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ABN Amro Using Tradition to Force Wealth Management Advantage in Asia

Lachlan Colquhoun

31 October 2006

Dutch bank ABN Amro is celebrating 100 years in China this year and Hans Diederen, the newly appointed head of the private banking unit in North Asia, sees its longevity in the region as a major asset as he pursues growth for ABN Amro Private Banking. Hong Kong-based Diederen arrived in Asia from Gibraltar earlier this year with responsibility for Hong Kong, Taiwan, and mainland China in addition to South Korea, the Philippines and Japan. His arrival has coincided with significant growth for ABN Amro Private Banking in the region, with a headcount of around 430 private banking employees servicing over 4000 clients. There are staff on the ground in Hong Kong, Taiwan and Shanghai while South Korea, the Philippines and Japan are served on a fly-in, fly-out basis. Although the bank does not publish separate asset under administration figures for North Asia, its recent report revealed that across Asia, the private bank currently administers close to $16 billion. “We have tripled assets under administration in two years, but the real multiplier effect will only be seen in the coming six months because we have been heavily recruiting,” Mr Diederen said. “We have a lot of private bankers at the moment who are only starting to bring their clients across so we will probably see a far more rapid increase of assets in the year ahead.” Since his arrival in Asia, Mr Diederen says he has been very aware of one of the private banking industry’s main regional challenges – a chronic skills shortage. But instead of grabbing any available talent, Mr Diederen says ABN Amro has some strict criteria on who it wants to recruit. “It’s not too difficult to recruit private bankers, because there’s a lot of private bankers who are looking for job opportunities,” he said. “But we have to be extremely careful in this market which is a bit overheated, and you have to be careful that you don’t take a private banker who has been with his current employer one year to eighteen months, after being with another bank for two years. “In a situation like that the client is suffering because the client doesn’t want to move all the time, and you see trends that are not sustainable.” Instead, Mr Diederen says his policy is to focus on private bankers who have been with their current employers for at least five years. “It has been a positive surprise to me that we have found very good qualified candidates with sizeable portfolios who have been in the market for ten to 15 years plus,” he said. ABM Amro Private Banking focuses on clients with the equivalent of $1 million in liquid assets available for direct investment. In North Asia, says Mr Diederen, exceptions can be made because many of the bank’s clients are entrepreneurs who are pondering the sale of their business, but are not yet in a liquid position. New entrepreneurs, in fact, feature prominently in ABN Amro’s plans for the region, particularly in mainland China and Taiwan, but they have different demands of their private bankers. “High net worth individuals from China and Taiwan are 90 per cent first generation entrepreneurs so they have less time to develop relationships with the banks,” Mr Diederen said. “The risk appetite of these people is also different because they keep a lot of money – around 50 per cent of it – in cash but they are happy to keep the rest of their wealth invested in equities and alternative investments, and this is where private bankers come in. “We have private bankers with backgrounds in investment banking or commercial banking or corporate banking who know what is going on in certain industries, and we are finding that these people are in a good position to bond very quickly with these type of clients, and make major steps in gaining their trust.” Another factor which makes Asia different, says Mr Diederen, is the current transfer of intergenerational wealth. ABN Amro has just partnered with business school INSEAD to survey high net worth families in the region, and has discovered they are at a crucial point. “We are focusing more on families in this region, and what we are seeing is that the generations have contrasting aspirations and different views on what to do with the family wealth,” he said. “This transfer is a moment of truth for the family and many of them are at this key crossroads now and we want to provide the essential support.” Much of the focus is now on China, where World Trade Organisation membership promises to open the market to foreign banks just as the country’s private wealth is booming. Some mainland clients bank with ABN AMRO through Hong Kong, but there is a small team already in place in Shanghai which is pioneering the business there. “China is by far and away the most interesting market for private banking in the coming years, but it will require some time and patience from foreign banks because they are not yet allowed to apply for licences for local currency,” Mr Diederen said. “That will hopefully happen soon when China is part of the WTO and close to that date they will announce the pre-requisites to apply for those licences, and that will be an important moment and the moment a lot of private banks are waiting for. “China is a huge opportunity and I think ABN Amro is in a very good position because we have been there for a long time.” ABN Amro, he says, already has a preferred banking segment in China, with six branches to be upgraded to eight by year’s end. “So this means that when the time comes we can leverage already on our good name and reputation, and build our business there when the opportunity comes,” Mr Diederen said.