Wealth Management in Asia - Webinar

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www.vrlfinancialnews.com www.timetric.com 1
Targeting the Private Banking Sweet Spot

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www.vrlfinancialnews.com www.timetric.com
VRL turns Timetric
• Editorial Excellence
• Private Banking
• Retail Banking
• Cards & Payments
• Leading Wealth Summit in Asia
• News updates on the latest
developments in the industry
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analysis and advisory services
• Data & analysis includes:
• Risk assessments,
• Forecasts,
• Industry analysis,
• Market intelligence,
• News and comments
• Consulting

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About Us
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Years of Experience
SOPRA BANKING SOFTWARE – Fast Facts
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leader in banking software. The
company was born in 2012 as the
merger of „Sopra Group‟s banking
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become faster, leaner and more
efficient.

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44
About me
Recent features on WM (available on PBI and BPA)
• Taking the pain out of paperwork
• Private banking 2022 – Moving towards an advisory fees
• Changing investment paradigms
• Changing skill profiles for private bankers
• “Plug and pray” – Confessions of a technology vendor
• 15 tips to build a successful private banking business
• Outsourcing in private banking – a natural evolution
• Empowering the relationship manager in the frontline
Recent research papers on WM:
• Changing business models in PB
• Evolving business models in Asian Wealth Management
• Empowering the relationship manager in the frontline
Thomas Zink
Associate editor/ content manager
VRL Timetric
Thomas.Zink@sg.timetric.com
+65 8272 3169

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Top 10 Asian Affluent Wealth Trends
1. Competition – New banking players (domestic and foreign) and non-bank players
2. Onshore wealth – following liberalisation and political stability in emerging Asia
3. Customer stickiness - Asian clients are multibanked and price sensitive.
4. Cost and efficiency – Compliance is a key driver of growing cost-to-income ratios
5. Digitalisation - Clients are mobile and demand improved relationship manager (RM)
availability, multi-channel banking, real-time information.
6. Commoditisation - Products are cascading downwards from private banking (PB) to
affluent banking (AB) and retail banking (RB).
7. Quality of advice – Mature players try to position themselves as „trusted advisor‟
8. Frontline productivity tools – Improve RM efficiency, harmonising advice and minimise
compliance risk
9. Client ownership - Banks seek to seize control of client relationships from RM by
improving management of customer information, tracking discussions, and team work
10. Value proposition - Wealth management in emerging Asia has to shift from red carpet
banking towards a customer-centric private banking value proposition

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Key challenges in addressing the
affluent segment in emerging Asia
Lacking value proposition
• Little differentiation between PB and AB – mostly in form of red carpet proposition
competing on pricing, rewards, and vanilla services
• Limited product availability due to regulatory constraints. Retail products dominate.
• Lack of sophisticated services, such as succession planning, financial planning, tax
optimisation, trust and fiduciary, philanthropy.
• Product-push mentality driven by remuneration and incentive structure focussed on
commissions, and product sales, new net money. Little focus on other KPIs.
• Focus on execution-only with generic advice. Banks are loosing the advisory and
discretionary business to family offices, independent financial advisors (IFA), foreign banks
Human resources
• Small talent pool, usually lacking experience, international certifications.
• Poaching is a common method to acquire new customers.
Clients
• Most HNW wealth moved offshore to SG and HK for asset diversification and illicit reasons.
• Low investor education and focus on equity trading, term deposits and mutual funds.
• Short-term, tactical investments. Asset allocation models are not deployed.

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The lower end of wealth spectrum
10 12 16
33
32
0.6 0.7 1.2 3.2
43
0%
20%
40%
60%
80%
100%
Adultsin%
<10000 10000-100000 100000-1m >1m
Distribution of adults wealth range (USD)
Source: Credit Suisse Global Wealth Databook
25.5
6.6 4.9
6.0
1.2
1.9
0.4 0.3
0.6
1.7
0
20
40
60
80
100
120
140
160
180
Adultsinmillions

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Affluent banking in Asia Pacific-
A largely untouched territory
Banking penetration
• Penetration of managed products in Asia‟s
middle class stands at 5% of total financial
assets on average compared with 15% in
western countries. (Fitch)
• Less than 50% of the mass affluent formally
manage their finances (budgeting, long-term
planning or financial advisers. (Council of
Financial Competition)
• Over 75% of the investment decisions are self-
directed. (Scorpio)

9 9
99
Banks still dominate the provision of
financial advice to the affluent
Have you set up a relationship with any of the following types of firm?
Source: Scorpio Partnership: Future Priority Report (2012)

