August 28, 2024 • 22 mins
Hong Kong's wealth management is booming as rich mainland Chinese investors pour in funds. The city’s offshore wealth-under-management industry now amounts to more than $2.2 trillion, the second largest in the world, and is approaching Switzerland's level. What's driving these rich Chinese to invest overseas, and how will China's economic slump impact future flows?
Lemuel Lee, Head of Wealth Management Hong Kong at BNP Paribas, and Sharnie Wong, Senior Financials Analyst at Bloomberg Intelligence, discuss these issues with host John Lee on the Asia Centric podcast.
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Speaker 1 (00:02):
You're listening to Asia Centric from Bloomberg Intelligence, the podcast
that pulls back the curtain on global business so you
can invest better across the Asia Pacific rim. I'm John
Lee in Hong Kong. Hong Kong's wealth management industry is
booming as rich mainland Chinese investors continue to pour funds
into the city. Hong Kong's cross border wealth under management
(00:26):
is now over two point two trillion dollars, making it
the second largest in the world, and it's only a
matter of time before it overtakes Switzerland as the biggest
offshore finance center. What's driving China's individuals and families to
invest overseas, what are they investing in and how will
China's economic slump impact future flows. Here to discuss Hong
(00:50):
Kong's wealth management industry is Lemiel Lee, head of Wealth
management at BNP in Hong Kong, and Shani Wong, senior
financials analyst that Bloomberg and tell ugents. Welcome, Lemuel and Channing.
Thank you for having me here. Lemuel. What fact is
a driving Hong Kong as a wealth hump?
Speaker 2 (01:10):
Well, several key opportunities are driving across the private wealth
management industry in Hong Kong and Greater China. Firstly, the
Hong Kong government is actively fostering a thriving ecosystem for
family officers, making and attractive destinations for both clients and
wealth management professionals. More importantly, initiatives like tax the new
(01:33):
Capital Investment Entrance Scheme relaunched this year and other streamlined
regulations are attracting families and entrepreneurs to establish a presence
in Hong Kong, creating significant opportunities for wealth managers. Secondly,
the continued growth potential in mainland China. While growth may
have slowed, the sheer size and potential for the Chinese
(01:55):
market reminds undeniable. Hong Kong serves as a crucial wealth
management hub for its strategic location. Wealth managers with an
onshore presence are well positioned to capitalize on this growth
by catering for the growing affluent and high network segment
that has an offshore need. Thirdly, well established capital markets
(02:18):
Hong Kong is strengthening its position as a key connector
between the Asia, the Middle East, and the mainland China.
This interconnectedness, coupled with a revival and IPO activity, presents
opportunities for wealth managers to offer investment solutions and capture
a share of the growing capital flows or not. I
(02:39):
see these three factors as the driving force to inflows
in Hong Kong.
Speaker 1 (02:44):
Lemillu alluded to China's weak economic picture. It's well known
that the country is suffering from a slow down. Its
property market and stock markets are both pressed. Consumption is weak.
But on the other hand, as we all know, mainland
investors continue to pour money offshore. Are you surprised by
the strength of all the flows given the weak economic picture.
Speaker 2 (03:08):
China continues to be a key growth drive in the region.
Growth may have slowed down, but the potential is still huge.
Our access and interactions determines our flows. For example, the
connect schemes between Hong Kong and China enables international investors
to gain broader access to onshore China capital markets. Through
(03:30):
Hong Kong Remenbe internization presents opportunities for Hong Kong to
position itself as an offshore Remenbee hub and wealth management
center for remen Be assets for both China and international investors.
In fact, after COVID, we have deepened interactions with prospects
(03:50):
and existing clients. As Chinese investors get more sophisticated, our
bankers have been taking the opportunity to engage in conversations
around more complex wealth needs such as secession planning, family
office setup, and wealth diversification for their offshore wealth, pivoting
a lot from the traditional discussions around pure investments. The
(04:14):
reduced iper activities and fundraising nevertheless has dampened overall investment
sentiments and less pronounced wealth creations, hence less assets and flows.
Speaker 1 (04:26):
And where are the rich mainland investors?
Speaker 2 (04:30):
Like?
Speaker 1 (04:30):
Where they putting their money? Is it in like an
S and P five hundred ETF? Is it gold? Is
it bitcoin? Is it? You know? Money? Paintings give us
some color? Where are they putting their money?
Speaker 2 (04:43):
Can I say all of the above?
Speaker 1 (04:45):
Okay? Look?
Speaker 2 (04:47):
After close to two years of pent up cash and
deposit balances due to high interest rates, clients have finally
started to return more broadly to lower risk and higher
quality segments of the market. Top inflows were into fixed
income such as global bond funds with a bias towards
developed market and investment grade. These well rated bond funds
(05:11):
provide relatively attractive, stable distribution income and our ideal position
for the rates cut environment. Equities continues to build momentum,
in particular towards Japan, India and US across different sectors
related to technology. With heightened volatility, many clients choose to
(05:31):
use structure products to cautiously enter the market to limit
the downside. We also advocate higher portfolio diversification to improve
risk return profiles for our clients and hence also saw
good inflows for multi assets funds, but also to add
higher components to alternatives including private debt, equity and hedge funds.
