Shayne Nelson tells WealthBriefingAsia how the bank is benefitting from its deep roots in the Asia region.

Shayne Nelson, chief executive of Standard Chartered’s private bank, enjoys getting away from it all with a fishing rod in pursuit of big game. But he doesn’t get much time to pursue this passion while Asia’s wealth management sector roars ahead.

Western banks are piling into the Asia-Pacific and Indian sub-continent regions – dazzled by a 9.7 per cent rise in the number of high net worth individuals in the Asia-Pacific region in 2010 alone (source: Merrill Lynch/Capgemini World Wealth Report). But Nelson, who has been at the helm of StanChart’s private bank since July 2010 when he succeeded Peter Flavel, knows his bank has the priceless benefit – and luck – of being an established player in this crucial region, as well as having deep roots in Africa.

“We are in the right place at the right time,” Nelson told this publication in an interview. “The opportunity is just massive. It is not just the growth in Asia but the growth that we can get from ourselves. Clients trust us, they are already with us,” he said.

One of the trickiest tasks for any big full-service banking group is to avoid making clients fear they are just numbers or having products pushed at them. At the same time, Nelson knows that as regulatory and other burdens rise, banks can cope better if they have economies of scale and can leverage benefits of investment and corporate banking arms.  Like other private banks held in a larger group, such as Credit Suisse, JP Morgan and Citi, Standard Chartered makes no apology for stressing the benefits of size. Nelson even casts doubt on whether small boutique players can make a big success in Asia.

“There are a lot of players coming to Asia from Europe but it is a bit of a different game here than in the West. If you look at most of the Western wealth [market] it is, or has been, around wealth preservation rather than creation, so there is a different mindset among the clients,” he said.

This publication caught up with Nelson after the bank earlier this year announced it had set up a high value client coverage segment, designed to bring together its private, priority, SME, international and Islamic banking divisions. 

Nelson has been at StanChart for a long period, starting in 1997 as regional head of audit, corporate and institutional banking covering Asia Pacific and India. His career has seen him take up such posts as managing director and CEO for Standard Chartered Bank Malaysia Berhad, a wholly owned subsidiary of Standard Chartered. Before his role in the private bank, he was regional CEO for the Middle East and North Africa region and CEO for Standard Chartered UAE.

Entrepreneurial culture

More so than in other regions, a high proportion of HNW individuals in Asia are entrepreneurs rather than wealth inheritors, which drives the business strategy of any private bank that wants to be successful there, Nelson said. He said 63 per cent of Asian high net worth individuals own their own business, which is higher than the global average.

“The mix between corporate and personal money is a very blurry line with many individuals in Asia,” he said.

This is where the focus on cross-referrals of clients within Standard Chartered comes in: "It is easier for us to gain share from clients we already have than by cold-calling people."

“Because we have been in these countries [India, China, etc] for more than 150 years, we have a long-term, stable, multi-generational relationship with clients. We have often had them as business partners but have not necessarily banked them across to our other streams,” he said.

Costs

“I think the highest risks [for this and other banks] are regulatory. We are certainly seeing a lot more regulatory incursion wherever we are, whether it is in Indonesia, Hong Kong, China, and so on.”

“All that entails improving systems, processes, engineering and platforms; it means putting quality people in place and having good compliance and reporting,” he said.

The stakes for handling these cost pressures are high. As PricewaterhouseCoopers pointed out in its recent bi-annual survey, the average cost-income ratio of private banks is 71 per cent and only a relatively small number of firms are below 60 per cent. It is not just regulations that affect profitability. Historically low interest rates in many countries squeeze margins, as do the high costs of getting the best talent. Asia is expensive for hiring staff: the average cost of an RM in Asia is $263,000 per annum, which is greater than in Switzerland.

“The cost of business is quite high; the depth of talent, such as for RMs and compliance staff is not here for the expansion of wealth,” Nelson said.

A shortage of talented RMs will be a constraint on growth he said. StanChart does hire private bankers, where appropriate, from other parts of the group, such as the wholesale banking side.  “The majority of hires we are making are coming from private banks,” Nelson said.

The firm is also developing good talent in the priority [mass affluent] banking side into private bankers where they fit the bill, he said.

Nelson’s bosses will hope the private bank can deliver. Wealth management income at this London-listed firm rose in 2010 by 24 per cent, year on year, to $1.138 billion.

The India market

As is increasingly obvious, the India market – both domestic and non-domestic – is attracting attention from wealth managers. In June, the private bank appointed a head of private banking for India, Sandeep Das, previously general manager for premium and consumer banking at Standard Chartered India.  

For the first time in the history of its World Wealth Report, Merrill Lynch/Capgemini announced that India had moved into the top 12 of countries in terms of the number of HNW individuals (153,000). Admittedly, the absolute numbers are way behind, say, those of the US (2.9 million) but the growth rate (20.8 per cent) gets private bankers understandably excited.

However, one issue that has to be borne in mind is that the offshore, non-resident India market is so far much greater than the domestic one, said Nelson.

“The product side [in India] is more limited than in booking centres such as Singapore and Hong Kong. There are quite a lot of regulatory restrictions in India that make doing business there a bit more difficult,” he said.

Nelson would not be drawn on specific numbers in terms of any hiring targets for the Asia-Pacific or MENA regions, but answered in more general terms: “The markets that we are focusing on to grow are around Asia and the Middle East. China continues to be a huge opportunity for us.”

“We have teams in Hong Kong and Singapore together with on the ground in China doing private banking. Indonesia continues to be a very attractive market for us with strong growth,” he said.

With the Asia-Pacific dimension in mind, Nelson commented on how clients from this region are increasingly visible purchasers of Western assets, such as London real estate. (To view a related article on this issue, click here).

“We continue to lend for housing, in London for example, for our own Asian clients,” he said. “We are certainly working for clients from all over the world that are investing into London. We would not be facilitating investment to help them around restrictions, however. A lot of Chinese clients have got significant businesses offshore these days,” he said.

“There are restrictions on exporting capital outside of China but they [businessmen and women] are allowed to export capital for starting companies, for example,” he said.

Caution

Are clients becoming more aggressive in their investment and risk appetite?

“I don’t think they are taking on a lot of aggressive products,” he said, arguing that the 2008 financial crisis had had a lingering impact.

“The industry as a whole lost a lot of trust with products that got sold.  At the moment markets are so choppy, even our house view is largely that we should sit on our hands. Investors [in Asia] still have a high preference for property and equities as asset classes,” he said.

Nelson also commented on the rapid growth of the Chinese renminbi currency market, a notable feature of recent months.

“The growth has been extraordinary in the offshore market, mainly out of Hong Kong. The issue for the industry is that this is one-sided – it is all going into the RMB. At the moment, there are a lot of people who want to deposit into RMB but not a lot want to borrow in it. The view is that the Chinese currency will eventually appreciate [against the dollar],” he said.