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Liberalisation and regulatory change
Product availability
• Indonesia: new products such as REITs, ETFs and index funds
• Thailand: Opening to foreign products through Asean Trading Link
• Philippines: Relaxation of REIT and ETF rules for domestic funds, new cross-selling
guidelines
Investor protection: Differentiation between retail and non-retail
• Indonesia: Prudential Principles Regulation (2010) differentiation of investor sophistication.
Other features include KYC principles and product suitability
• Philippines: Dispense the submission of product by product documentary requirements
Consolidation of regulatory supervision
• Indonesia: Merge of regulatory bodies into a new super authority – FSA.
Protectionism:
• Philippines: Raise of caps for foreign share owner ship in domestic corporates.
• Indonesia: Introduction of cap on foreign share ownership in banks.
• Malaysia plans relaxation of ownership caps for foreign banks
Islamic wealth management
• Malaysia to enhance disclosure requirements in the Islamic capital market
• Malaysia widens access for retail investors to bonds and Sukuks

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1111
What makes a sustainable business
model?
Automation
& efficiency
Industrialisation
of products
Digitalisation
Team work
Profitability
management
Customer
onboarding
Communication
Relevant
research
Quality of
advice
Transparency
Sustainability Reduce
cost
(Re)Build
trust
Source: Timetric

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How to improve quality of advice?
• Customer centricity
– Custom-made products catering the client‟s needs
– Targeted and relevant research
• Training
– Continuous training and certification of RMs
– University degree in private banking?
• Teamwork
– Generalist and specialists work in a team
• Clear KPIs and incentives
– Align client interest with RM interest
– Include KPIs such as client appraisal
• Tools and technology
– Frontline tools allowing the RM to focus on customer, not administration
– Alerts, reminders, project planning, task managers and single view of customer
– Visualisation and simplification of information (product, KYC, research)
– Data analytics and multivariate segmentation

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Homogenisation of advice
• „Bad advice‟ is a key source of customer attrition and reputational risk
– Banks try to homogenise their overall investment strategy to align frontline
advice, research and product development. In some banks this can almost be
described as the industrialisation of advice and product manufacturing.
– This enables fast time-to-market for new products.
– Products are customised to customer needs and leveraging synergies across the
bank
– If advice aligned is aligned with product development and research, the entire
bank speaks with a single voice providing a more consistent and reliable client
experience.
• This increases the quality of advice, shortens the product
development process, and accelerates our ability to provide targeted
research to customers and increases transparency.

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Dealing with increasing regulation
efficiently
• Moving compliance towards the front-office (systems)
– Frontline systems that integrate compliance checks, risk profiling, client
suitability, alerts, reminders, and task manager
– Standardisation of data entry and KYC
– Reducing the administrative hassle for the client and RM within the regulatory
framework
• Automation and Straight-Through-Processing (STP)
– Remove human intervention from the process architecture
– Increase frequency and accuracy of reporting and business intelligence (BI)
– Standardisation of data across bank, country, globally
• Banking in the “Age of the regulator”
– There is no way around compliance
– Proactive is better than reactive
– Develop voluntary, yet progressive industry standards, practices and conducts

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Balancing client portfolio transparency
with high-level security
• Reputational risk, including data breaches is seen as one of the biggest
risks in private banking.
• Recent incidents of data leaks and cyber attacks on financial organisations
have brought tighter risk management to the fore.
• Data security threats from mobile and online leaks could increase by 60%
for financial firms, but less than half intend to upgrade their investment in
security. (E&Y study, 2011)
Key issues:
• No information from the service is stored on the computer, mobile.
• Implement in new encryption techniques, stronger identity and access
management controls.
• Security needs to be a joint effort between bank, technology
provider, regulator and customer.
• Deal with the “Bring Your Own Device” challenge

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Digitalisation of the „client
relationship‟
Customers like digital and demand the convenience of interacting with
the bank anytime, real-time and through a channel of their choice
• While not all customers may be interested today, the next generation will demand a
comprehensive and functionality-rich digital multichannel capability bringing all
channels together with:
– A common touch & feel and functionalities
– Access to the same information for clients, frontline, back office
– A real time capability
– A consistent experience across all channels
– Active and particularly interactive communication
• A higher degree of self-service providing access to products, advice and research as
well as more efficient frontline technology, will likely maintain or improve service
quality despite a growing number of customers per RM.

