Helping Asian Wealth Management Communities interact

Strategy & Practice Management

How UBP is adapting to Asia’s changing landscape

Michael Blake of UBP

Nov 24, 2017

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As private banks continue to face mounting pressures in terms of profitability, cost, competition and regulation, Union Bancaire Privée (UBP) is coming off the back of its integration with Coutts, determined to embrace change and accelerate growth

In the bank’s first full year since UBP’s acquisition of the Coutts Asia business, Michael Blake foresees a positive path forward. 

Last year’s integration of the Swiss boutique firm’s private banking unit with the Coutts business in Hong Kong and Singapore went smoothly, meeting the key goal of maintaining stability across clients, staff, and systems.

“Client and staff retention levels have been far higher than anticipated,” says Blake, chief executive officer for UBP in Asia. 

One of the reasons he believes the bank was successful in retaining clients is because UBP can offer a more customised product offering. This is especially in relation to UBP’s institutional asset management capabilities, its expertise in alternatives and its in-house direct investments offering.

“Clients have welcomed UBP’s pure-play expertise in investment management and are doing more business with us as a result,” Blake says.

Now, the focus is on growth that remains sustainably profitable amid a generally tough environment for international private banking.

“The priority last year was a successful transition,” says Blake. “Our priority this year has been to do more with existing clients and to attract new RMs.  We have seen strong results so far.”

One way that UBP supports this goal is by providing new RMs with a specialist front office onboarding team in their first months with the bank.  

“We hire experienced RMs with deep advisory expertise and strong networks in their chosen markets,” explains Ranjit Khanna, head of South Asia for UBP.  “The onboarding team helps RMs navigate the bank’s domain, so they can focus on onboarding prospects quickly and then select the most appropriate advisory tools for their clients.”


Key markets beckon

UBP’s priorities from a geographic perspective are centred on the two big opportunities of Greater China and Indonesia. 

Progress is underway. In response to sustained growth in North Asia markets, UBP bulked up its Greater China capabilities in 2017 with the hire of Jonathan Lin as market head, Greater China and Ushe Koh as market head, Hong Kong.   

“The continued strong performance of our existing business, combined with the injection of experienced new RMs, has led to increased AUMs and significantly improved profitability,” says Eric Morin, head of North Asia. “We plan to continue this expansion in 2018.”

The Hong Kong domestic market comprises around two-thirds of the overall North Asia business, bolstered by a new focus on clients from Greater China.

Having this kind of geographic discipline is important for UBP Asia to achieve its target of doubling its share of UBP Group AUM from 15% to 30% in the medium term.  

Blake is optimistic. “We are making good progress towards our target on the back of senior hires, deeper product penetration and closer co-operation with our asset management team.” 

Khanna shares this view, adding that the bank’s private ownership offers clients and RMs an attractive and differentiated proposition. “Our product platform supports entrepreneurial RMs in delivering bespoke advice to clients.” 


Real advice

Like other banks, UBP is conscious that clients have increasingly high expectations of their wealth managers due to changing and more complex needs. 

“One of the most important functions of a private banker is to ensure clients stick to their financial objectives and do not get distracted by the surrounding noise,” Khanna observes. “Keeping that front-and-centre ensures the quality of advice remains high.”

Khanna also believes that, with transactional fees commoditised, banks have to move towards a more advisory-driven model by charging fees for advice.

“Increasingly, more clients will be willing to pay an all-encompassing fixed fee for advice,” explains Khanna. “High quality advice will always command a premium.” 

Morin believes that the type of content UBP can deliver in its advisory solutions creates an important differentiating factor.

For example, the bank has the capacity to propose direct investment opportunities to clients including investing in real estate across various cities in the US, commercial aviation and student accommodation in Europe. 

At the same time, being transparent in terms of charging structures is key for the industry as it continues to build trust with clients. “This business is about trust and being transparent establishes trust,” explains Morin. 


Adapting to survive

Yet the challenge for UBP and every other international private bank in Asia today is how to turn the new wealth being generated in Asia into tangible business to ensure continued growth. 

This challenge is further compounded by the move towards a tax-transparent world, which potentially blurs the boundaries between international and domestic wealth management – possibly with an almost default move towards domestic players as funds get repatriated.

“The structural changes in the private banking industry over the past couple of years have been significant,” explains Blake. “They are leading to more clearly differentiated business models and clearer choices for clients and their relationship managers.”

Khanna agrees. “There will be different models that will emerge and those organisations that adapt and move quickly will be winners.”

Blake believes that international players will continue to enjoy an advantage over their domestic counterparts when it comes to offering pure play wealth management advice. “The advisory proposition and expertise of international wealth managers cannot be replicated easily.”

When servicing clients from Mainland China, for example, Morin explains that UBP focuses on helping wealthy families to better organise their governance, including establishing family offices.

At the same time, the bank’s focus on wealth preservation can help these clients to generate stable revenue streams in their private banking portfolios.

Further, UBP aims to create a competitive advantage by blending high-quality advice with a tailored approach delivered quickly. “Given that every client is unique in terms of their needs, every solution we offer is relatively bespoke,” adds Morin.

Indeed, with the private banking industry evolving rapidly, players that fail to adapt and embrace change quickly are unlikely to survive. “We are at a crossroads for the industry and it is incumbent on existing players to navigate actively through these turbulent times,” says Khanna.


On a solid track

The announcement of UBP’s results for the first half of 2017 confirms the bank’s positive momentum.

Firm-wide, net profit at the end of June 2017 was CHF109.5 million, up 21.6% from a year earlier. And AUM totalled CHF118.9 billion at the half-year point.

While operating expenses increased by 9.9% in the 12 months to June 2017, due to the integration of Coutts in Asia, strong cost management enabled UBP to improve its cost/income ratio to 63.5%. This compares with 67.9% at the end of December 2016.

Guy de Picciotto, UBP CEO, said when announcing the results: “While we have benefited from positive market movements, the hard work and dedication of our teams in offering our clients innovative solutions have played a significant role in achieving this set of results. They also reflect the substantial investments we have recently made in strengthening our teams and demonstrate the dynamism of our activities in Asia.”

More specifically in Asia, the bank has made senior RM acquisitions in its Greater China, Hong Kong and South East Asia market teams over the past 12 months.

Michael Blake

CEO Private Banking Asia at UBP