Asia's billionaires develop taste for boutique wealth managers

By Sumeet Chatterjee and Anshuman Daga

HONG KONG/SINGAPORE (Reuters) - Growing demand by Asia's rich for independent advisory services and access to a wide variety of investment products is spurring the surge of boutique wealth managers more associated with the established wealth hubs of Switzerland and London.

The boutiques, or so-called external asset managers (EAMs), mainly tap small-and-mid-level business owners and executives, who are typically out of reach for private banks, by leveraging their locally based advisers' contacts and family ties.

As a result, more and more private banks are also leaning on boutique managers to boost their assets in a region which is seeing the fastest billionaire population growth in the world.

While it is a long-established practice in developed wealth centres, with Switzerland and London home to over 2,000 EAMs each, industry officials say Asia has scope to multiply the current pool of less than 200 such boutique wealth managers.

Hong Kong-based Chi Man Kwan - a former private banker with BNP Paribas and Standard Chartered, who set up an independent asset management firm three years ago - is one of the beneficiaries of the growth.

"We are, as an industry, a lot younger than our counterparts in Europe," Kwan said. "But if you benchmark us against the amount of wealth that is being created in Asia, it's the tip of the iceberg."

Having started out by managing his parents' wealth, Kwan's Raffles Family Office now has 35 staff, $2 billion (1.57 billion pounds) in assets and more than 70 clients. Kwan said his start-up would double the headcount and assets over the next two to three years.

EAMs offer investment advisory, tax and succession planning services to clients, and partner with the large wealth managers such as Credit Suisse and UBS to open accounts and execute deals.

As they are not tied to any particular private bank, they are free to offer bespoke and independent advisory services, a flexibility that Asia's rich find increasingly attractive.

EAMs account for up to 6 percent of total wealth management assets in Asia, according to a survey by trade publication Asian Private Banker. That will double over the next three to four years, industry executives told Reuters.

GROWING ROLE

The trend is getting a foothold in Asia at a time when the overall individual wealth is expanding.

Asia Pacific saw total household wealth grow 3% last year to $114.6 trillion from a year ago, making it the largest wealth region globally, a Credit Suisse global wealth report shows.

"EAM accounts are relatively low-maintenance accounts for private banks," said Alexander Florsheim, chief investment officer at Carret Private, which manages more than $1 billion in assets in Asia.

"Private banks don't have to spend much and pay incentives to in-house relationship managers for originating the business."

Schroders Wealth Management announced in February it was acquiring the wealth management business of Singapore-based independent asset manager Thirdrock Group, which had $3 billion of assets.

RISING COSTS

Besides UBS, Credit Suisse and Julius Baer, who work with EAMs in Asia, Bank of Singapore set up a desk last year to work with independent asset managers covering Greater China and North Asia.

The head of that desk, Jeffrey Peng, said partnering with independent managers helped it access clients in different markets, and saved costs as the work was split between the bank and boutiques.

Noah Kan, head of Julius Baer's intermediaries business in Southeast Asia, said working with EAMs was as profitable as the Swiss private bank's direct business, and it would remain relevant to its growth strategy in the region.

Credit Suisse, which provides services to over 1,000 EAMs globally, said in the past three years it had sharpened focus on working with the local asset managers in Asia Pacific (APAC) instead of the "satellite offices" of their European peers.

"Moreover, the EAM penetration in APAC is still lower than that in other regions and the industry is expected to grow as a result of the local wealth creation and increasing awareness," its Greater China head of EAM business Franck Chen said.

UBS did not respond to a request for comment.

Many rich individuals prefer to work with boutiques due to their transparent fee model, primarily a management fee charged as a percentage of the client assets.

"Only if a client's portfolio does well, then your firm earns more and if clients suffer, then your firm will share the pain. So it's your firm's incentive to ensure that you do well for your clients," Singapore-based AL Wealth Partners co-founder Anthonia Hui said.

The rising cost of hiring wealth advisers from bigger global private banks and meeting compliance requirements are however a challenge for boutiques, even as they run operations with 20-100 people and avoid flashy office locations.

Most of the smaller independent managers are not equipped to make huge investments in systems, compliance, and people, said Olivier Mivelaz, who started wealth management platform Swiss Asia in Singapore in 2004 and now manages $3 billion in assets.

"If you don't have a critical mass, you are not equipped to make these investments," he said.

(Reporting by Sumeet Chatterjee and Anshuman Daga; Editing by Stephen Coates)