Small Banks Look to Asia In Targeting Nouveau Riche

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HONG KONG—Within Asia's private banking scene, several new entrants in the region argue that small is better.

A handful of small private banks, advisers and start-ups, are setting up here in a bid to grab market share from mammoth investment-banking competitors. They are trying to benefit from dissatisfaction among wealthy clients with advice they received during the financial downturn.

"The timing has never been better," says Urs Brutsch, founder of Hoffman & Partners Wealth Management (Singapore) Pte. Ltd., which started up last year after Mr. Bratsch and several colleagues defected from Clariden Leu Ltd., a unit of Swiss Banking Giant Credit Suisse. Before starting his Asia-focused firm, Mr. Brutsch headed Clariden's business in the Asian-Pacific region. He declined to disclose how many clients have joined him at his new firm, or its current assets under management.

"The banks have screwed up quite a bit in the last few years, and independence has never had more value," Mr. Brutsch says.

Although some parts of Asia escaped the worst of the economic downturn, some high-net-worth individuals in Asia were hard hit, especially in Hong Kong, where many clients got caught in highly leveraged structured products that were difficult to exit from and wiped up huge chunks of savings. At the end of 2008, assets of high-net-worth individuals in Hong Kong had plunged around 65%, to $181 billion total, according to a 2009 report released by Merrill Lynch Global Wealth Management and consulting firm Capgemini.

Smaller firms argue that as boutiques, they aren't tied to complex products cooked up by in-house investment-banking divisions. Their independence, they say, keeps their private bankers from simply trying to peddle products that may not mesh with a particular client's overall risk levels or goals.

Asia today also represents the biggest growth market for wealth managers. The high-net-worth populations in China and India, for example, will nearly triple in the decade ending in 2018, adding about $4 trillion in individual wealth, according to the Merrill Lynch/Capgemini study.

The big firms aren't sitting on their hands. Credit Suisse and J.P. Morgan still say the region stands out as the fastest growing globally in terms of assets. The head of J.P. Morgan's international private bank, Douglas Wurth, just moved to Hong Kong from New York to take a new position heading all private banking markets outside of North America.

Marcel Kreis, head of private banking in Asia at Credit Suisse, counters criticism that big banks added well-connected private bankers indiscriminately during the boom hiring years of 2006 and 2007. The big banks are also client-oriented, and not tied to proprietary trading and investments, he says.

"We now have much more of a focus on hiring bankers with more experience," he says.

But some private bankers say that because many Asian fortunes are self-made, rather than inherited, relationships with outside advisers are being forged now, rather than handed down. For newcomers and niche players, that means the field is wide open. Small private banks are eager to characterize the big banks as impersonal, product-pushers.

BSI, a Switzerland-based private bank that is part of Italian insurer Generali Group, has moved aggressively. Late last year, it hired 70 private bankers from RBS Coutts Bank in Singapore. Next month, Hanspeter Brunner, formerly of RBS, will take over as BSI's chief executive in Asia, also based in Singapore.

Switzerland's Bank Sarasin & Co. is another niche player aggressively seeking expansion in the region. Between December 2007 and June 2009, Bank Sarasin's private wealth assets in Asia and the Middle East rose nearly 30% to 10.8 billion Swiss francs (US$10.1 billion), a spokeswoman said. In its effort to pursue Asian money with even more vigor, Sarasin is opening a private banking branch in Hong Kong next month. To get the word out, the firm had draped a banner across an office building at the corner of two major thoroughfares in the city's busy Central district.

The 169-year-old private bank is also applying for approval from Singaporean regulators, expected to be granted in 2011, for a license allowing it to accept deposits in the local currency, which could increase its base of local clients.

As well, the Swiss bank is boosting headcount in Asia by poaching experienced private bankers from bigger rivals. Most notably, it hired Grace Barki to head its Southeast Asia business from UBS, where she led efforts in Indonesia and the Philippines. Another UBS recruit, Febby Avianto, joined to head Sarasin's Indonesia team, a market he focused on while at his previous employer.

Even nonfinancial firms see an opportunity to step in. U.K. law firm Herbert Smith LLC recently decided to expand its private client business to Asia, where, until now, it has offered its services strictly to corporate clients.

Rupert Ticehurst, a London-based partner at the firm who will lead the effort, says Asian business owners were increasingly asking for help with personal matters, such as succession planning, taxes, trust services and charities. In addition, a spokesman said, the law firm's practice in Europe had less to do there amid the recession. "I did a tour of private banks in Asia, and discovered there aren't many private client lawyers here," Mr. Ticehurst says.

Write to Laura Santini at laura.santini@wsj.com

Source: http://online.wsj.com/article/SB10001424052748703444804575070870327303684.html?mod=WSJ_business_LeftSecondHighlights