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Aligning technology priorities with
customer needs
• Most banks‟ spending is influenced by strategic intent and profit-drivers. The
client however looks at it from the angle asking how technology benefits him:
– How do you manage my money?
– How do you manage risk?
– Can you provide a banking experience that makes me feel good, that is simple and
that is transparent?
– How can I reach my banker through a channel that is convenient to me?
• Key IT requirements in private banking:
– Scalability
– Automated regulatory and client reporting,
– Proactive advice across all asset classes,
– Efficiency and speed through straight-through processing,
– Consolidated single view of a customer across business lines, borders and banks.
• There is no golden bullet. Banks need to decide their business strategy based on
client needs and align the IT strategy. The banks that have made the most significant
progress are those that have aligned their business model with their clients‟ needs.

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“In a modern PB, everything should
be conceptualised for STP”
• From product focus to process focus
– Straight-through processing
– Modularisation, centralisation and decentralisation
• Investment gears to the front-end
– With regulation a key driver of cost, banks try to increase the efficiency in the
frontline, while downsizing middle and back office
– Information from the back office are pushed towards the frontline
– But the frontend can only be as good as the core system and data available in
the back office
• Technology put larger banks at an advantage, but with better and
more affordable off-the-shelf vendor solutions this gap is narrowing
– Larger banks still benefit from synergies across business lines, such as
consolidation of operations or shared platforms
– IT outsourcing for new entrants and smaller players who do not seek
differentiation (eg. platform sharing)

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Conclusion
1. Affluent banking in emerging Asia has huge potential and given the
pace of these markets is a key building block for the onshore private
banking business.
2. Banks in emerging Asia still struggle to build a private banking value
proposition that goes beyond red carpet banking. With the
liberalisation of regulation and foreign banks entering the
landscape, domestic players will have to get moving.
3. Competition will move away from execution and products and move
towards quality of advice.
4. Technology will be instrumental to build scale and deal with
increasing regulatory requirements and changing customer demands
and behaviour.

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Targeting the Private Banking Sweet Spot
Thomas Zink
Associate Editor and Content Manager
VRL Timetric
thomas.zink@sg.timetric.com

E X C E L L E N C ED R I V I N G
Scaling Up your Wealth
Management Business

About Me
22
Anselm de Souza
Managing Director for Asia Pac
anselm.desouza@soprabanking.com
Spoken at:
• VRL Wealth Management Round Table –
Malaysia, Indonesia
• Wealth Management Round Table – Philippines
• TOAP Convention – Philippines
• Wealth Management Boot Camp – Philippines
• Hubbis Wealth Management Forum –
Malaysia, Indonesia

 Key Developments in Asian Private Wealth industry
 Growth Challenges to the Asian WM Market
 A fully integrated front-to-back approach to scaling up the WM
business
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Agenda

Changing Environment in Asia :
Demographics
Asian
entrepreneurs
are contributing
over 70% of
HNWi
Well
Informed, Opinio
nated and
Transactional
Technically Savvy
High level of
mobility
New ways to
communicate and
interact with their
Relationship Mgrs
Younger investors
– 41% of HNWI
are 45 years and
younger

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Changing Environment in Asia :
Offshore vs Onshore
Outlook
• Better
Economies
• Improved
Product &
Services
• Improved
Regulation &
Efforts
Tax & Regulatory
Compliance
• Cross-border
Taxation
• Disclosure/
reporting
standards
• Changes in
Capital and
liquidity
requirements
• FATCA
Financial Crime
Prevention
• Know Your
Customers
procedures/anti-
money
laundering
• Risk
management
systems

 Key Developments in Asian Private Wealth industry
 A fully integrated front-to-back approach to scaling up the WM
business
26
Agenda

Common challenges in Wealth Management
Managing risk?
Facing regulatory changes?
Knowing and serving my client?
Streamlining operations?

 Aligning Technology priorities with client needs
 Conceptualising for STP
28
Key Focus for Today

Client Servicing : Person to person vs Automation
29
Source: Gartner

30
Clients get what they want, how they want it
• Identify
and tailor
segment of
clients
Client
Relationship
Officer
Call
Centre
Internet
other
RetailBanking
TRADITIONAL MODEL
Organisation-Centric
DiscountBrokerage
Full-ServiceBrokerage
Investment
Management
PrivateBanking
Trustandfiduciary
services
Trusts
Advisory
Banking
Mutual
Funds
Products
Multi
Channels Insurance/
Pensions
NEW MODEL
Client-Centric
Integrated service around Client segments
supported by a dedicated access and service
approach
Clients get what organisations want to sell them
Clients get what they want, delivered how
they want it and at an acceptable price
Result

