Private Wealth Management Association / PwC Hong Kong private wealth management landscape 2016

Transcription

1 September 2016 Private Wealth Management Association / PwC Hong Kong private wealth management landscape

2 Contents P.01 P.02 P.03 Introduction Challenges facing Private Wealth Managers in Hong Kong Market size and client base in Hong Kong P.04 Focusing on China P.05 Shift in Private Banker attributes P.06 Focusing on operational efficiency P.08 Onboarding challenges and the road to digitalisation P.10 Digitally driven onboarding P.12 Mobile and online advancements P.14 Digital offerings and product innovation P.15 Non-financial related services P.16 Contacts

3 Introduction The findings of this report are based on results from the Private Wealth Management Association (PWMA) Hong Kong survey conducted jointly by the PWMA and PwC in July The purpose of this survey was to gather information about the current Private Wealth Management landscape in Hong Kong. The survey was conducted by means of an online questionnaire. 35 out of the 46 PWMA member firms completed the survey. The results have been analysed in combination with global and APAC insights from other sources where available. The survey report touches upon the following areas: Key challenges faced by Private Wealth Management Organisations (PWMs) Market/ industry size Private Banker attributes Operational efficiency Onboarding challenges and digitalisation Digital service offerings and product innovation Non-financial related services PWMA / PwC Survey

4 Challenges facing Private Wealth Managers in Hong Kong Regulation 96% of PWMs cited regulation as their top challenge Key Challenges Cost effective management of regulatory compliance. Ongoing impact of global regulatory reforms on our business and clients Compliance to stringent regulations and ability to adapt to regulatory changes Strict regulation and selling processes Tightening regulatory requirements Talent Talent 1 in 2 PWMs have issues obtaining and retaining talent Key Challenges Finding and onboarding of key talent in the front-line Limited Talent Pool and Lack of talent in HK industry Recruitment and retention War for talent, high staffing costs Operating cost vs. revenue Rise in operating cost Decrease in revenue Key Challenges Rising cost base despite low fees Managing the rising cost of doing business Maintaining / growing profitability Highly competitive markets, particularly in the HNW space Falling margins due to highly competitive market Digitalisation & IT enhancements Driving efficiency + security Key Challenges Digitalisation Enhancing IT platforms to increase efficiency and to meet regulatory requirements Cost effective evolution of the technology platform Information security 2 PWMA / PwC Survey 2016

5 Market size and client base Overview of Hong Kong s private wealth management market Asia Pacific has been at the forefront of growth in the private wealth management market in recent years. Hong Kong s population of High Net Worth Individuals (HNWIs), with net worth between US$1 million and US$30 million, rose by 4.6% in 2014, followed by a further 3.3% increase in This trend is expected to continue until According to Private Banker International Report in 2016, there were 200,000 HNWIs in Hong Kong, collectively holding around US$1.1 trillion in wealth. In their report, the HNWI population is expected to grow by 14.2% to reach 230,000, while total HNWI wealth is projected to grow by 23.5% to reach US$1.4 trillion. 1 According to Wealth-X, Hong Kong s private wealth management market volume grew to US$600 billion in 2015 to become the fifth largest offshore wealth centre globally. 3 Our 2016 survey of 35 private wealth management organisations in Hong Kong indicates total Assets Under Management (AUM) of over US$700 billion. Total Ultra High Net Worth wealth reported in 2014 was US$595 billion, with a population of 3,335 UHNWIs in Hong Kong. 2 Hong Kong is ranked 2nd billionaire city with 79 billionaires, behind New York with 97, who together possess total wealth of US$291 billion as of The Asian Private Banker s 2015 AUM and RM Headcount League Report indicates the number of Private Bankers in Asia at 5,213 and the size of Asia AUM at US$ 1.47 trillion as of Private Banker International: Greater China Awards Luncheon Wealth X & UBS. World Ultra Wealth Report 2014 (2014) 3. WEALTH-X BILLIONAIRE CENSUS Asia Private Banker 2015 AUM & RM Headcount League Tables 3 Publication Title PWMA / PwC Survey