(05:53):
In particular, liquid alternatives like relative value fixed income and
long short global equity strategies receiving the best traction by
Chinese investors.
Speaker 1 (06:05):
And you first mentioned bond funds. Now you can get
much higher interest rates in the US and other parts
of the world than in China. The US stock markets
have also significantly outperformed those on the mainland. Is this
also another reason why mainland investors want to invest overseas
but just getting a lot better returns.
Speaker 2 (06:26):
I think returns headline is one target of which investors
are yield seeking, but I think what's more the pertinent
question is diversification. Many investors over the last four years
have natural home bias and they've invested in their own markets,
and we've seen the performance of Hong Kong and China
as a result. They've learned the benefits of diversification and
(06:49):
not only targeting returns with the US, but earlier mentioned Japan, India,
and they're really yield seeking to find returns in those
respective markets, and that's why we really see the benefits
of dipersification outside of your home market.
Speaker 1 (07:05):
Asia Centric is produced by Bloomberg Intelligence, where more than
five hundred experienced analysts and strategists work around the clock
to bring you timely, world class research. Our coverage spans
two hundred market industries, currencies, commodities, and industries, as well
as over two thousand equities and credits. If you like
(07:25):
what you hear, don't forget to subscribe and chirm let
me you're the head of wealth at BMP. A lot
of listeners want to know how rich are these people.
Are they sort of like crazy rich billionaires or are
they more like the single digit millionaire types? Like what
(07:45):
does it take to become a client of a private bank?
Speaker 2 (07:50):
Well, my definition private banking. There's several segments in the
market but I'll use the industry standard of what we
call the high network, which is generally between three to
up to let's say twenty million or so, and the
ultra high network, which is from normally thirty all the
way up to one hundred or even to the billions.
So the range is there. We are BNP par serve
(08:12):
the spectrum of clients and are really agnostic to the size.
What's more important is we're making sure that we serve
the needs and the needs offshore.
Speaker 1 (08:21):
Okay, Shane, I want to bring you into the conversation.
The chairman of UBS, Sergia Ermodi, warned earlier this year
that Switzerland could lose its crown as the world's wealth
management hub to Hong Kong. Now, can you give us
some numbers? Is this a foregone conclusion and like when
is this going to happen?
Speaker 3 (08:41):
Yes, right now, Hong Kong has roughly about two point
two trillion of our cross border wealth and Fwitzerland is
the head with about two point four tillion. But when
we look at the growth opportunity, the growth in Asia
is a lot faster than what we're seeing in Europe,
which is a developed market. So you know, a slam
also mentioned. A key driving force is China. It is
(09:04):
the second largest in terms of wealth globally, behind the US,
and people are still getting richer. You know, despite COVID
and despite their current property slump, people still save a lot.
You know, the savings rates really high, about the third
of their income. And right now with the fact that
property's done, you know, it's not an attractive investment. And
(09:26):
then with deposit rate cuts, there is this huge drive
for them to use that money and invest in high
yielding investment products. And I think offshore is definitely a
very attractive destination for them. Even if the FED cuts
rates later this year, the yields on something very low
risk like a time deposit, it's still far higher than
(09:48):
what they get on shore. So I think this is
one of the key drivers that is pushing a lot
of onshore customers to Hong Kong.
Speaker 1 (09:56):
Okay, And when will Hong Kong overtake Switzerland? Do you think.
Speaker 3 (10:01):
When we look at the growth potential, so for Hong
Kong it could grow roughly about six to eight percent,
so it should happen within the next two to three years.
Speaker 1 (10:12):
And when a rich mainland investor decides to pour money overseas.
It's not just Hong Kong. There's other options as well.
There's obviously Singapore, there's also maybe potentially Dubai. How does
Hong Kong compete for this money shanny. Yeah, So one.
Speaker 3 (10:30):
Edge that Hong Kong has that none of the other
places have would be their infrastructure connecting Hong Kong and
global investors with China. And also the fact that right
now regulators are really prioritizing these cross border schemes. They're
really pushing ahead. So for example, earlier this year they
increase the quotas for the southbound Wealth Management to connect
and also they relax the eligibility criteria for the ETF
(10:53):
connect And there's just so much going on. So when
we look at the flows through so many of their
cross border schemes, like the Neutral Cognition A fund scheme
for example, with AUM there surging. We look at the
GDII funds on shore that is also accelerating. So it
goes to show that policy support is also very important,
and I think that is one key differentiating factor with
(11:14):
Hong Kong. Thus is anywhere else.
Speaker 1 (11:16):
And lemme or did you want to add to that?
