More info on HNWIs in Asia

From Private Banker International

Despite ploughing many millions of dollars into building up their wealth management operations in Asia, the leading global private banks still have a poor record when it comes to regional client asset-gathering on a major scale.

Between them, the top ten banks manage only 6 percent of the high net worth personal financial assets in Asia, which are estimated by the Merrill Lynch/Capgemini World Wealth Report to total $7.6 trillion. New data, based in part on UBS estimates, shows that the leaders between them had about $470 billion of assets under management (AuM) in Asia as of the end of 2006 (see table).

Top-ranked is UBS itself, with $93.3 billion or only around 1 percent. UBS’s total client assets in Asia puts it just ahead of next-ranked Citigroup, with $81.6 billion.

UBS claims a market share for the total global private banking market of about 3.5 percent, showing that it and its competitors still have much to do to attract Asian high net worth business.

The UBS data is contained in an investor presentation given by Kathryn Shih, the head of UBS Wealth Management Asia-Pacific, and Johan Riddergard, head of business development for UBS Wealth Management Asia. The ranking excludes ABN AMRO and Société Générale, but PBI has added in the totals for these two institutions.

ABN AMRO’s private banking AuM in Asia was $10 billion at the end of 2005, $15 billion by the end of last year and had ballooned to $17 billion by this May. Société Générale Private Banking also reports a year-end figure of $17 billion.

Talking about the issues of client penetration, the two UBS executives admit: “Our market share in Asia-Pacific is 1 percent and we are the biggest player – [leaving] large room for additional growth.”

As part of its costly build-up in the region, UBS had amassed 750 advisers across Asia by the end of last year, representing a compound annual growth rate of 30 percent since 2000. Over the same period, its AuM posted a compound growth of 19 percent.

The next stage of UBS’s push into Asia will be to shift increasingly into onshore wealth management, rather as it has done in Europe as traditional Swiss-style offshore banking has declined in relative importance amid fierce regulatory controls and a demand by clients for better performance.

So far, private banking in Asia-Pacific has focused on regional international wealth, but the two UBS executives contend that “the real opportunity is in domestic wealth accumulation”.

“About 90 percent of the wealth in Asia-Pacific is domestic and we have just started to capture it,” they add.


Onshore growth

Onshore wealth will grow as wealth becomes more concentrated among high net worth houses, while there is an increased need for professional advice as clients become more sophisticated and first-generation wealth passes on to the next generation, they say.

UBS’s own estimate is that total Asia-Pacific wealth management assets are worth $12.5 trillion among households with more than $210,000 of investable liquid assets, a figure higher than that of the World Wealth Report, which sets a client wealth cut-off point of $1 million and above.

These assets across Asia, excluding Japan, are projected by UBS to grow by 9.7 percent between 2007 and 2010 – versus comparable growth globally of less than 6 percent. By the end of the decade, global wealth assets as a whole are forecast to hit $55 trillion.