Hang Seng Bank’s Alan Luk Believes Trust and Relationships are Keys to Success
Alan Luk of Winner Zone Asset Management
Jan 14, 2019
Alan Luk, Hang Seng Bank’s Head of Private Banking and Trust Services, met with Hubbis to discuss the recent developments and opportunities being created in the Hong Kong and Mainland wealth management markets, which he believes are entering a more challenging period as competition intensifies, as regulatory demands expand and as the mainstream financial markets vacillate.
“Over the last 10 years, positive economic developments in mainland China have resulted in more and more high-net-worth individuals (HNWIs) taking up wealth management services,” Luk begins. “However, we must still exercise some caution, as on the one hand, we have enjoyed this exponential growth, but on the other, we must consider the signals that there is an ongoing slow-down of the economy on the Mainland.”
The value proposition that Hang Seng Bank represents has special appeal to Hong Kong-based, Chinese, first- or second-generation HNWI investors, according to Luk. “For these customers, reputation is everything,” he elucidates. “They rely upon our brand, which is long-established and high quality. What we want to achieve is to become a one-stop service provider to these HNWIs, providing commercial and general banking as well as private banking, and also trustee services. We are continuously looking to strengthen and broaden our relationships.”
Hang Seng Bank also has a wholly-owned subsidiary which offers one-stop property asset management solution, such as property acquisition, property leasing and sales services etc, maximising convenience for investors. “This suits our HNWIs as most have emigrated out of the mainland,” Luk explains, “and they do not have hands-on experience when it comes to property management in Hong Kong.”
Hong Kong versus Singapore – a tale of two financial centres
Luk argues that Chinese and other investors tend to look to Hong Kong rather than Singapore in the current investment climate. “Both are international financial centres located in Asia, but the trustee law in Hong Kong has been recently revamped, which makes moving and holding funds more efficient,” he explains.
In addition to this, Luk believes the quality of service his bank offers in Hong Kong is highly competitive. “This is due to more frequent communication with customers and higher emphasis upon tailor-made solutions,” he clarifies. “Additionally, the geographical location of Hong Kong is better suited to mainland Chinese customers - easy access is essential to winning and then building strong relationships.”
In the face of adversity, adapt and emerge stronger
One issue that Hang Seng Bank is currently facing is staff turnover. “This year we lost some relationship managers (RMs) to only slightly better-paid positions elsewhere, which has overstretched the rest of the team,” Luk reports. “While poaching RMs from other banks for marginal salary increases does work in the short-term, a more effective long-term strategy is to provide intensive, comprehensive training to increase productivity and job satisfaction. Nevertheless, this does take at least three years to achieve.”
He argues therefore that the rapid movement of RMs between firms creates somewhat of an unsustainable situation, which in turn leaves the wealth management industry in a precarious position.
A developing trend in wealth management is the fee-based discretionary portfolio management (DPM) model. “Moving forward,” Luk predicts, “this will be the dominant strategy going into the next five to ten years, certainly for us anyway. At the same time, we will also roll out an alternative investment strategy to the one that has dominated in recent years, steering investors towards balancing portfolios, thereby mitigating market turbulence.”
When pressed to explain this position, Luk clarifies that the investment market is becoming more challenging in general and structured products have also decreased in popularity in recent times.
To mitigate the reduction in product sales such as structured products and to plug the gap until DPM truly builds up – and it has not yet gained sufficient traction broadly across Asia - Luk explains that over the next couple of years, Hang Seng Bank will be taking a prudent approach towards cost-benefit ratios, especially when it comes to hiring new staff.
Humans still preferred to robo-advisors
A final issue Luk addresses is the recent rise of digitalisation in wealth management. “Digitalisation tends to make people feel fancy,” reports Luk. “We are at a stage where it seems like the way of the future, but as we see it there is a limit to what it can achieve in terms of augmentation of the HNWI customer experience at this point in time. It still has much further to go before it takes over from the human adviser.”
This is not to say that HNWI clients totally eschew robo-advisory, as the protocol is accepted as a means of delivery of some information and ideas. But the typical HNWI customer still wants to talk to a person when making his or her final investment decisions.
“As HNWI clients are making major investment decisions, with each one client’s portfolio in the millions of dollars,” Luk concludes, “they may need the additional confidence and reassurance that a human adviser can offer, rather than simply accepting recommendations at the click of a button.”
CEO & CIO at Winner Zone Asset Management
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