Heyday for Asian Bankers as the Region’s Millionaires Swell

Asian bankers are having a field day as the number of millionaires in the region swell

From Bloomberg (bold emphasis mine)

Asia-Pacific millionaires outnumbered those in Europe for the first time in 2010, according to a survey by Capgemini SA and Bank of America Corp. More millionaires means more spending and more demand for private wealth managers from banks such as BSI SA, JPMorgan Chase & Co. (JPM), UBS AG (UBSN) and HSBC Holdings Plc. (HSBA)Recruiters say too many banks are hunting too few experienced staff in the region, pushing up salaries and crimping profits.

“Good bankers have at least one offer on the table, if not two,” said Collardi, 37. “Today, if you want to be successful in hiring, you need to be forceful.”

Global demand for client relationship managers is expected to rise 13 percent over 2011 and 2012, while growth in the Asia- Pacific region will be double that, PricewaterhouseCoopers LLP said in an e-mail. That’s pushed top salaries in Singapore to almost twice the level in Switzerland, the world’s biggest offshore wealth manager, according to London-based recruitment firm EMA Partners International.

Senior private bankers in Singapore earn between $160,000 and $410,000 a year, while the comparative range in Switzerland is $152,000 to $210,000, EMA estimates.

“People are simply paying too much and that cannot be justified from an economic point of view,” said Thomas R. Meier, Zurich-based Julius Baer’s CEO in Asia. If a bank pays 30 percent more than a person’s salary at his previous employer, and the new recruit ends up adding just 5 percent more to revenue, the bank will feel the pinch, the 48-year-old said.

The premium to attract somebody new in Asia is 20 percent to 30 percent of their base compensation, said Matthew Streeton, partner at The Consulting Partnership, a Singapore-based recruitment firm. Usually, private bankers get a guaranteed bonus in their first year on top of the base salary and thereafter earn an annual bonus based on performance, he said…

Asia’s 3.3 million high-net-worth individuals had $10.8 trillion in assets, compared with the $10.2 trillion accumulated by their 3.1 million counterparts in Europe, according to the report published in June by Capgemini and Bank of America’s Merrill Lynch Global Wealth Management.

Recruiters say private bankers need an apprenticeship because wealthy clients expect to be advised by someone with experience who can understand their goals.

Remarkably Asian bankers are even paid more than their bosses or multinational employers.

Yet all these signify as mounting evidence of an ongoing paradigm shift from a myriad of agglomerated forces, such as globalization, wealth convergence, the internet, technology driven innovation and differences in the degree of the welfare state, economic freedom and applied administrative, fiscal and monetary policies.

Has Swelling Numbers of Asian Millionaires Been Symptomatic of Wealth Transfer?

We’ve been talking about wealth transfer, i.e. from the West to the East. And perhaps, this could be a sign. A report says, Asian's have nearly caught up with the west in the race of High Net Worth Individuals (HNWI).

According to Bloomberg,

``The number of individuals with at least $1 million of investable assets in Asia-Pacific rose 26 percent to 3 million in 2009, matching Europe and almost overhauling North America’s 3.1 million, according to the 14th annual World Wealth Report published yesterday.

``Asia “continues to lead the global economic recovery and this has benefited many of the markets in the region in terms of both growth and wealth creation,” Ong Yeng Fang, market managing director for Indonesia, Philippines and Thailand at Merrill Lynch Wealth Management, said at a conference in Singapore today. Given Europe’s debt crisis, “there is a very high possibility that their numbers will be surpassed.”


To add, the Capgemini-Merrill report says: (bold highlights mine, graphs from Capgemini)

-The Asia-Pacific HNWI population rose 25.8% overall to 3.0 million, catching up with Europe for the first time, after falling 14.2% in 2008. Seven countries within the region actually saw their HNWI populations recover beyond 2007 levels.



-Asia-Pacific HNWI wealth surged 30.9% to US$9.7 trillion, more than erasing 2008 losses and surpassing the US$9.5 trillion in wealth held by Europe’s HNWIs.

-After falling 19.0% in 2008, the HNWI population in North America rebounded, gaining 16.6% in 2009. HNWI wealth there rose 17.8% to US$10.7 trillion. North America remains the single largest home to HNWIs, with its 3.1 million HNWIs accounting for 31% of the global HNWI population

For us, the reason Asia has been fast catching up with the west is that she has been engaged in less relative inflationism, which has been embraced by the west as the orthodoxy. But of course, everything is fluid or subject to change.

How Asia's Richest Fared In 2008

Some interesting charts and commentaries on the wealth conditions of Asia's Richest in 2008 from Capgemini's Asian Wealth Report 2009.

Here are the highlights (bold highlights mine)


``Asia-Pacific’s population of high net worth individuals (HNWIs1 ) shrank 14.2% in 2008 to 2.4 million, while their wealth dropped 22.3% to US$7.4 trillion.



``The HNWI population and its wealth were even more concentrated by the end of 2008 than they had been a year earlier. Japan and China together accounted for 71.9% of the Asia-Pacific HNWI population and 65.8% of its wealth, up from 68.8% and 62.4% respectively.


``Asia-Pacific’s Ultra-HNWIs2 suffered greater losses of wealth than Ultra-HNWIs in other regions and their population also diminished by more. At the end of 2008, Asia-Pacific’s Ultra-HNWI population was down 29.6% from a year earlier, compared with the global decline of 24.6%, and their wealth was down 35.1% vs. 24.0% globally."

Additional observation:

The chart below decomposes on the financial assets held by the High net worth individuals.


A noteworthy observation is that except for India, South Korea and Australia, the cash component of the financial assets of High Net Worth Individuals in the region have the largest share in terms distribution.

India on the other hand has equity exposure as the largest, while South Korea and Australia are substantially into real estate.

It would be interesting to see how these huge share of cash holdings would respond to "inflationary setting", which we expect would likely boost property and or stock markets.


Importantly, the Capgemini report highlights on the regulatory conditions and how it impacts on the general business environment.

The report cites some strategic disadvantages in select Asian economies as the Philippines, Vietnam and Japan.

Again Capgemini (all bold highlights mine)

``Tough’ markets (Japan, Vietnam and Philippines) have the tightest regulations in the region and are difficult to penetrate. Japan, for instance, has historically been a very tough market for Western banks as the market is dominated by local players. Foreign banks can emphasize their global reach and product expertise, but lack the branch networks and local resources of their Japanese rivals. The local wealth management segment has always been short of expert capabilities, products and services, but foreign players are still unable to win the complete trust and confi dence of Japanese clients. Foreign banks did get somewhat of a respite recently when the Financial Services Agency (FSA) eased regulations regarding how banks can interact with their securities arms. Previously, banks had been barred even from recommending services among sister divisions. The new regulation presents a major boost to foreign banks, which had been most disadvantaged by the regulation, as they lacked the same holding company structure as local banks.

``Regulations in Vietnam and the Philippines are also stringent, making these markets tough to enter. Vietnam recently revised its credit law, and has put tough restrictions on credit and bank-equity ownership. Foreign banks are concerned this law could hamper their future growth plans in Vietnam. The Philippines also puts substantial limits on the local operations of foreign wealth management firms, so many are largely operating from offshore locations."

Again overregulation has again served as a major deterrent or a significant barrier to investment flows.

You can read a summary of the report from Finance Asia here or read the entire report from Capgemini here (registration required)