The recent Singapore IBF/CFA Wealth Management seminar had some big-wigs from the major banks and financial intermediaries speaking. Real who's who and a good show.
As some sound bites circulate the Internet, the most telling story comes from UBS' Christine Ong, probably their #2 in Asia private banking. She warned of the need for more experienced private bankers and that many inferior (my words) bankers in the industry were weeded out during this recent economic meltdown. She is quoted as saying: "no more hiring hairdressers".
For those that proclaimed that Singapore was the next Switzerland for wealth management, or have high hopes for the Lion City, sit back and look beyond the facade. Yes facade.
Singapore was a backwater center up until the mid 1990's. No more a financial powerhouse than Jakarta or Taipei. A series of great government initiatives coupled with the collapse of the Asian pillars: Japan (credit crunch, Asian Financial crisis), then Hong Kong (1997, economic bubble, SARS, etc) and Singapore became literally the only viable player in Asia. [Noteworthy is the name Andy Xie (ex-Morgan Stanley). Google him to see what he thought about Singapore's early 90s success that supposedly got him in hot water.] Cheaper, well educated and a sympathetic government helped Singapore grow fast and then exploded by early part of this decade. As foreign fiscal policies tightened, more EU and Carribbean money kept flowing in. With a good background and jump on Islamic products and services, Singapore sucked in more Arab and Muslim money. As Indians grew rich and became NRIs, their money went to a friendly neighbour like Singapore. As such, 20-man private bank branches became 100-teams. Bank tellers became Wealth Managers. Trust Officers became Senior Fiduciary Specialists and hairdressers became UBS Client Advisors. And if not for the recent crisis, it would have continued, as money was flowing in with no end in sight. As long as AUM and product sales were increasing, who cared about mis-selling Lehman mini-bonds or the real lack of depth or relationship management?
So what the future hold? Clearly, Singapore over-extended itself in the past. So where does Singapore get those 900-odd bankers Ong says they need? Now with China continually opening up, expect Hong Kong to shift its resources to tap that potential and suck up banking resources doing so. Japan is slowly but surely back on its feet and South Korea surviving, so all the big deals will be in North Asia. And if India continues its growth, it too will suck banking resources out of south Asia.
That leaves Singapore clutching at straws for talent and resources. Does Singapore have a competitive advantage? No not really and that's how fast the landscape changes. Labour and office costs have risen too much in the past and more corrections will be needed to be competitive. These days, it's more about where to setup the laptop rather than who's operating the laptop. Give me a few expats and 30 locals that can read english and do addition and subtraction and you can have a top notch Mumbai back office in a few months. Banking secrecy is fading out, and in this day and age, do you really want money or clients that need to be secret? How much "secret" Indonesian/Malaysian/Philippines (and more recently allegedly Myanmar corruption) money do you see fleeing Singapore once secrecy is off the table? Hong Kong government is taking a more proactive approach which may further erode whatever Singapore policy advantages there are (but Hong Kong government's MO is to drag these things out in consultation hell so the market corrects itself without any actual intervention). Any better investments? Nope. Tax? May be slightly better for businesses but not so for individual investors. Notice the OECD tax information exchange agreements Singapore is scrambling to sign? (See 12 Monkeys entry below). Each one signed will turn off another money faucet. Any better service? Maybe, but more likely if you want your hair set while discussing your portfolio. How about expertise? Would you think it strange that the banker shortage is the only area where Singapore was deficient in terms of human capital? Performance? Look closely at Temasek (the soverign investment fund) and how it wheeled and dealed in Bank of America shares into one of the world's single biggest losses on Wall Street history, some US$4.6Billion. [Update: On the flipside, GIC (Government of Singapore Investment Corporation) has just sold off half its stake in Citigroup for a US$1.6 billion profit. Win some, lose some]
Simply put, Singapore has peaked as a wealth management center. An impressive feat, building into a major player within 10-15 years but I predict a slow and moderate growth at best in the coming years.
As for the unemployed hairdressers? I think Christine was wrong in letting them go. After all, they are professionals in the sense that they can competently cut/style hair, otherwise they would have no customers. I can't say the same about these 20-somethings the banks have running around marketing structured products they themselves do not understand but unfortunately still end up with customers. Have the PBs continued to grow their AUM or revenue this last year? I bet people are still cutting their hair with their familiar hairdresser.
Hairdressers are "people" persons. They are usually great conversationalists and/or listeners and adapt the to moods and whims of their clients, unlike some of the divas the private banking sector has created over these past years.
Hairdressers are typically "self-employed" in that they rent space in salons and develop their own clientele from that space. They are unlikely to leave unless they don't get along with salon management or find rent goes up too much. Still their customers usually follow them due to their superior relationship management. Private bankers like to think they're "self-employed" but receive a salary from their bank and are likely to leave as soon as someone offers more salary. They are likely only able to bring 35% of their customers with them when they switch shops.
Hairdressers are great cross-sellers, in referring their customers to manicurists and beauticians and such. It will be a cold day in hell before a PB calls up some one in another department with a business referral. (Sometimes out of selfish interests, but in Singapore, it's usually the case the guy/gal hasn't been in the industry or organisation long enough to know who or what services are available!)
I think Hairdressers win......by a mile.
