By: Julian Webb
The high-net-worth-individual (HNWI) population in Asia Pacific (APAC) grew by 8.5% and wealth rates increased 11.4% in 2015, according to the World Wealth Report by RBC Wealth Management and Capgemini. In addition, the wealth of HNWIs in APAC is expected to reach $15.8 trillion and is poised to surpass the wealth in North America. While these numbers significantly impact private banks, what perhaps impacts them more is that their target investor audience is also getting younger.
A number of wealthy families are passing wealth down to their children, whose risk profiles are often different to those of their parents/elders. A number of private banks at Fund Forum Asia 2016 highlighted that this new generation is more focused on wealth preservation and marginal growth and is less likely than older generations to take risks; volatile markets make them nervous. Private banks must embrace this change and start talking to clients about investments that deliver risk-adjusted returns at minimal volatility. To understand sources of returns, banks need good data management and governance practices in order to deliver clients relevant and timely reporting across asset classes, currencies, and markets.
In addition, this younger audience is more tech savvy than older generations. While interpersonal relationships with HNWI clients will always be a fundamental aspect of private banking, those institutions that embrace automation, a data-driven culture, and digital communication channels (including mobile phone apps and social media) will have a competitive advantage. Delivering reports to clients in a simple, straightforward, and near real-time format is critical. Today’s clients want to know how their portfolios are doing instantaneously. Distributing reports to clients in a user-friendly format, and readable via a mobile or tablet, is also essential.
Private banks must work with service providers who understand client reporting best practices and how to manage and deliver underlying investment data. A failure to evolve could result in younger clients looking elsewhere and potential market disruptors – of which there are many – entering the fray. Fintech must be seen as a complement to private banks and not as a competitor. The private banking industry must evolve alongside fintech and leverage its strengths so it can retain its HNWI client base going forward.