Typical Situation
- 31 -
Relationship
& Portfolio
Managers
Deposits
Trust
Treasury
Credits
External
Providers
Systems
External
Asset
Managers
Other
Product
Providers
Stock
Brokers
Internal Dept/
Systems
Manual / Semi Manual
• Client On Boarding
• Order Management
• Portfolio Management
• Collateral Management
• Corporate Action
• Settlement
• Client
• Broker
• custodian
Inefficiencies
Confidentiality
Errors
Misappropriation
Compliance
Risk
Reputational
Risk
Back Office / Ledger Systems
Client Support Unit & Operations

The Top 3
32
Customers
Return of Investments
(yield)
Better customer reports
Secured Transactions
Management
Increased revenue &
margins
Improving skill sets of
people
Managing Compliance
& Risk issues
PB/WM Head
Understanding clients
needs
Talent Management
Fluent Delivery &
Operational efficiency
Issues Faced
Manual processes & Inadequate systems
Talent & staffing
Adoption of new regulatory and compliance

 Key Developments in Asian private banking industry
 A fully integrated front-to-back approach to scaling up the
WM business
33
Agenda

Wealth Management Drivers and Challenges
34- 34 -
Financial
Accounting
Product and
operations
management
Risk
Management
Clients
and
channels
Mass Affluent/
High Net Worth
Client retention or
increase through
excellence in
service
Concentrate on
Core Business
Product
differentiation and
short time to
market
KYC, build client
segmentation
Aggregated client
reporting
Product efficiency:
processing mass
affluent but also
individual elite
Wide functional
coverage
Automating
processes, movin
g processes back
into core systems
Self-service e-
platforms
Lower TCO
Supporting
growth through
increasing
efficiency
Scale costs to
activity
Growing
corporate
reporting
Growing
significance of
regulation
(FATCA, MiFID
, KYC, AML…)
Guarantee
client
confidentiality
IT
Management
Product scaling
and incremental
approach to
additional
functions or
tools
Cope with
limited IT
Resources
Remote access
for Wealth
Managers
COO, Head of
Operations
CFO Risk
Manager
Sales
Manager, Wealth
Manager
CIO
Clients
Main source : PWC - Global Private Banking/Wealth Management Survey 2007: Executive Summary

Wealth Management Solution answers to
Drivers and Challenges
35- 35 -
Differentiators Best practices on Operational Efficiency & Compliance
Financial
Accounting
Product and
operations
management
Risk
Management
Clients
and
channels
COO, Head of
Operations
CFO Risk
Manager
Clients
360° view of clients
assets and operations
Multi-channel inquiries
and updates by
Managers and Clients
Flexible
solution, configurable
for Mass and Individual
Comprehensive KYC
info
Efficiency by flexible
Model
Portfolio, Autom.
Order Alloc., Portfolio
Constrains, …
Wide multi-functional
WM and banking
functions
Single Input, efficient
controls, integrated
STP front to back
E-channels with
customer self
servicing
Integrated Front
to Back Office, to
reduce TCO
(licenses, interfa
ces costs, …)
Complete activity
and profitability
reporting
Built-in
compliance
(business as usual
for editor)
Segregation of
client info access
IT
Management
CIO
Sound future-
proof IT solution,
E-channels for
Wealth
Managers on
front-to-back info
Sales
Manager, Wealth
Manager

- 36 -
Right Infrastructure?
Private and Wealth Management Systems
Maximum process automation
Flexibility
ReportingClients
RegulationTariffs
Wide functional coverage
Clients, Order Mngt, Accounting, CA
Specialized functions
Constraints, Alerts, Allocated orders…
+
Short Time to Market

Solution Overview
- 37 -
Operations
&Customer
Servicing
Teams
Relationship
& Portfolio
Managers
PNB Bank‟s Internal
Systems
SOPRA BANKING FOR WEALTH MANAGEMENT
Portfolios & Assets Management
Securities
Multiple Order
Generation
Portfolio
Constraints
Portfolio
Performance
Portfolio
Reporting
Model
Portfolio
Order Mgt Settlement
Platform
Custody Corporate
Actions Mgt
Generic and analytics
Compliance reporting Reference Data Risk Mgt Communication Accounting
Financial data providers Markets & Exchanges CustodiansAuthorities
Deposits
Trust
Treasury
Credits
Internal Dept
/ Systems
External
Asset
Managers
Other
Product
Providers
Stock
Brokers
External
Providers
/ Systems
Private
Banking
Customers

A Wealth Management Solution to Upscale your
Business
Business solution based on Ready-to-use set of
features:
Specialised Wealth Management
Combined with standard banking Functions
Integrated Front to Back
High flexibility but quick usability
Customer differentiation and Best practices in
internal processes

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Editor's Notes