Archive for October, 2013

We are not going to fight with local banks: Tan Su Shan

Tan Su Shan, managing director and group head of consumer banking and wealth management at DBS is very bullish on the Indian market. The Singapore banking major is aiming to make the most of the booming India-Singapore business corridor. In an interview with Samie Modak, Su Shan said that DBS doesn’t intend to fight with local banks and wants to just focus on what it’s best at.

While DBS set up its retail banking operations in India as early as 1994, it has been actively doing this business only since 2009. What was the reson for the reluctance and more importantly why is DBS now focused on retail banking in India?

Sanjeev (Bhasin) joined the bank five years ago. Under his leadership, we really looked at this (Indian) market with vigour. Our group CEO Piyush Gupta is from India and he knows this market very well. The new leadership that come on board with Piyush in 2009 has seized the moment. The Indian market might see some volatility in the short term but in the longer term we remain very bullish. A lot of NRIs we do business with have expressed interest in putting money in India. DBS has an edge as the India-Singapore business corridor is very strong. A lot of Indians have made Singapore their second home. On that basis, DBS can play a very strong role.
 
In India, most foreign banks have found it difficult to operate retail banking business profitably. In recent years, lenders like Barclays and Royal Bank of Scotland have exited the business. What strategy have you adopted to conduct retail banking business profitably in India?

I think what is important is the staying power and strategy. India is a very big market. We are never going to be like a local bank in terms of branch presence. The idea is to do what you are good at. We are going to focus on customers that are on the India, Singapore corridor. Despite the weakening of the rupee, every year there are thousand of Indian visitors to Singapore.

What is going to be your product offering?

We want to play to our strengths. We are not going to fight with the local banks. We want to supplement our lack of physical presence with digital presence. We have a good online platform and we are further refining that. Our strength is that we give really good deposit rates. For NRIs who want to come here, it is 9%. Interest rates are high here, so for you it’s not big deal but offshore it’s wow. We are not in the credit card game, but we give very good rebate on debit cards. We have got products that offer 8% post tax IRR (internal rate of return). They are good solid wealth management products, some top of range stuff that we can offer to the local HNI (high networth individuals) market and NRIs.

When would DBS India break even? Any growth targets that you’ve set?

I am hoping in the next year or so. If we get our productivity targets next year, I think we have a high chance. It’s up to the management team to do it. Growth targets set are in double digits and I think we can easily achieve it.

Will you be open to set up a subsidiary in India if the Reserve Bank of India (RBI) makes it mandatory? Are you facing any regulatory impediments in India?

We would be interested (in setting a subsidiary). We will focus on corporate banking, building SME capabilities. We will focus on the emerging affluent segment. The demographics are very encouraging. I will be honest I haven’t felt the impediments here were that great. There is so much to do onshore that it is enough for us to keep busy. With the recent
FCNR move, I think the direction is that they are welcoming a lot more FCNR flows. The world is moving towards free trade. The regulations will be tight for banks but that’s for different reasons.

What’s going to be the strategy for tapping the affluent class?

You have to be part of client’s wealth creation process. In case of all our clients, their business and personal wealth is inextricably linked, mostly the privately held companies. Therefore we are offering a package of financial solutions with wealth management solutions. In Asia, the wealth is very new. They have made a lot of money in the last 10 years. They are very rich in asset but are cash poor. So wealth management solutions cannot just say that I just want your money. In Asia part of the solution is financing, offering liquidity.

If you need to raise liquidity, Indian rates are too high. You have to look at the most optimal rate. We have done debt issuances in Singapore dollars for big Indian companies. Similarly, we have done Indian REITs. We have done securitisation and provided liquidity. We plan to roll out a mortage programme soon.

In times like this when banks are not lending, having a second alternative for funding is not a bad option and Singapore provides that. We are very excited with the Asian middle class.

