What all the big guns (and us) were saying at Wealth Think Singapore 2016….
“The pitfall for most banks is the fact that they don’t have a unique value proposition.”Bassam Salem, Region Head, Asia Pacific, Citi Private Bank
“The DBS mantra is that being fully digital is the only way the bank will survive the next 10 years.”Tan Su Shan, Group Head, Consumer Banking and Wealth Management, DBS Bank
“The winning formula for private banks as it was in the past decade won’t work going forward.”Michael Benz, Former Group Head of Private Banking, Standard Chartered Bank
“The industry must shift to a purely fee-based model. This is the only honest way to advise a client.”Urs Brutsch, Managing Partner & Founder, HP Wealth Management
“All energies should be on risk management on the client side, and operational excellence for banking platforms.”Mark Smallwood, North Asia Coverage Team Head – Singapore, Deutsche Bank Wealth Management
“So many private clients want alternative investments, but most industry players only offer standard publicly-accessible investment products which clients can execute on their own.”Julian Kwan, Founder & Chief Executive Officer, InvestaCrowd. Thanks again to Hubbis, Michael Stanhope and Andrew Crooke for hosting a great event.
What is the problem?
Putting aside the necessary, by unexciting areas of compliance and risk, our take on the digitisation of the wealth management and banking industry, is that most people are lost or focused simply on the solution of executing a transaction, and the driver for most fintech companies is to make that transaction/ process more time and cost efficient for the clients.
So that means everyone is really focusing on the same thing. What has happened over the years, is that the value proposition offered by the banks to private clients was to preserve and build wealth, offer tax optimization advice, set up investments, companies etc etc, but the issue today is that everyone is so risk averse the only products being offered to the clients are either available publicly (and through an app that might even be free to use), OR, it is a private equity deal, but only a massive deal that makes it worthwhile for the banks to get out of bed. The issue with those deals are that they require huge internal and external resources to vet and package the product, and finding good returns for large sums of capital is increasingly difficult so the returns are often not attractive.
Admittingly the investment world at times looks and feels like the below, but it seems like we better get used to this in the increasingly volatile world that we are living in. But investors have to take responsibility for their actions and if they choose to enter private investments that is up to them.
What we think the solution is…
Product, Product, Product, clients want product that everyone else cannot get too. They want access to private deals, that might not always be easy to assess or squeaky clean, but provide the best risk-adjusted rewards. We know many of these private banking clients, they made most of their money doing deals, starting businesses, investing in real estate and other industries. They want to see and do more interesting things with a portion of their wealth.
In our humble opinion, the best way for huge institutions and old school firms that come with huge client lists (BIG value), but huge baggage and legacy issues (BIG handbrake), is to collaborate and partner with the new school platforms and companies that are sourcing and providing the product that the clients really want. It is a good solution and the “blame” for any bad trades can be passed on to the platform if that is the major reason/risk issues associated with structures that might fit the bill as above. There is no magic to this, but it is going to take time.
We think that if the industry can just stop to think about how the $ made the $ in the first place, what the $ wants to do now, then maybe the rock and hard place might not be as hard as it seems and the hard place might actually be a good place to stop for a drink or 2.
InvestaCrowd is an online real estate capital marketplace offering debt and equity investments into real estate projects in Tier 1 Global gateway cities in Australia, USA and the UK only. Headquartered in Singapore, deals on InvestaCrowd are exclusively available to our members only. To see the latest offerings and begin investing today, login and create an investor account at www.investacrowd.com
We welcome all comments and would love for you to share if you find this useful and interesting, thank you.