BNY Mellon expands Apac wealth business

By:
Rob Hartley
Published on:

BNY Mellon is to expand aggressively in the Asia-Pacific region, targeting increased market share in the wealth business, offering a discretionary model to customers.

BNY Mellon is aiming to grab a larger slice of the Asia-Pacific (Apac) wealth management business with a sizeable expansion of its presence in Hong Kong.

Charles Long-large
  There’s a lot of
first-generation wealth
in this region and it’s
all going to go through
a transition

Charles E Long Jr

BNY Mellon Wealth Management has received regulatory approval in Hong Kong to launch comprehensive discretionary investment and wealth management services to high-net-worth individual investors, the company said in a statement.

The bank is focused on three main target markets in its new push for business, according to Jeroen Kwist, managing director, head of Europe and Apac, BNY Mellon Wealth Management. "One is the US citizen who lives here and has decided to stay in the region," he tells Euromoney. "The second part of it … we have people like Asian families that have what we call a US-connected element to it."

Kwist explains that a US-connected element could be someone with a green card or a dual-citizen, adding: "They could be a Hong Kong citizen and a US citizen or they have potentially taxable interests in the US, they have children that live there, they have businesses that they run out there, so they get connected with the US.

"The final part of it is not connected to the US. It’s the Asian families and the wealthy that have the same kind of needs as US investors, except maybe not the taxable elements or Fatca [Foreign Account Tax Compliance Act], those kinds of things."

BNY Mellon plans to offer a discretionary model to customers, according to Kwist, which involves handing authority over an account to the bank, albeit with guidelines agreed beforehand. 

Discretionary route

Alternative models to the discretionary route that exist in the market include a transactional agreement, which involves placing trades under instruction from a client, and advisory, which involves trades being suggested and confirmed, he says.

"The discretionary investment management approach is evolving here in the market," says Kwist. "We are definitely not the only one that has discretionary offering. 

"But our discretionary offering is very tailored and bespoke, whereas many of the other financial institutions, what they end up doing is they will tie you to a specific model where there is not a lot of opportunity to actually create tailored solutions for the client."

BNY Mellon has more than $187 billion in private client assets, as of September 30, 2014, according to the company.

And Charles E Long Jr, head of Greater China at BNY Mellon Wealth Management, says the firm enjoys a 97% client retention rate. "We serve our clients in a team environment, so if somebody jumps from us, our experience is the clients don’t generally go with them," he says.

Wealth management in the Apac region suffers from a well-known shortage of qualified people. The nature of the business and its need for strong relationships over a long period of time mean it is notoriously difficult to place young talent into the industry, unlike other banking businesses.

"We’ll end the year with about 10 client-facing people and about 50 support people, and our goal is to grow that as we see the business start to come in as we launch here," says Long.

"Looking in this marketplace, finding those people is very difficult. We’ve found some … We’ve been hiring locally, but our standards are very high and because our model is different than the model you see there, people are coming in and they are not used to what our model is and we are very specific about it." 

He adds: "You also see here that a lot of the relationship managers jump every few years, taking their clients with them, or at least try to. And I think you are seeing less of that happen because the clients are getting frustrated with all the moves and nothing really changed."

The discretionary investment management approach
is evolving here in the market

Jeroen Kwist

The creation of new fortunes across the Apac region in recent decades has created valuable business for wealth managers able to tap into the needs of those with a large pool of resources. 

However, unlike in countries such as the US, where wealth has often already passed through several generations, wealth managers in Apac are seeing more clients with first-generation wealth.

"There’s a lot of first-generation wealth in this region and it’s all going to go through a transition; it’s already starting to go through a transition," says Long. 

"So that creates some changes in the dynamics of how a family thinks about their wealth and what demands they have of those service providers for wealth. So frequently, that first generation, the entrepreneur that created the wealth, he likes to be very much in control, he wants to make all the decisions, and that carries through all aspects of his or her life." 

He adds: "So you end up with a situation, where, if you look at Asia, a lot of the institutions, their wealth and private banking, as they call it here, is really structured to be more transaction-oriented."

However, the traditional ways of doing things appear to be changing as new generations bring more international experience to the table, which can lead to a willingness to look at wealth management in a different light.

"What you see now is that next generation of wealth, a lot of them have been educated in Europe or North America and they have seen different models than exist here," adds Long. "And if you look at wealth in Europe or North America, there’s a lot more discretionary wealth management. It’s a bigger part of the market."