Speaker 2 (11:19):
Well, absolutely, I think Hong Kong and Singapore both possess
key advantages that make them both leading hubs for managing
private wealth in Asia. They both have their unique strength
catering to varying client needs. Rather than competing I outside,
they're often complementing each other in serving needs of sophisticated investors.
(11:39):
Some families now opt to set up accounts in both cities.
Client seed diversification not only at a portfolio level, but
also the custody of assets in terms of location the
versification we see the growth of Asian high network and
Ultra high network population, further strengthening the proposition for both hubs.
(12:00):
Emerging markets like to buy are also worth monitoring, but
unlikely to supersede establish plays. Yet, when we talk about competition,
one point that I want to highlight for us is
the competition on talent. This is something that keeps me
up every night. You know, how do we position ourselves
as to go to bank to attract the right talents,
(12:22):
to build a good working environment that enables our people
to unleash their potential and perform at the best.
Speaker 1 (12:29):
I wanted to mention on Singapore. Now they had a
huge money laundering scandal last year. Authorities jailed. I think
a number of individuals from the mainland. I think it
was over two billion dollars. It was reported by various
press that the funds were from criminal activities. Now, the
Singapore authorities subsequently tightened family office regulations, making it more
(12:53):
difficult basically to park your money. There is this do
you think benefiting Hong Kong at all? Like this money
now moving.
Speaker 3 (13:00):
Back to Hong Kong, I think with Singapore's regulators really
tightening the rules and you know, implementing tougher compliance criteria
for a lot of these private banks, there could be
a return of family officers to Hong Kong. So previously
Singapore grew a lot faster than Hong Kong did, especially
(13:20):
throughout COVID. There was a recent commission survey done by
the Hong Kong government which showed that in Hong Kong
there's about two thousand, seven hundred single family offices and
then Singapore had about one thousand, four hundred. So right
now Hong Kong family office space is still a lot larger.
But I think going forward, you know, as Singapore's regulated
tightened in terms of scrutiny on the industry, Hong Kong
(13:44):
at the same time, they are easing rules to clean
tax concessions. So I think for the next a couple
of years we could see Hong Kong maybe extend its
lead a little bit.
Speaker 2 (13:54):
I think what's important is to maintain a high standard
of email vigilance in terms of onboarding, and I think
Hong Kong over the years and decades there have been
as an international hub, have maintained the standard, and that's
why that has been proven to reinforce one of the
earlier points around well capitalized our market. And that's in
(14:15):
itself the attractiveness because of the soundness of the fact
that Hong Kong remains robust as a world class international
financial centers and has the ability to really make sure
that the wealth comes in addressing this needs. I think
it's more pertinent and also explains the reason why these
inflows are being reinforced back into Hong Kong.
Speaker 1 (14:36):
And Lemielle, you talked about the war for talent. You
are always trying to get the best people. Now, when
I look at Hong Kong, I think a lot of
people will be surprised at how strong the wealth management
industry is doing. If you listen to the press, Hong
Kong's property market is really suffering, especially on the commercial side.
You know, Shannie mentioned that IPO activity is really down.
(14:59):
Retail spending is down as well. But it seems like
the wealth management industry is the one sort of shining
light within the finance industry that's doing well. Are you
getting a lot of people, a lot of cvs wanting
to work at BMP, and how are you trying to
attract the right talent?
Speaker 2 (15:19):
In terms of attracting talent, it's not something that we've
only seen as the last couple of years. What's important
to attract talent in the industry is making sure that
we have the ecosystem for them to thrive. And I
look at it in terms of three pillars or three pongs.
Speaker 3 (15:34):
One.
Speaker 2 (15:35):
We need to make sure that we attract the right
people for that to happen. We need to make sure
that we ensure we train them. We train them so
that they know how to be in the industry, they
know how to help serve the clients. And that's really
important because we need to make sure that they we're
given the career to thrive and having a longer term
prospect in the private wealth industry. Second of all, we
(15:56):
need to make sure that they actually have the platform
it was earlier shared by There's a lot of different
regulations that come out, whether it be the SPI or
the CIS. You know, how does the platform be agile
enough to adapt to these new changes so you can
be one of the earliest movers to be leading in
the private banking industry. And I think what's also important
(16:17):
is the platform allows you to customize to the needs
of our clients, so that you're not having cookie cutters
and pushing products, but really customizing the needs of the
inversus of whether it's high net worth or or try networth.
And lastly, what's important is to have the products. We
need to make sure the products are there, that we
are serving the needs of our clients. And now as
(16:39):
clients needs are getting more sophisticated, we actually serve not
only the needs based out of Asia, but they may
have needs for MPa propose in Europe or we actually
help them in terms of one bank. Also the business
needs whether they need to raise capital or have M
and A so all not to attract talent. I think
these three pillars are vital so that we can serve
(17:02):
our clients' needs holistically and as a result of this
over the years, Yes, we've been getting a lot of cbs.
