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Private bankers ride an updraft in Asia as region's wealth soars

SINGAPORE: Katherine Kosasih, a 28-year-old private banker from Indonesia, took a new job a month ago, and is already receiving phone calls from head hunters who want to lure her away.

"I keep on telling them, 'No more - I want to stay where I am' " said Kosasih, who works in the Singapore office of LGT Bank in Liechtenstein. "But I must be on their database; or maybe a friend in the industry gave them my name. It's quite a small pool of people here and everybody knows everyone."

Kosasih has worked in wealth management for just five years, and has been a relationship manager for just over one year, but already she has worked for three employers in the sector, winning a significant pay rise each time that she has moved on.

After starting her banking career in Australia, as an account officer in a commercial bank in Sydney, she switched to wealth management in 2002, joining a European bank as an assistant private banker in Jakarta - an entry-level job selling wealth management products by cold-calling.

In 2005, moving onward and upward, she joined a Swiss bank in Jakarta as a relationship manager.

She had every intention of staying with her Swiss employer for the long haul, Kosasih said, "but when my boss left the bank it certainly influenced my decision to seek a change."

That decision led to her following her team leader to LGT. "When you're comfortable working with someone and you're comfortable working in a team, it's not unusual to have the whole team move," she said.

Kosasih declined to discuss her salary, or details of her previous employment packages, but industry sources said junior private bankers may receive $65,000-$78,000 a year plus a "significant" bonus, and can earn sharp increases, sometime doubling their salaries, when they move. A very senior banker can easily command several million dollars, plus bonus.

The young Indonesian's fast-track trajectory is far from unique. Private wealth management has been growing at an ever-faster pace in recent years in Asia, where high net worth individuals, defined as people with more than $1 million in liquid assets, had accumulated an estimated $7.6 trillion of financial wealth by the end of 2005, according to the most recent World Wealth Report, published by Merrill Lynch and Cap Gemini last year.

The report predicted these fortunes would increase at an average annual rate of 6.7 percent to reach $10.6 trillion by 2010.

"The industry has really evolved at super speed thanks to the Asian recovery story," said Tee Fong Seng, regional market manager for Southeast Asia at UBS Wealth Management. "People have so much more money, they're all looking for private bankers."

This year alone, industry analysts say, some 1,000 additional private bankers will be needed in Asia to cope with growing demand. This is presenting tremendous employment challenges as the region is facing an undersupply of talent. In the last couple of years the acute shortage of wealth management professionals in Asia has led to a game of musical chairs after bonus time in March and April, as banks have resolved to poach from one another.

In March, Barclays Wealth hired Didier Von Daeniken, a former co-head of private banking at Credit Suisse with over 16 years experience in the wealth market, to drive the British bank's Asian expansion.

According to industry sources, the mobility rate from one bank to another for private bankers in Asia is hovering around 15 percent, and team hiring appears to be on the increase as banks try to supercharge their pursuit of lucrative business opportunities.

In April, Deutsche Bank hired 18 executives from Citigroup Global Wealth Management, as the Citigroup team followed their former boss Ravi Raju - a 16-year Citibank veteran and regional managing director - who had already joined Deutsch Bank a month earlier. Also in April, UBS lost six private bankers to Goldman Sachs, including their team leader, Tan Shern Liang.

Tan has a career profile typical of the most sought-after private bankers. With more than 10 years experience as an asset portfolio manager for Citigroup, he switched to private banking in 1999, first at Citigroup, then at UBS in 2003. He also has a knowledge of Greater China clients and their needs, having worked for several years as a relationship manager on a Taiwan desk. "He's a very experienced private banker and the products knowledge he acquired as an asset manager comes in very useful for his clients," noted an industry source, who asked to remain anonymous. Tan declined to be interviewed for this story.

Christopher Sykes, managing director with responsibility for Greater China at Edward W Kelley, an executive search firm, said finding experienced bankers and persuading them to move to another institution is becoming increasingly difficult.

"You still tend to find good private bankers in the region, but you may also have to go to Switzerland or London," Sykes said. "They are expensive to hire and retain but it's also a question of quality of institution. This is rather important these days."

High-prestige institutions like Morgan Stanley, catering to ultra wealthy individuals, continue to attract talent, Sykes said. But "boutique banks can actually be more attractive for senior bankers because this is where more discerning clients at the top end will go.

"This particular niche, where fees can be high, is where many banks in Asia would like to be these days: low volume, high income."

With so much money in search of management, "it's very exciting for a middle or even a senior-level private banker to access this new wealth," Sykes said. 'If you're working on improving or building a business, it will be a challenge, but not as much as finding new wealth in Europe, for example."

But some industry analysts are starting to sound a note of warning.

"The musical chairs game currently played by wealth managers highlights a fundamental flaw in the wealth management business model," said Justin Ong, head of the wealth management practice at PricewaterhouseCoopers.

"Spiraling salaries cannot be the answer in this war for talent," Ong said. "It undermines the basis of the economic model."

Universities and training institutes in the region, like the Wealth Management Institute, a Singapore banking school set up in 2003, are not producing enough qualified individuals to meet the industry's growing demands, he added.

Large private banks like UBS, Credit Suisse, and Citigroup have recognized the shortage and started in-house training programs.

UBS, for example, is recruiting and training wealth managers from other branches of banking, and even from outside the industry, said Tee.

"Corporate bankers make the easiest conversion as private bankers and they can bring clients because of their previous job," he said.

"Investment bankers either make it big or find it difficult to adjust because they don't always have the right people skills, " he added.

Increasingly, however, banks are also looking at unrelated professions, hiring and training former engineers, lawyers, sales representatives and civil servants to fill the gaps.

"We look at some key attributes that will make them successful as private bankers. Of course you need some numeric abilities, but you also need an ability to listen well, an ability to converse. You must have an inquisitive mind," Tee said.

Pang Siu Yuin, is now a junior private banker at UBS Wealth Management, as she nears the end of an 18-month in-house training course. In her previous job, Pang was a senior manager at the Singapore Symphony Orchestra, in charge of programming and education.

"I was looking for a radical change of career, and wanted to be in a growth industry, using my people skills," Pang said. She was one of 33 successful candidates out of 3,000 hopefuls from the Asia-Pacific region who applied in 2006 for the first UBS Wealth Management Associate Program.

UBS has set up its own wealth management campus in Singapore and aims to train 5,000 private bankers there by 2010. Students are paid $46,000 to $59,000 annually, plus a bonus, during their training.

As part of the program - which included six weeks of classroom work studying private banking, basic economics, derivatives, and wealth planning, as well as advisory skills - Pang rotated amongst different UBS departments around the globe, including a six-week stint in Zurich which provided her with "a very good insight into the Swiss banking culture," she said. She now works as part of a team, shadowing two senior bankers.

In a world where bonuses are no longer enough to ensure loyalty, banks are trying various other initiatives to retain their employees, especially senior staff, said Ong.

"The higher the seniority, the greater the ownership needs are, and some banks are looking to give senior staff more freedom and responsibility, thus creating an 'ownership' element to the operating model," he said.

Some private banks are even exploring a franchising model, in which teams "are allowed to operate as pseudo-independent outlets within the bank," Ong said.

The franchise approach allows the team leader to take operational ownership of his, or her, business unit within the bank. "This means having the authority to decide on remuneration of relationship managers, pricing structures for products, spending on support services, for example," Ong said.

Several boutique and niche private banks have adopted this type of structure as a way to attract and keep talented managers, he said.

Source: the International Herald Tribune, By Sonia Kolesnikov-Jessop
Tuesday, May 22, 2007