6 Focusing on China Growing importance of the private wealth market in China The China market is growing in importance for the private wealth industry due to the strong momentum of wealth creation. During 2015, China continued to close the gap with the United States in terms of both the number of billionaires and total wealth. During 2015, China registered an additional 70 billionaires an increase of 37% year-on-year, while the total wealth of Chinese billionaires grew 53% to US$675 billion 5. The increase in the number and the total wealth of billionaires in China also impacted the client base of PWMs. Among the 35 PWMs surveyed, almost all have clients/beneficial owners who are domiciled in Greater China. Figure 1: Top countries where clients / beneficial owners are domiciled (exclusive of Hong Kong) 96% Hong Kong China 93% A new billionaire was created almost every week in China during Q UBS/PwC Billionaire Report (2015) 5. WEALTH-X BILLIONAIRE CENSUS % Others Singapore Indonesia Switzerland Taiwan 4 PWMA / PwC Survey 2016

7 Shift in Private Banker attributes over 3,400 Front Office Practitioners 2,000 Middle Office Practitioners 2,200 Back Office Practitioners Out of the 35 PWMs surveyed 78% of PWMs agree/ strongly agree the industry will have to invest more in talent management and development going forward. Today Our survey respondents believe there will be a shift in the relative importance of Private Banker attributes over the next 5 years. Risk management and the ability to provide advice and planning as a distinct service will become more important in the next 5 years than they are today. Seven attributes are of high importance today and will continue to be of high importance in the next 5 years, these are displayed in the top right quadrant. Figure 2: Most important Private Banker attributes for their organisation now and in the next 5 years High importance Ability to assess client suitability and risk profile Communication skills Ability to provide advice on clients overall wealth goals Responsiveness to clients needs/requests Ability to retain existing clients Ability to gain new clients Ability to identify and respond to client needs Ability to collaborate across your organisation to deliver client needs Ability to provide innovative solutions to clients Low importance Low importance Personal impact and influence Cross-selling skills Ability to provide asset related advice Ability to provide advice and planning as a distinct service Recognised industry qualifications Good knowledge of external products (open product architecture) In 5 years Risk management High importance PWMA / PwC Survey

8 Focusing on operational efficiency 79% of PWMs surveyed responded that they have employed strategic or tactical approaches to improve operational efficiencies. 85% of PWMs indicate the top strategic/tactical approach they use to increase value from operations is centralisation of activities through shared internal services. Figure 3: Strategic or tactical approaches currently used to increase value from operations 85% Centralisation of activities through shared internal services (e.g HR, finance, etc.) 77% End to end process and efficiency improvement 50% Development of more integrated operational centres of excellence (e.g securities processing, product provision, etc.) 42% Use of outsourcing arrangements Development of new onshore markets with operational infrastructure requirements 23% Development of new offshore markets with operational infrastructure requirements 15% 6 PWMA / PwC Survey 2016

9 Operations and Technology are the primary functions that are outsourced, followed by Finance and HR. The top locations to which services are outsourced are Singapore and India. Figure 4: Outsourced functions and associated locations 5% US Operations functions 10% China 5% Phillipines Hong Kong 15% India 15% Switzerland 50% Singapore Technology functions 8% Scotland 4% US 4% Phillipines Hong Kong 4% China 23% India 8% Holland 15% Switzerland 34% Singapore PWMA / PwC Survey

10 Onboarding challenges and the road to digitalisation 65% of organisations consider too many manual process steps to be a major issue within the client onboarding process. PWMs are taking on average business days to onboard a client. Figure 5: Key issues within the onboarding process 65% Too many manual process steps 48% Complexity and volume of forms 43% Limited functionality of tools supporting relationship opening 30% Limited functionality of workflow tools 26% Limited ability to adapt processes to new requirements 22% Too much waiting time between process steps 13% Missing knowhow of RMs 9% No disciplinary action or incentive scheme for RMs to ensure quality of documentation 4% No communication across teams within the onboarding process 4% Other: resources 8 PWMA / PwC Survey 2016