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Thursday, October 31st, 2013 EN No Comments

No clear rules for family trusts: UBS

An increasing number of wealthy Chinese are seeking to make better use of their assets and get them properly protected in order to pass them on to the next generation, according to a senior official at UBS Securities Co Ltd. Provided to China Daily

Setting up a family trust using wealth management services on the Chinese mainland is still not an option, as existing laws don’t have clear rules to protect the interests of clients, said a senior official at UBS Securities Co Ltd.

An increasing number of wealthy Chinese are seeking to make better use of their assets and get them properly protected in order to pass them on to the next generation, UBS Securities added.

“We’ve been receiving continuous inquiries from our Chinese clients on family trusts in the past two to three years, as they realized that they have to consider how to pass on the assets to their children securely, but unfortunately we still cannot help them out,” said Tan Yuan Kueh, managing director and wealth management CEO at UBS Securities China.

She added that most wealthy businessmen in China use her firm’s services in overseas locations.

Family trusts are a common and efficient wealth management method in many countries to keep assets in the family and minimize taxes.

However, the scenario is different in China.

Zhang Qiong, UBS Securities’ executive director of investment products and wealth management services, said that current Chinese laws don’t clarify the final ownership of family trusts and that the registration of trust assets is not yet allowed.

Therefore, trust companies in China are still providing wealth management services via low-risk financial products and trust products instead of setting up family trusts.

“As we don’t want to bring any obvious risks to our clients, we currently don’t have any family trust services in China,” Zhang said.

Meanwhile, wealthy local residents are looking forward to having their assets properly protected for the second generations.

“If family trusts are legalized and have clear regulations, I would definitely choose to set up one to ensure that my children will access a certain amount of money as they grow up,” said Chen Xiuqing, a property developer in Wenzhou, Zhejiang province.

UBS Securities said that most local businessmen are wisely allocating their financial assets.

“Fewer people are putting their money in the stock market and in the real estate market. At the moment, most of them are waiting for better investment opportunities, while they choose to buy low-risk financial products from banks and other financial institutions,” said Jason Liu, head of the corporate advisory group at UBS Securities.

Liu added that trust products with controllable risks also are becoming quite popular among Chinese businessmen.

Meanwhile, more local businessmen are also choosing to make direct investments.

Asia Pacific’s wealthiest investors are moving money into direct investment opportunities and away from capital markets as they see greater opportunities in other businesses and in real estate, rather than in the equity and bond markets, according to the second annual UBS/Campden Wealth Asia Pacific Family Office Survey.

The survey showed that real estate investing receives the biggest asset allocation among all the markets in the region.

In addition, Chinese businessmen are also eyeing enhanced educational opportunities for their children when they place their assets overseas.

“More clients are willing to send their children overseas to high schools and universities, which they see as an opportunity to see the world and bring some knowledge back to help run the family businesses,” said Liu.

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Thursday, October 31st, 2013 EN No Comments

ON THE MOVE-UBS lands team of four advisers from Merrill Lynch


NEW YORK |
Thu Oct 31, 2013 5:20am IST

NEW YORK Oct 30 (Reuters) – UBS AG unit Wealth
Management Americas said on Wednesday it hired a team of four
financial advisers for its UBS Private Wealth Management office
in Los Angeles.

Advisers Mark Binder, Craig Chiate, Glenn Oratz and Scott
Brown have joined UBS from Merrill Lynch Private Banking
Investment Group, where they managed $3.1 billion in client
assets and liabilities.

“We as a team wanted to work at an organization that was
more exclusively focused on wealth management and not
necessarily commercial banking services and other areas,” Chiate
said in an interview.

Chiate said current UBS executives Robert McCann, Robert
Mulholland, Brian Hull and Mike Perry were instrumental in
recruiting him and his team.

All of those executives previously worked at Merrill Lynch.
McCann led Merrill’s wealth management business before joining
UBS as head of the firm’s U.S. wealth management unit in late
2009.