Speaker 1 (17:07):
To join us and Shannie. Looker Lemuel has been talking
about BNP's role. But you know, just outside of B
and P, which companies are really thriving in this wealth
management environment in Hong Kong.
Speaker 3 (17:21):
So I think everyone is doing really well. When we
look at the more Hong Kong centric global banks like
HSBC and Standard Hearted, you know, they talk about very
strong increase in wealth management revenue. There isn't that much disclosure,
but of what they disclose it is going very well.
So for example, Muta fund sales, insurance sales that they're
(17:44):
doing very well. And then when we look at the
Singapore banks as well, apart from them, you know, with
a very big presence in Singapore, they also have a
very large operation in Hong Kong too. So I think
the Hong Kong banks and also the Singapore banks, just
by their geographical footprint, they are pro the most positively
leveraged to this Hong Kong Welsh growth story.
Speaker 1 (18:05):
And look, we talked a lot about the growth potential,
but let's also talk about the risk. Now. We all
know that investing in this part of the world, especially
when it relates to China, there's always regulatory risk. Is
there any regulatory risks you can see on the horizon?
A Shani? Can you just talk about that.
Speaker 3 (18:23):
What we've seen the regulators do in recent years is
to relax the rules, and it is quite unpredictable at times,
but I don't think that they'll backtrack anytime soon. And
from what the Hong Kong regulators and also mainline regulators
have said, they do plan to increase the quotas for
their current schemes, like for example, the Southound Wealth Management Connects.
(18:44):
They already just tripled the individual quota to three million
R and B and there is talk of that potentially
being listed higher. Because you know, this quota it doesn't
really cater to the private banking space, which you know
have a far larger out of wealth. So I think
going forward, it's likely that they're going to be more
(19:05):
opportunities to come in terms of what could potentially go wrong. Ultimately,
the regulators they do have a lot of control, so
if any of these schemes were to not work, or
if there's any sudden shock to the system or stress
to the system, they could potentially pull back or tighten approvals.
Another example would be the MRF scheme. Right now, the
(19:27):
rules are quite tight and even though the scheme does
allow asset managers to access on shore retail customers, the
pace of approval has been quite slow. But then again,
there are talks of the rules being relaxed going forward.
So you know that again is hope and more opportunity
for Hong Kong FI managers to take advantage of these
(19:48):
opportunities as they come.
Speaker 2 (19:50):
Maybe I want to share one point. I would say
industry trends have been continually thinking that Hong Kong has
attracted money purely from China, but I do believe that
has changed. What I mean by that is that Hong
Kong as a super connector attracts significant capital inflows from
(20:10):
not only China, but also playing a pivotal role in
linking to Southeast Asia and the Middle East. Its strategic location,
robust legal framework, it's deep pool of financial talent and
unparalleled service level makes it an attractive destination for both
clients and wealth management professions. This we knows Hong Kong
(20:31):
standing and Hong Kong has a long history of capital flows,
expertise and device to and from Southeast Asia. The Hong
Kong government has recently been putting a lot of effort
in building the corridors with the Asian countries, which has
helped to drive a lot of business opportunities from MOSO
places like Indonesia and Thailand. We're also seeing how things
(20:53):
will involve in terms of the Middle East, and this
is rather new, so we haven't seen significant inflows, but
there's a growing effort to develop this dialogue. So I
thought it would be important for the listeners to also
get a sense of where these flows are coming from
across the region.
Speaker 1 (21:09):
Okay, before I let you go, Lemielle, there's listeners of
Asia centric all around the world. You know, a lot
of people listening to you probably want a job in
private banking. But if you're not in private banking, how
do you get your foot in the door? Like give
them some tips?
Speaker 2 (21:25):
Well, I think what's important is to have transferable skill sets.
What I mean by this is if you've been working
in let's say, asset management, you may have an interest
to join our discretionary or investment counselor's team. If you've
got expertise across specific asset classes like equity, bonds of
fixed income, you can join our products team. But if
(21:46):
you overall have a passion to serve the needs of clients,
have a real meaningful engagement with clients in general and
serving their needs, then you can become a banker and
relationship manager. And what's really interesting and makes the career
and wealth management fun is there's something new every day
because clients have multi angles of needs and they change
(22:06):
throughout the life of their wealth journey. And what I
mean by that is wealth is generally comes into three cycles.
They have wealth generation, wealth management and wealth legacy. And
what makes it fun is that we follow our clients
through those cycle and that changes every day.
Speaker 1 (22:23):
Okay, that's a great answer, Lemiel. We have three Australians
working in Hong Kong now speaking on this podcast. If
three Australians can do it, then other people can do
it as well. It's been an interesting discussion on Age's
wealth industry, China's billionaires, and Hong Kong's role as offshore
(22:43):
financial center. Thank you, Lemiel and Shannie for joining the show.
