SINGAPORE: Private banks are gearing up to meet an expected surge in demand from well-heeled clients amid increased scrutiny of the sector.
Looming interest rate cuts in the United States will likely prompt wealthy customers here and elsewhere to look for other ways to boost investment yields, which in turn will put heightened focus on the private banks that cater to them.
Meanwhile, Singapore’s financial regulator has reiterated the need for the private banking industry to uphold high standards of market conduct and transparency in its dealings with clients.
This involves providing more transparency on fees, appropriate disclosures to clients and ensuring that pricing arrangements agreed with customers are adhered to, said a Monetary Authority of Singapore (MAS) spokesperson.
The MAS was responding to The Straits Times’ (ST) queries about a broader review of private banking pricing and disclosure practices that it carried out from 2019 to 2023 after earlier inspections.
Its review led to a S$3.9mil civil penalty being imposed on Credit Suisse in December over its failure to prevent or detect misconduct by relationship managers in its Singapore branch.
The regulator said the review showed instances where clients were charged more than what was represented by relationship managers and agreed to in fee schedules or pricing arrangements.
“Following the review, banks have taken actions to address gaps identified in their controls, and to review the conduct and practices of relationship managers,” its spokesperson told ST.
PwC Singapore partner Quek Kian Leong said he has found that deliberate attempts to overcharge clients are uncommon.
He noted that discrepancies in pricing could also result from situations such as a time lag between when an order is made and executed, and a large ticket size that amplifies small differences in prices.
Private banks need to have clear frameworks that send the right messages to relationship managers about the standards expected from them, added Quek, who is the main author of the professional services firm’s annual private banking report.
Banks have also introduced more market heads that oversee smaller groups of junior bankers, including in the area of governance and conduct, he said, adding: “That’s probably one of the ways in which the banks are thinking about pursuing expansion, while keeping risk to an acceptable level.”
Chew Mun Yew, who heads UOB’s private bank, noted that the business is part of the broader bank so uninvested deposits could be deployed elsewhere in the institution.
This alleviates pressure to push sales, especially when the investment climate is less ideal for customers.
UOB has been building up its team of relationship managers – from 200 in 2021 to more than 350 at the end of 2023, with an aim to have more than 400 by 2026.
Over 70% of recent hires have experience in local and international banks, noted Chew, adding that UOB has set up an internal academy to develop relationship managers’ technical knowledge, soft skills and business acumen in client advisory.
The timing is significant, given that upcoming rate cuts will prompt clients to look for higher returns or other sources of income from alternative financial instruments.
“There are other macro trends that will increase the demand for relationship managers’ services, such as increased volatility in markets caused by the numerous elections happening globally. These concerns, alongside a slowing global economy, will also prompt clients to seek advice on their portfolios,” said Chew.
His bank is taking a defensive investment approach that is overweight on fixed income as a broad asset class, and advocates exposure in alternative assets such as hedge funds and private markets.
“For participating in long-term secular growth ideas, we advocate industries like artificial intelligence and healthcare,” he said.
An HSBC spokesperson said the bank regularly reviews its controls and provides training to relationship managers to strengthen processes and uphold professional standards.
Adeline Ang, Bank of Singapore’s global head of human resources, said that the bank created a new Single Family Office Risk Management learning programme in 2023, amid growing interest from clients to set up single family offices (SFOs) here.
It aims to ensure relationship managers understand key risks in dealing with SFOs. — The Straits Times/ANN