“We thought the world of them then and we’re happy to be
working with them again,” Chiate said.

Chiate said that he and his team have reached out to all of
their clients and expect that many will continue to work with
them.

The team began working at UBS on Oct. 29, the company said.
Binder, Chiate and Oratz spent 13 years at Merrill Lynch, and
each has been named to Barron’s magazine’s list of top 1,000
financial advisers in America at least once between 2009-2012.

Brown spent 10 years at Merrill Lynch before joining UBS.
UBS declined to comment on the team’s annual revenue production
while at Merrill Lynch. Merrill Lynch confirmed the departure
but declined to comment further.

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Thursday, October 31st, 2013 EN No Comments

Operating profits jump 36% at Ameriprise



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    Ameriprise Financial Inc. reported a second straight quarter of double-digit profit growth, driven by strong stock market gains and an insurance and annuities accounting change it makes every third quarter.

    Operating profits at the Minneapolis-based investment services company jumped 36 percent from a year ago to $392 million, or $1.91 per share, far outpacing Wall Street estimates of $1.73.

    Chairman and CEO Jim Cracchiolo called it an excellent quarter.

    “We are building on the momentum we’ve experienced throughout the year; wealth management is producing strong results and assets under management are up across the firm,” Cracchiolo said in a news release.

    Total assets under management and administration hit $735 billion, up 8 percent from a year ago.

    The company benefited from a big gain in its annuities business, mostly driven by its annual review of insurance and annuity valuation assumptions, typically done every third quarter. Operating profits in its annuities business more than doubled to $219 million compared with a year ago, when the accounting change lowered earnings in the segment.

    But Ameriprise also saw continued strong gains in its asset management and advice and wealth management units. Asset growth in fee-based accounts for retail customers drove operating net revenue in advice and wealth management up 12 percent to $1.1 billion.

    The company said it has relaunched its advertising campaign with actor Tommy Lee Jones.

    Ameriprise markets itself as the fifth-largest branded broker-dealer. Its army of 9,761 financial advisers focuses on the affluent and mass affluent — people with $100,000 or more to invest. Operating net revenue per adviser improved 12 percent to $110,000, it said.

    In contrast, the company’s long struggle with net outflows from its two big mutual fund managers Columbia and Threadneedle continues. Altogether, $4.3 billion more flowed out of the mutual funds in the third quarter than flowed in — more than double the outflows in the previous quarter and 25 percent more than year earlier.

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    Wednesday, October 30th, 2013 EN No Comments

    Baidu triggers alarm bells with launch of Baifa mutual funds

    A Baidu ad device at an expo in Nanjing. (Photo/CFP)

    A Baidu ad device at an expo in Nanjing. (Photo/CFP)

    Chinese internet search giant Baidu on Oct. 28 launched its first online wealth management product, Baifa, but within just one hour Baidu crashed due to the large surge of visits, resulting in a failure to take registrations on the Baifa accounts in several places such as Beijing and Shanghai, the online edition of the Chinese-language Economic Observer reports.

    During its promotional period, Baifa claimed an 8% yield for the mutual fund product, which sounded alarm bells at the national securities regulator for being above the maximum permitted limit.

    Later that day, Baidu announced that Baifa had sold wealth management products worth more than 1 billion yuan (US$164 million) within just five hours, with the number of its clients exceeding 120,000, reaching the quota for its founding members.

    Baidu is working with China Asset Management Co to launch Baifa, a money market fund seen as the investment product with the lowest risk in the wealth management field.

    During Baifa’s promotion period, its ads mentioned an 8% yield, which is misleading because a money market fund can have a yield of at most 5%. Last Friday, the China Securities Regulatory Commission convened many mutual funds firms and Baidu, stressing that all publicly raised mutual funds must follow the regulation not to mislead investors by guaranteeing yields. Baidu refrained from further mention of an 8% product yield, although seemingly it had already had the desired effect.