Speaker 2 (22:47):
Thank you.
Speaker 3 (22:48):
Thanks.
Speaker 1 (22:50):
I'm John Lee in Hong Kong. This podcast was produced
by Clara Chen and you've been listening to the age
of centric podcast
You're listening to Asia Centric from Bloomberg Intelligence, the podcast
that pulls back the curtain on global business so you
can invest better across the Asia Pacific rim. I'm John
Lee in Hong Kong. Hong Kong's wealth management industry is
booming as rich mainland Chinese investors continue to pour funds
into the city. Hong Kong's cross border wealth under management
(00:26):
is now over two point two trillion dollars, making it
the second largest in the world, and it's only a
matter of time before it overtakes Switzerland as the biggest
offshore finance center. What's driving China's individuals and families to
invest overseas, what are they investing in and how will
China's economic slump impact future flows. Here to discuss Hong
(00:50):
Kong's wealth management industry is Lemiel Lee, head of Wealth
management at BNP in Hong Kong, and Shani Wong, senior
financials analyst that Bloomberg and tell ugents. Welcome, Lemuel and Channing.
Thank you for having me here. Lemuel. What fact is
a driving Hong Kong as a wealth hump?
Speaker 2 (01:10):
Well, several key opportunities are driving across the private wealth
management industry in Hong Kong and Greater China. Firstly, the
Hong Kong government is actively fostering a thriving ecosystem for
family officers, making and attractive destinations for both clients and
wealth management professionals. More importantly, initiatives like tax the new
(01:33):
Capital Investment Entrance Scheme relaunched this year and other streamlined
regulations are attracting families and entrepreneurs to establish a presence
in Hong Kong, creating significant opportunities for wealth managers. Secondly,
the continued growth potential in mainland China. While growth may
have slowed, the sheer size and potential for the Chinese
(01:55):
market reminds undeniable. Hong Kong serves as a crucial wealth
management hub for its strategic location. Wealth managers with an
onshore presence are well positioned to capitalize on this growth
by catering for the growing affluent and high network segment
that has an offshore need. Thirdly, well established capital markets
(02:18):
Hong Kong is strengthening its position as a key connector
between the Asia, the Middle East, and the mainland China.
This interconnectedness, coupled with a revival and IPO activity, presents
opportunities for wealth managers to offer investment solutions and capture
a share of the growing capital flows or not. I
(02:39):
see these three factors as the driving force to inflows
in Hong Kong.
Speaker 1 (02:44):
Lemillu alluded to China's weak economic picture. It's well known
that the country is suffering from a slow down. Its
property market and stock markets are both pressed. Consumption is weak.
But on the other hand, as we all know, mainland
investors continue to pour money offshore. Are you surprised by
the strength of all the flows given the weak economic picture.
Speaker 2 (03:08):
China continues to be a key growth drive in the region.
Growth may have slowed down, but the potential is still huge.
Our access and interactions determines our flows. For example, the
connect schemes between Hong Kong and China enables international investors
to gain broader access to onshore China capital markets. Through
(03:30):
Hong Kong Remenbe internization presents opportunities for Hong Kong to
position itself as an offshore Remenbee hub and wealth management
center for remen Be assets for both China and international investors.
In fact, after COVID, we have deepened interactions with prospects
(03:50):
and existing clients. As Chinese investors get more sophisticated, our
bankers have been taking the opportunity to engage in conversations
around more complex wealth needs such as secession planning, family
office setup, and wealth diversification for their offshore wealth, pivoting
a lot from the traditional discussions around pure investments. The
(04:14):
reduced iper activities and fundraising nevertheless has dampened overall investment
sentiments and less pronounced wealth creations, hence less assets and flows.
Speaker 1 (04:26):
And where are the rich mainland investors?
Speaker 2 (04:30):
Like?
Speaker 1 (04:30):
Where they putting their money? Is it in like an
S and P five hundred ETF? Is it gold? Is
it bitcoin? Is it? You know? Money? Paintings give us
some color? Where are they putting their money?
Speaker 2 (04:43):
Can I say all of the above?
Speaker 1 (04:45):
Okay? Look?
Speaker 2 (04:47):
After close to two years of pent up cash and
deposit balances due to high interest rates, clients have finally
started to return more broadly to lower risk and higher
quality segments of the market. Top inflows were into fixed
income such as global bond funds with a bias towards
developed market and investment grade. These well rated bond funds
(05:11):
provide relatively attractive, stable distribution income and our ideal position
for the rates cut environment. Equities continues to build momentum,
in particular towards Japan, India and US across different sectors
related to technology. With heightened volatility, many clients choose to
(05:31):
use structure products to cautiously enter the market to limit
the downside. We also advocate higher portfolio diversification to improve
risk return profiles for our clients and hence also saw
good inflows for multi assets funds, but also to add
higher components to alternatives including private debt, equity and hedge funds.
