Sunday, Jul 31, 2016

Dubai: As developed markets become more saturated and an ever larger part of net new money will be difficult to access without a local set-up, the importance and challenge of client acquisition are accelerating.

Wealth managers will need to better incentivise relationship managers (RMs) to acquire new clients, optimise retail/commercial banking feeder channels, and focus on client life events as key acquisition opportunities.

Alternatives — including hedge funds, private equity, real estate, structured products and commodities have been the only source of material alpha generation over the past decade, and analysts expect this to continue going forward. Moreover, access to these products is a significant source of differentiation which wealth managers still hold, unlike traditional asset classes where low-cost beta offerings are growing in popularity.

After a period of cleaning up their offshore businesses, wealth managers will need to refocus on their offshore strategies to capture faster growing emerging markets assets. Beyond a small group of global leaders and a few specialist firms, offshore offerings often lack product shelf depth and offerings corresponding to core client needs, such as hard currency investment products, forex and mortgage/asset-financing capabilities.

Digitisation and the use of artificial intelligence (AI) will also be an important risk management feature. Although digital technology can help make processes smoother, banks need to obtain detailed histories of clients and their sources of wealth and fully adhere to all relevant regulatory and compliance standards. Such requirements are making offshore banking more resource-intensive, leading to front-office costs per client that are close to those of onshore operations Nonetheless, more frequent interaction should also provide opportunities for wealth managers to serve clients better.

Factbox: Key points

• To sustain profitability, the industry will need to redesign the ‘core’ high-net worth service model and digitise parts of the value chain.

• The industry should explore new sources of value creation such as platforms that enable investors to access opportunities such as growth stage financing or direct real estate investments.

• Leaders will need to sharpen their focus on client acquisitions and managing attrition risks, in particular with respect to intergenerational wealth transfers.

• Wealth managers should expand their existing philanthropy offering into full charity operations support, following the trend of professionalisation in charitable giving.

By Babu Das Augustine Banking Editor

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