    Many financial institutions aren’t optimistic about Baidu’s move, or rather they remain cautious, because Baidu lacks a professional team like Alipay and it doesn’t have Tencent WeChat’s micro-paid mobile end users. Baidu hasn’t got the recognition necessary in relation to either products or awareness of the related risks, the institutions believe.

    However, in the internet era there is rising opportunity once a new platform is established. That’s why China Asset and Baidu have agreed to go ahead with their partnership.

    Financial risks are closely related to fund yields. No matter what kind of strategies are used to promote these companies, the financial institution partner, in this case, China Asset, must take the actual responsibility in controlling the financial risks within, the report said.

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    Wednesday, October 30th, 2013 EN No Comments

    Mercer appoints head of wealth management in Asia

    The Asset Update

    30 Oct 2013 by The Asset

      

    Contact The Asset
    © Asset Publishing and Research Limited

    All rights reserved. No unauthorized reproduction by any means.

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    Wednesday, October 30th, 2013 EN No Comments

    Baidu launches online wealth management platform

    China, South Africa vow upgraded relationship

    China and South Africa on Monday held their fifth plenary session of the China-South Africa Bi-National Commission in Beijing, vowing to upgrade their comprehensive strategic partnership.

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    Tuesday, October 29th, 2013 EN No Comments

    Baidu’s Baifa launches, gets over 1b yuan

    Baidu Inc, China’s leading search engine, has attracted more than 1 billion yuan ($164.3 million) of investment on its online wealth management product Baifa after it was made public Monday morning, the company said later that day.

    Baidu cooperated with China Asset Management Co to launch Baifa, which allows a minimum investment of just 1 yuan and was at one time promoted as a product with an annual fund return of 8 percent, though the company said on October 22 that it would not guarantee that rate.

    The wealth management product’s closest rival in the market is Yu’ebao, which was launched in June by China’s e-commerce giant Alibaba Group. Yu’ebao allows users of Alipay, China’s biggest online payment platform, to use the money in their accounts to invest in funds. Yu’ebao’s return rate stood at 4.8 percent Monday.

    China’s largest e-commerce and Internet service companies, including Alibaba Group, Tencent Holdings and Suning Appliance Co, have either made moves or shown interest in offering wealth management products online.

    Baidu touted Baifa as “an innovation based on the online financial service platform,” and is a “combination plan of wealth management products,” but it did not specify which components are included in the plan.

    Although the search engine giant heavily promoted Baifa prior to its launch, the product’s website encountered technical errors which prevented customers from logging in and buying the product for nearly three hours Monday morning.

    “Because the website received a huge amount of visits simultaneously, Web users from some locations had trouble logging in,” Baidu said in a statement published on its official Sina Weibo account.

    Zhang Meng, an analyst from Analysys International, told the Global Times Monday that it was “unacceptable” that Baifa’s website malfunctioned on the first day.

    “No matter what the cause was, it showed that Baidu did not

    prepare well and was not experienced enough in handling such deals,” Zhang said.

    An investor from Qingdao, East China’s Shandong Province, told the Global Times Monday on condition of anonymity that he took –thousands of yuan out of his Yu’ebao account a few days ago to invest in Baifa.

    “I’m so disappointed. I don’t know if I can still trust financial products offered by Baidu if it had such a problem on the very first day,” he said.

    Despite some customers’ disappointment, more than 1 billion yuan was invested in Baifa as of 2:50 pm on Monday, only two hours after the technical problem was fixed at 1 pm, the company said. No more updated data was available as of press time.

    Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting, told the Global Times Monday that Baifa performed so well because of heavy marketing from Baidu. However, Baidu needs time to set up close cooperation with banks before it could catch up with Yu’ebao’s service quality, Lu said.

    “While Alibaba is very experienced with conducting a large number of online deals at the same time, Baidu is still a newcomer to the game.”