(05:53):
In particular, liquid alternatives like relative value fixed income and
long short global equity strategies receiving the best traction by
Chinese investors.
Speaker 1 (06:05):
And you first mentioned bond funds. Now you can get
much higher interest rates in the US and other parts
of the world than in China. The US stock markets
have also significantly outperformed those on the mainland. Is this
also another reason why mainland investors want to invest overseas
but just getting a lot better returns.
Speaker 2 (06:26):
I think returns headline is one target of which investors
are yield seeking, but I think what's more the pertinent
question is diversification. Many investors over the last four years
have natural home bias and they've invested in their own markets,
and we've seen the performance of Hong Kong and China
as a result. They've learned the benefits of diversification and
(06:49):
not only targeting returns with the US, but earlier mentioned Japan, India,
and they're really yield seeking to find returns in those
respective markets, and that's why we really see the benefits
of dipersification outside of your home market.
Speaker 1 (07:05):
Asia Centric is produced by Bloomberg Intelligence, where more than
five hundred experienced analysts and strategists work around the clock
to bring you timely, world class research. Our coverage spans
two hundred market industries, currencies, commodities, and industries, as well
as over two thousand equities and credits. If you like
(07:25):
what you hear, don't forget to subscribe and chirm let
me you're the head of wealth at BMP. A lot
of listeners want to know how rich are these people.
Are they sort of like crazy rich billionaires or are
they more like the single digit millionaire types? Like what
(07:45):
does it take to become a client of a private bank?
Speaker 2 (07:50):
Well, my definition private banking. There's several segments in the
market but I'll use the industry standard of what we
call the high network, which is generally between three to
up to let's say twenty million or so, and the
ultra high network, which is from normally thirty all the
way up to one hundred or even to the billions.
So the range is there. We are BNP par serve
(08:12):
the spectrum of clients and are really agnostic to the size.
What's more important is we're making sure that we serve
the needs and the needs offshore.
Speaker 1 (08:21):
Okay, Shane, I want to bring you into the conversation.
The chairman of UBS, Sergia Ermodi, warned earlier this year
that Switzerland could lose its crown as the world's wealth
management hub to Hong Kong. Now, can you give us
some numbers? Is this a foregone conclusion and like when
is this going to happen?
Speaker 3 (08:41):
Yes, right now, Hong Kong has roughly about two point
two trillion of our cross border wealth and Fwitzerland is
the head with about two point four tillion. But when
we look at the growth opportunity, the growth in Asia
is a lot faster than what we're seeing in Europe,
which is a developed market. So you know, a slam
also mentioned. A key driving force is China. It is
(09:04):
the second largest in terms of wealth globally, behind the US,
and people are still getting richer. You know, despite COVID
and despite their current property slump, people still save a lot.
You know, the savings rates really high, about the third
of their income. And right now with the fact that
property's done, you know, it's not an attractive investment. And
(09:26):
then with deposit rate cuts, there is this huge drive
for them to use that money and invest in high
yielding investment products. And I think offshore is definitely a
very attractive destination for them. Even if the FED cuts
rates later this year, the yields on something very low
risk like a time deposit, it's still far higher than
(09:48):
what they get on shore. So I think this is
one of the key drivers that is pushing a lot
of onshore customers to Hong Kong.
Speaker 1 (09:56):
Okay, And when will Hong Kong overtake Switzerland? Do you think.
Speaker 3 (10:01):
When we look at the growth potential, so for Hong
Kong it could grow roughly about six to eight percent,
so it should happen within the next two to three years.
Speaker 1 (10:12):
And when a rich mainland investor decides to pour money overseas.
It's not just Hong Kong. There's other options as well.
There's obviously Singapore, there's also maybe potentially Dubai. How does
Hong Kong compete for this money shanny. Yeah, So one.
Speaker 3 (10:30):
Edge that Hong Kong has that none of the other
places have would be their infrastructure connecting Hong Kong and
global investors with China. And also the fact that right
now regulators are really prioritizing these cross border schemes. They're
really pushing ahead. So for example, earlier this year they
increase the quotas for the southbound Wealth Management to connect
and also they relax the eligibility criteria for the ETF
(10:53):
connect And there's just so much going on. So when
we look at the flows through so many of their
cross border schemes, like the Neutral Cognition A fund scheme
for example, with AUM there surging. We look at the
GDII funds on shore that is also accelerating. So it
goes to show that policy support is also very important,
and I think that is one key differentiating factor with
(11:14):
Hong Kong. Thus is anywhere else.
Speaker 1 (11:16):
And lemme or did you want to add to that?
Speaker 2 (11:19):
Well, absolutely, I think Hong Kong and Singapore both possess
key advantages that make them both leading hubs for managing
private wealth in Asia. They both have their unique strength
catering to varying client needs. Rather than competing I outside,
they're often complementing each other in serving needs of sophisticated investors.
