around Client segmentssupported by a dedicated access and service approach

Clients get what organisations want to sell themClients get what they want, delivered how they want it and at an acceptable priceRe

sult

Typical Situation

- 31 -

Relationship & Portfolio Managers

Deposits

Trust

Treasury

Credits

External ProvidersSystems

External Asset

Managers

Other Product

Providers

Stock Brokers

Internal Dept/ Systems

Manual / Semi Manual• Client On Boarding• Order Management• Portfolio Management• Collateral Management• Corporate Action• Settlement

• Client• Broker• custodian

InefficienciesConfidentiality

ErrorsMisappropriation

ComplianceRisk

Reputational Risk

Back Office / Ledger Systems

Client Support Unit & Operations

The Top 3

32

Customers

Return of Investments (yield)Better customer reportsSecured Transactions

Management

Increased revenue & marginsImproving skill sets of peopleManaging Compliance & Risk issues

PB/WM Head

Understanding clients needsTalent ManagementFluent Delivery & Operational efficiency

Issues Faced

Manual processes & Inadequate systemsTalent & staffing Adoption of new regulatory and compliance

Key Developments in Asian private banking industry



33

Agenda

Wealth Management Drivers and Challenges

34 - 34 -

Financial Accounting

Product and operationsmanagement

Risk Management

Clientsandchannels

Mass Affluent/

High Net Worth

Client retention or increase through excellence in service

Concentrate on Core Business

Product differentiation and short time to market

KYC, build client segmentation

Aggregated client reporting

Product efficiency: processing mass affluent but also individual elite

Wide functional coverage

Automating processes, moving processes back into core systems

Self-service e-platforms

Lower TCO Supporting

growth through increasing efficiency

Scale costs to activity

Growing corporate reporting

Growing significance of regulation (FATCA, MiFID, KYC, AML…)

Guarantee client confidentiality

IT Management

Product scaling and incremental approach to additional functions or tools

Cope with limited IT Resources

Remote access for Wealth Managers

COO, Head of Operations

CFO Risk Manager

Sales Manager, Wealth Manager CIO

Clients

Main source : PWC - Global Private Banking/Wealth Management Survey 2007: Executive Summary

Wealth Management Solution answers to Drivers and Challenges

35 - 35 -

Differentiators Best practices on Operational Efficiency & Compliance

Financial Accounting

Product and operationsmanagement

Risk Management

Clientsandchannels

COO, Head of Operations

CFO Risk Manager

Clients

360° view of clients assets and operations

Multi-channel inquiries and updates by Managers and Clients

Flexible solution, configurable for Mass and Individual

Comprehensive KYC info

Efficiency by flexible Model Portfolio, Autom. Order Alloc., Portfolio Constrains, …

Wide multi-functional WM and banking functions

Single Input, efficient controls, integrated STP front to back

E-channels with customer self servicing

Integrated Front to Back Office, to reduce TCO (licenses, interfaces costs, …)

Complete activity and profitability reporting

Built-in compliance (business as usual for editor)

Segregation of client info access

IT Management

CIO

Sound future-proof IT solution,

E-channels for Wealth Managers on front-to-back info

Sales Manager, Wealth Manager

- 36 -

Right Infrastructure?

Private and Wealth Management Systems

Maximum process automation

Flexibility

ReportingClients

RegulationTariffs

Wide functional coverageClients, Order Mngt, Accounting, CA

Specialized functions Constraints, Alerts, Allocated orders…

+

Short Time to Market

Solution Overview

- 37 -

Operations &Customer Servicing Teams

Relationship & Portfolio Managers

PNB Bank’s Internal Systems

SOPRA BANKING FOR WEALTH MANAGEMENT

Portfolios & Assets Management

Securities

Multiple Order Generation

Portfolio Constraints

Portfolio Performance

Portfolio Reporting

Model Portfolio

Order Mgt Settlement Platform

Custody Corporate Actions Mgt

Generic and analytics

Compliance reporting Reference Data Risk Mgt Communication Accounting

Financial data providers Markets & Exchanges CustodiansAuthorities

Deposits

Trust

Treasury

Credits

Internal Dept/ Systems

External Asset

Managers

Other Product

Providers

Stock Brokers

External Providers/ Systems

Private Banking Customers

A Wealth Management Solution to Upscale your Business

Business solution based on Ready-to-use set of features:

Specialised Wealth ManagementCombined with standard banking Functions

Integrated Front to Back

High flexibility but quick usability

Customer differentiation and Best practices in internal processes

THANK YOU !

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wealth management in asia - webinar

Technology

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paperwork private banking

affluent banking ab

retail banking rb

red carpet banking

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multichannel banking

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