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    Tuesday, October 29th, 2013 EN No Comments

    Studio interview: Baidu launches online wealth management platform

    China, South Africa vow upgraded relationship

    China and South Africa on Monday held their fifth plenary session of the China-South Africa Bi-National Commission in Beijing, vowing to upgrade their comprehensive strategic partnership.

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    Tuesday, October 29th, 2013 EN No Comments

    Wealth management challenges and opportunities in Asia

    Wealth management challenges and opportunities in Asia

    This may become the Asian century but the wealth management sectors of each Asian country behave differently and have varying products, processes and problems that require a nuanced response, writes  Michael Farrell.

    This may become the Asian century but the wealth management sectors of each Asian country behave differently and use varying products, processes and problems that require a nuanced response, writes  Michael Farrell. 

    In 2012, the then Federal Government released a white paper on Australia in the Asian Century, saying “The scale and pace of Asia’s transformation is unprecedented and the implications for Australia are profound”.  

    So as Australia repositions itself within the Asian region, advisers will need to carefully consider the implications for the financial advice industry and how they can best adapt to extract value for their own businesses.  

    A better understanding of the region, its nuances and opportunities is vital. 

    Having spent two years in Singapore and an additional period in Hong Kong, I was fortunate to be exposed to a variety of wealth management offers in a number of countries across the region as well as cross-border securities execution, clearing and supporting technology.   

    The first thing to acknowledge is Asia is not Asia – it consists of more than 50 countries, each quite unique in nature, with divergent cultures and varying levels of commercial maturity and infrastructure. 

    With a combined population of over four billion people and the two largest countries (China and India) accounting for over 2.5 billion of that total, and Indonesia  the third largest by population at close to 250 million, the region remains fertile ground for many industries including financial services.   

    As hubs Singapore and Hong Kong are global cities, quite different in nature, yet both pursuing excellence and dominance as centres for financial services in the region.

    The regulators in both centres continue to work towards advanced structures to ensure that retail client interests are protected, driven largely by the post-GFC mis-selling experiences of many. 

    The wealth management industries are vibrant in both countries; however Singapore is fast becoming the Private Banking hub of the region.  

    Throughout the region banks and insurance companies largely control wealth management and advice; however Singapore is fast growing an IFA channel concentrating on advice with open architecture. Irrespective, banks and insurance companies will continue to dominate until the IFA’s are able to create traction. 

    Whilst based in Singapore, what was enlightening was observing the wealth management industries in each of the geographical markets, how advice was provided, what advice entailed, who sought advice, the types of products utilised, how they were utilised, where the problems lay and the relative importance of the wealth management divisions in the various banks/institutions throughout the region. 

    Also interesting was dealing with the regulators requirements in each of those jurisdictions and the varying levels of knowledge and expertise observed.  Each of these markets had clear and unique characteristics and each one must be treated independently when determining opportunities.  

    The products and services across the region are varied and include investment products in multi-currency, FX, margin FX, offshore trusts, and insurance wrappers providing access to many of the mutual funds available. 

    Many of these products and services can be readily accessed at the retail banks. The nature of many of these products differs in nature to those in Australia and the means of client’s accessing them is clearly less restrictive. 

    Language and culture play a critical role in each market, so players working on a regional basis need to understand and appreciate that what works in one country may not work in another and what may seem sensible to you may well be nonsense to someone else.

    Developing relationships and building trust takes time and are important in most commercial dealings.  

    Often what you might hear might not be what you are being told. Continual confirmation and affirmation is often critical to ensuring desired outcomes are achieved. 

    There are two distinct client segments in the key geographical markets: 

    1. The local market, and 
    2. The expatriate market.  

    Each of these can be further segmented and some cross- over does exist.  

    The first is longer term for obvious reasons, needs to be treated as a domestic market and provided with products and services that meet the local needs. 

    Serving the different segments requires careful analysis and needs to meet the ever increasing demands and affluence of the local investor.