(11:39):
Some families now opt to set up accounts in both cities.
Client seed diversification not only at a portfolio level, but
also the custody of assets in terms of location the
versification we see the growth of Asian high network and
Ultra high network population, further strengthening the proposition for both hubs.
(12:00):
Emerging markets like to buy are also worth monitoring, but
unlikely to supersede establish plays. Yet, when we talk about competition,
one point that I want to highlight for us is
the competition on talent. This is something that keeps me
up every night. You know, how do we position ourselves
as to go to bank to attract the right talents,
(12:22):
to build a good working environment that enables our people
to unleash their potential and perform at the best.
Speaker 1 (12:29):
I wanted to mention on Singapore. Now they had a
huge money laundering scandal last year. Authorities jailed. I think
a number of individuals from the mainland. I think it
was over two billion dollars. It was reported by various
press that the funds were from criminal activities. Now, the
Singapore authorities subsequently tightened family office regulations, making it more
(12:53):
difficult basically to park your money. There is this do
you think benefiting Hong Kong at all? Like this money
now moving.
Speaker 3 (13:00):
Back to Hong Kong, I think with Singapore's regulators really
tightening the rules and you know, implementing tougher compliance criteria
for a lot of these private banks, there could be
a return of family officers to Hong Kong. So previously
Singapore grew a lot faster than Hong Kong did, especially
(13:20):
throughout COVID. There was a recent commission survey done by
the Hong Kong government which showed that in Hong Kong
there's about two thousand, seven hundred single family offices and
then Singapore had about one thousand, four hundred. So right
now Hong Kong family office space is still a lot larger.
But I think going forward, you know, as Singapore's regulated
tightened in terms of scrutiny on the industry, Hong Kong
(13:44):
at the same time, they are easing rules to clean
tax concessions. So I think for the next a couple
of years we could see Hong Kong maybe extend its
lead a little bit.
Speaker 2 (13:54):
I think what's important is to maintain a high standard
of email vigilance in terms of onboarding, and I think
Hong Kong over the years and decades there have been
as an international hub, have maintained the standard, and that's
why that has been proven to reinforce one of the
earlier points around well capitalized our market. And that's in
(14:15):
itself the attractiveness because of the soundness of the fact
that Hong Kong remains robust as a world class international
financial centers and has the ability to really make sure
that the wealth comes in addressing this needs. I think
it's more pertinent and also explains the reason why these
inflows are being reinforced back into Hong Kong.
Speaker 1 (14:36):
And Lemielle, you talked about the war for talent. You
are always trying to get the best people. Now, when
I look at Hong Kong, I think a lot of
people will be surprised at how strong the wealth management
industry is doing. If you listen to the press, Hong
Kong's property market is really suffering, especially on the commercial side.
You know, Shannie mentioned that IPO activity is really down.
(14:59):
Retail spending is down as well. But it seems like
the wealth management industry is the one sort of shining
light within the finance industry that's doing well. Are you
getting a lot of people, a lot of cvs wanting
to work at BMP, and how are you trying to
attract the right talent?
Speaker 2 (15:19):
In terms of attracting talent, it's not something that we've
only seen as the last couple of years. What's important
to attract talent in the industry is making sure that
we have the ecosystem for them to thrive. And I
look at it in terms of three pillars or three pongs.
Speaker 3 (15:34):
One.
Speaker 2 (15:35):
We need to make sure that we attract the right
people for that to happen. We need to make sure
that we ensure we train them. We train them so
that they know how to be in the industry, they
know how to help serve the clients. And that's really
important because we need to make sure that they we're
given the career to thrive and having a longer term
prospect in the private wealth industry. Second of all, we
(15:56):
need to make sure that they actually have the platform
it was earlier shared by There's a lot of different
regulations that come out, whether it be the SPI or
the CIS. You know, how does the platform be agile
enough to adapt to these new changes so you can
be one of the earliest movers to be leading in
the private banking industry. And I think what's also important
(16:17):
is the platform allows you to customize to the needs
of our clients, so that you're not having cookie cutters
and pushing products, but really customizing the needs of the
inversus of whether it's high net worth or or try networth.
And lastly, what's important is to have the products. We
need to make sure the products are there, that we
are serving the needs of our clients. And now as
(16:39):
clients needs are getting more sophisticated, we actually serve not
only the needs based out of Asia, but they may
have needs for MPa propose in Europe or we actually
help them in terms of one bank. Also the business
needs whether they need to raise capital or have M
and A so all not to attract talent. I think
these three pillars are vital so that we can serve
(17:02):
our clients' needs holistically and as a result of this
over the years, Yes, we've been getting a lot of cbs.
Speaker 1 (17:07):
To join us and Shannie. Looker Lemuel has been talking
about BNP's role. But you know, just outside of B
and P, which companies are really thriving in this wealth
management environment in Hong Kong.
