Strategy

Comment: What Is The Difference Between An Eastern and A Western Millionaire?

Tara Loader Wilkinson Asia Editor Hong Kong 2 February 2012

Comment: What Is The Difference Between An Eastern and A Western Millionaire?

Asian and non-Asian wealthy entrepreneurs have dramatically different priorities, ambitions and preferences, underlining the importance of cultural knowledge for global wealth managers.

No, it’s not the beginning of a bad joke. Asian and non-Asian wealthy entrepreneurs have dramatically different priorities, ambitions and preferences, underlining the importance of cultural knowledge for global wealth managers.

Wealth in Asia is at an all-time high, and private banks have piled into the region in a bid to dip into its fast-growing pool of riches. Some have been less successful than they may have hoped. Experts estimate that relationship managers in Asia get paid on average a quarter more than their Western counterparts, as the shortage of qualified professionals pushes up compensation. 

As the costs increase, revenues are being squeezed on the way down. According to Scorpio Partnership, margins at private banks in Asia are thinner than anywhere else in the world as cost/income ratios are compressed. The reason is simply that although there are plenty of wealthy individuals in Asia, they are not necessarily stashing their fortunes in high risk, fee paying products. Post financial crisis, many are more interested in lower-margin options oriented towards capital preservation, such as cash or fixed income.

The key to bringing on new accounts, according to Shayne Nelson, chief executive of Standard Chartered Private Bank, is understanding what makes your market tick. A cookie-cutter approach to global wealth management is not going to work. A HNW individual living in London is going to have different desires from one living in the Philippines, for example.

“With low to no growth in the traditional bastions of private banking, Asia is getting to be the must-have market. But in order to succeed, private banks need to understand its unique characteristics to navigate through the landscape successfully,” said Nelson

But the question is, who are these high net worth Asians? What are their wealth ambitions and preferences, outlooks and expectations?

A growing rift

Three-quarters of Asian entrepreneurs have seen an increase in their wealth over the past 12 months and 84 per cent expect their wealth to further increase over the next 12 months despite economic conditions, according to a survey of 3,300 high-net-worth individuals, published  last month by Scorpio Partnership and sponsored by Standard Chartered Private Bank and SEI.

In comparison, only 49 per cent of non-Asian entrepreneurs saw their wealth increase over the past 12 months and 70 per cent expect their wealth to increase further over the next 12 months.

This wealth confidence difference is underscored by the average money goal surveyed. The average money goal for the Asian entrepreneur is approximately $10 million. Almost 40 per cent of them believe they can achieve that goal in one to five years. In contrast, the non-Asian entrepreneur has an average money goal of $7.7 million and only 23 per cent of them believe they can achieve that in one to five years, said the survey.

Wealth also plays a significant role in shaping Asian entrepreneurs’ personal development. If they had 10 times their current wealth, Asian entrepreneurs would channel more energy into achieving their goals, personal growth and development, and be more excited about the new opportunities and experiences money can bring. In contrast, non-Asian entrepreneurs focused more narrowly on two areas - health and family life

The different role that wealth plays in defining the individual is further reinforced by the direct correlation between wealth and social status for Asian entrepreneurs. Three times as many Asian entrepreneurs (23 per cent) are excited by the prospects of an increase in social status that wealth brings, compared to their non- Asian counterparts (seven per cent). Twice as many Asian entrepreneurs (14 per cent) also equated wealth with success, compared to non-Asian entrepreneurs (seven per cent), said the FutureWealth Survey.

In short, Asia’s wealthy are enjoying the ride of their wealth growth, are more ambitious, more driven, and consider wealth as a measurement of success or increased social status, compared to non-Asian wealthy, who are generally more conservative. If global private banks can adjust their services accordingly, they might be on to a winner.

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