    Much of the investment by the wealthier individual and families is off-shore – Australia is an obvious beneficiary of these opportunities.  

    The expatriate market is more mobile, short/medium term in general and is looking for advice that crosses from the local environment whilst they live in the local market; however it also needs to address their homecoming and needs when this occurs. 

    The complexities of tax residency, retirement funding and offshore investments all require specific expertise. In general the expatriates utilise their home banks, financial advisers from their home market, local IFA’s specialising in ex-pat advice (who are often ex-pats themselves) and global banks that provide more tailored advice.  

    Whilst the advice industry is maturing at different rates in the numerous Asian countries, much of the activity is still focussed on products sales over the counter or by dedicated wealth managers in bank branches at the mass market level. 

    The international private client businesses offer services to the wealthier clients and provide a more global offering; however they are still focussed on product solutions rather than sophisticated structured advice.  

    Tied life insurance agents remain a major source of business for life companies, whilst the banks employ wealth managers to sell financial products. There are moves to improve the advice component within many life companies but it will take time to be successful. 

    At the other extreme the private banks cater for the HNW and UHNW and there is also the emergence of some family offices to meet the needs of this segment. 

    However the mass market segment is dominated by banks and insurance companies. IFAs do exist; however not in large numbers and often many specifically serving the ex-pat market.  

    Ethics and product sales incentives remain a significant concern in a number of the less developed markets throughout the region.  

    Whilst the Australian advice industry has been built around compulsory superannuation and the complexity of the Australian taxation system, some markets in Asia have their local advice industry built primarily around asset allocation and products. 

    Returning to Australia a number of things were quite obvious: 

    • regulation is significant and overwhelming at times; 
    • the industry structure has led to the prominence of complex regulated platforms; 
    • advice concentrates on retirement planning and incomes and minimising tax liabilities; 
    • research has a heavy qualitative overlay compared with Asia where quantitative measures are still prominent; 
    • the Australian market is relatively insular and rarely looks beyond its borders; 
    • banks dominate the advice industry and the Top 6 players are all locally owned; and 
    • global banks and insurance companies are minor players in the advice market. 

    In many ways these characteristics are similar to Asia: Indonesia for example is largely dominated by local players, and whilst some large local banks do have significant presence in Singapore and Hong Kong, the banks are building out their wealth management franchises. 

    Regulation in many countries is increasingly burdensome, yet perhaps Australia has developed an even more complex web of requirements.  

    Despite the complexities and continually changing regulations, Australia compares favourably in terms of governance, compliance, advice quality, disclosure, access to product and services and platforms. 

    Training and education is robust and is developing a more professional and quality industry. Australia’s financial advisers are focussed on providing quality financial advice as a prime objective and thereafter using appropriate products and services that support that advice.  

    The Asian region continues to develop and there are certainly opportunities for Australian businesses to provide guidance in the development of these markets in years to come. 

    Sensitivity to culture, humility, respect and patience are all virtues required to achieve success. 

    From an adviser’s perspective, access to the large and growing sector is coming via the Significant Investor Visa (SIV). The SIV was introduced in November 2012 to attract potential migrants with a demonstrated history of success in business and investment. 

    It allows foreign high net worth investors to invest $5 million into investments that meet the SIV guidelines for a minimum of four years before being eligible to apply for permanent residency in Australia.   

    By June 30, there were 305 applications being processed by immigration, with the majority coming from Chinese nationals, and the opportunity is there for many more. 

    To take advantage of this growth opportunity, developing relationships and/or a referral arrangement with an Asian counterpart, be it an adviser, an accountant or a potential client is important.

    For Australian advisers seeking to access opportunities in Asia, the challenge lies in developing a clearly defined focussed strategy that is well researched, considered and with patience a core virtue.   

    Michael Farrell is group general manager, advice division at IOOF.

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    Monday, October 28th, 2013 EN No Comments