11 74% of PWMs onboard their clients within 30 business days. Figure 6: Average time to onboard a client Less than 20 business days business days 26% 48% business days 17% business days 4% business days 4% Greater than 121 business days 0% 0% 20% 40% PWMA / PwC Survey

12 Digitally driven onboarding 1 in 4 A quarter of PWMs cite digitally driven onboarding as the offering that would add the most value to the client experience. This is supported by the fact that manual processes and complexity and volume of forms were noted as top issues within the onboarding process. (Figure 5). PWMs said digitally driven onboarding would add the most value to the client experience. Five Hong Kong firms have already digitised their onboarding process, highlighting an opportunity for other organisations to utilise FinTech to enhance the customer experience. Over half of PWMs have knowledge platforms currently available as a digital service offering. Figure 7: Digital offerings currently available, and the offerings that add the most value to the client experience Digital service offerings Currently Available Number of PWMs Service currently not available in PWMs but believed would add most value to client experience Digitally driven onboarding 5 10 Means to speak to clients anytime, anywhere and by any channel Self-service investment platform (e.g robo advice) Knowledge platform to share insights on client (e.g a CRM platform) Digital concierge service for clients that require services beyond financial management Other (e.g internet banking, personalized and actionable alerts) PWMA / PwC Survey 2016

13 Technology and onboarding in Asia Pacific The need for digitally driven onboarding is also apparent when examining the increasing budget that PWMs allocate to their AML and risk processes. According to a report by Asian Private Banker, 62% of private banks in Asia commit 1-10% of their technology budget to AML and risk solutions. Half of the COOs polled also expect their technology spend to increase by 11-30% within the next year. 6 1 in 7 PWMs have digitally driven onboarding. 6. Asian Private Banker. Tech and talent key to tackling AML threat, (July 11, 2015) PWMA / PwC Survey

14 Mobile and online advancements PWMs are growing increasingly aware of the benefits technology can provide their clients. 83% of PWMs offer mobile and/or internet banking services today. Figure 8: Top 5 services that PWMs provide today and what they will focus on in the next two years for online and mobile offerings In 2 years Proactive alerts in relation to market events Account opening forms Equity trading Available Now Portfolio statement (view) Access to bank s research Educational material (videos, presentations, etc.) Electronic mailbox for client correspondence Online Services Top 5 services Available Now Educational material (videos, presentations, etc.) Proactive alerts in relation to market events Currency conversion calculator In 2 years Proactive alerts in relation to market events Equity trading Portfolio statement (view) FX trading Deposit booking Currency conversion calculator; Equity trading; Local and international payments Mobile Services Equity trading Access to bank s research Access to bank's research Deposit booking; FX trading 12 PWMA / PwC Survey 2016

15 Clients digital expectations in Asia-Pacific The need for digital offerings are particularly apparent in Asia Pacific compared to Europe and North America, as more than 60% of HNWIs in the region find it important for wealth managers to have strong digital offerings. HNWIs in Asia Pacific are also marginally ahead of their global counterparts in employing digital technology, with 77% of Asia Pacific s HNWIs already using online and/or mobile banking, compared to the global figure of 69% Strategy& PricewaterhouseCoopers. Sink or Swim: Why wealth management can t afford to miss the digital wave (Asia Pacific Highlights), (2016) PWMA / PwC Survey

16 Digital offerings and product innovation PWMs believe the future will be less about providing products and more about collaboration and providing innovative solutions to clients to meet their objectives and goals. 78% of PWMs either agree / strongly agree that the ability to provide new technology and digital capabilities to complement face-toface relationships is important. Figure 9: The part of a typical PWM client journey that will be most impacted by technology/fintech The PWM client journey 17% Client evaluation and decision to open an account 62% of PWMs say digital offerings will impact maintenance of ongoing services and upselling/ cross-selling the most. 33% Upselling / Cross-selling 17% Onboarding 29% Maintaining ongoing services 4% Exiting PWMs think robo advice will provide the private banker with more comprehensive investment advice to engage in more informative conversations with the client. 14 PWMA / PwC Survey 2016