Speaker 3 (17:21):
So I think everyone is doing really well. When we
look at the more Hong Kong centric global banks like
HSBC and Standard Hearted, you know, they talk about very
strong increase in wealth management revenue. There isn't that much disclosure,
but of what they disclose it is going very well.
So for example, Muta fund sales, insurance sales that they're
(17:44):
doing very well. And then when we look at the
Singapore banks as well, apart from them, you know, with
a very big presence in Singapore, they also have a
very large operation in Hong Kong too. So I think
the Hong Kong banks and also the Singapore banks, just
by their geographical footprint, they are pro the most positively
leveraged to this Hong Kong Welsh growth story.
Speaker 1 (18:05):
And look, we talked a lot about the growth potential,
but let's also talk about the risk. Now. We all
know that investing in this part of the world, especially
when it relates to China, there's always regulatory risk. Is
there any regulatory risks you can see on the horizon?
A Shani? Can you just talk about that.
Speaker 3 (18:23):
What we've seen the regulators do in recent years is
to relax the rules, and it is quite unpredictable at times,
but I don't think that they'll backtrack anytime soon. And
from what the Hong Kong regulators and also mainline regulators
have said, they do plan to increase the quotas for
their current schemes, like for example, the Southound Wealth Management Connects.
(18:44):
They already just tripled the individual quota to three million
R and B and there is talk of that potentially
being listed higher. Because you know, this quota it doesn't
really cater to the private banking space, which you know
have a far larger out of wealth. So I think
going forward, it's likely that they're going to be more
(19:05):
opportunities to come in terms of what could potentially go wrong. Ultimately,
the regulators they do have a lot of control, so
if any of these schemes were to not work, or
if there's any sudden shock to the system or stress
to the system, they could potentially pull back or tighten approvals.
Another example would be the MRF scheme. Right now, the
(19:27):
rules are quite tight and even though the scheme does
allow asset managers to access on shore retail customers, the
pace of approval has been quite slow. But then again,
there are talks of the rules being relaxed going forward.
So you know that again is hope and more opportunity
for Hong Kong FI managers to take advantage of these
(19:48):
opportunities as they come.
Speaker 2 (19:50):
Maybe I want to share one point. I would say
industry trends have been continually thinking that Hong Kong has
attracted money purely from China, but I do believe that
has changed. What I mean by that is that Hong
Kong as a super connector attracts significant capital inflows from
(20:10):
not only China, but also playing a pivotal role in
linking to Southeast Asia and the Middle East. Its strategic location,
robust legal framework, it's deep pool of financial talent and
unparalleled service level makes it an attractive destination for both
clients and wealth management professions. This we knows Hong Kong
(20:31):
standing and Hong Kong has a long history of capital flows,
expertise and device to and from Southeast Asia. The Hong
Kong government has recently been putting a lot of effort
in building the corridors with the Asian countries, which has
helped to drive a lot of business opportunities from MOSO
places like Indonesia and Thailand. We're also seeing how things
(20:53):
will involve in terms of the Middle East, and this
is rather new, so we haven't seen significant inflows, but
there's a growing effort to develop this dialogue. So I
thought it would be important for the listeners to also
get a sense of where these flows are coming from
across the region.
Speaker 1 (21:09):
Okay, before I let you go, Lemielle, there's listeners of
Asia centric all around the world. You know, a lot
of people listening to you probably want a job in
private banking. But if you're not in private banking, how
do you get your foot in the door? Like give
them some tips?
Speaker 2 (21:25):
Well, I think what's important is to have transferable skill sets.
What I mean by this is if you've been working
in let's say, asset management, you may have an interest
to join our discretionary or investment counselor's team. If you've
got expertise across specific asset classes like equity, bonds of
fixed income, you can join our products team. But if
(21:46):
you overall have a passion to serve the needs of clients,
have a real meaningful engagement with clients in general and
serving their needs, then you can become a banker and
relationship manager. And what's really interesting and makes the career
and wealth management fun is there's something new every day
because clients have multi angles of needs and they change
(22:06):
throughout the life of their wealth journey. And what I
mean by that is wealth is generally comes into three cycles.
They have wealth generation, wealth management and wealth legacy. And
what makes it fun is that we follow our clients
through those cycle and that changes every day.
Speaker 1 (22:23):
Okay, that's a great answer, Lemiel. We have three Australians
working in Hong Kong now speaking on this podcast. If
three Australians can do it, then other people can do
it as well. It's been an interesting discussion on Age's
wealth industry, China's billionaires, and Hong Kong's role as offshore
(22:43):
financial center. Thank you, Lemiel and Shannie for joining the show.
Speaker 2 (22:47):
Thank you.
Speaker 3 (22:48):
Thanks.
Speaker 1 (22:50):
I'm John Lee in Hong Kong. This podcast was produced
by Clara Chen and you've been listening to the age
of centric podcast
Hosts And Creators
John Lee
Tom Corbett
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