17 Non-financial related services PWM service offerings are expanding, with 35% of respondents currently offering non-financial services in addition to services that address the financial needs of the client. These services include, but are not limited to, art, real estate and luxury concierge services. Figure 10: Non-financial services offered by PWMs Real estate services 56% Auctions / Art Collection 22% Luxury Brands 11% Wealth planning advice 11% 35% of PWMs offer other services, in addition to addressing clients financial needs. PWMA / PwC Survey

18 Contacts Joanne Leung Managing Director PWMA Antoinette Hoon Private Banking Advisory Services Partner PwC HK Marie-Anne Kong Asset and Wealth Management Leader PwC HK James Quinnild Financial Services Consulting Asia Pacific Leader PwC HK Julie Watson Financial Services Consulting Director PwC HK A few words about the research and sources: A number of sources were utilized to research and profile the landscape of private wealth management industry in Hong Kong. These were blended into a mosaic analytical framework from which we conducted extensive analysis. This information and data is part of PwC proprietary data and analytics structures and are non-commercial in nature and specifically non attributable regarding the identity of any underlying individual or family. In addition to the result of the survey conducted by the PWMA, the following were specifically leveraged as a part of our research: PwC has a significant body of research drawn from publishing studies on Wealth and Private Banking, and Family Businesses including current and future perspectives on a number of industries from which we were able to derive insights. These include Sink or Swim: Why wealth management can t afford to miss the digital wave (Asia Pacific Highlights), (2016) issued by Strategy& PricewaterhouseCoopers, and the UBS/PwC Billionaire Report (2015). For the market data on Hong Kong s High-Net Worth population, Ultra High-Net Worth population and private wealth market in China, we used the Wealth-X Billionaire Census ( ), World Ultra Wealth Report Wealth X & UBS, and Headcount League (2015) - Asian Private Banker. For the respective projection of the High-Net Worth population, we used the Great China Awards Luncheon (2016) - Private Banker International report. Other market data on the budget spent on AML and risk solutions is based on the Tech and talent key to tackling AML threat report (July 11, 2015) issued by the Asian Private Banker. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice of any kind. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. PwC and the PWMA are not affiliated. The PWMA is a Hong Kong-based voluntary association incorporated as a company limited by guarantee. The initiative to set up an industry association for the private wealth management industry is the result of a consultancy study sponsored by the Hong Kong Association of Banks (HKAB). 16 PWMA / PwC Survey 2016

19 About Private Wealth Management Association ( PWMA ) Established in September 2013, PWMA is a Hong Kong-based voluntary association incorporated as a company limited by guarantee. The main objectives of PWMA are: to better position Hong Kong as the private wealth management hub in the region by promoting and encouraging the growth and development of the PWM industry in Hong Kong and to help maintain Hong Kong s status and competitiveness as a major financial centre; to promote proper conduct, integrity and high standards of professional competence on the part of PWM practitioners; to provide a forum for members to discuss and exchange views on trends and challenges faced by the PWM industry and how to strategically position for these trends and challenges; to provide industry representation and consultation in Hong Kong on PWM related matters; and to provide a channel for the private wealth management industry to maintain ongoing dialogue with governments, regulators, trade bodies and non-governmental organisations. PWMA has 46 full corporate members, with a 9-member Executive Committee serving as the governing body of the PWMA. About PwC PwC China, Hong Kong and Macau work together on a collaborative basis, subject to local applicable laws. Collectively, we have around 600 partners and 15,000 people in total. We provide organisations with the professional service they need, wherever they may be located. Our highly qualified, experienced professionals listen to different points of view to help organisations solve their business issues and identify and maximise the opportunities they seek. Our industry specialisation allows us to help co-create solutions with our clients for their sector of interest. We are located in these cities: Beijing, Shanghai, Hong Kong, Shenyang, Dalian, Tianjin, Qingdao, Nanjing, Suzhou, Hangzhou, Ningbo, Wuhan, Changsha, Xi an, Chengdu, Chongqing, Xiamen, Guangzhou, Shenzhen, Macau. PWMA / PwC Survey

20 This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors PwC. All rights reserved. PwC refers to the China member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details. HK C1