Singapore’s role as the wealth management center of Asia has been strengthened by the growing number of millionaires in the region, but it’s also being challenged by a shrinking pool of workers needed by the sector.
According to the recent PricewaterhouseCoopers 2011 Global Private Banking and Wealth Management Survey, Singapore is poised to become the number one financial center in the world by 2013 beating Switzerland and Hong Kong to the post.
The survey also highlights the fact that the biggest challenge facing the private banking industry in Singapore is hiring and retaining people.
Despite the recent slowdown and market volatility, private banks in Singapore have not stopped hiring. Says a 38-year-old private banker who has been working in Singapore for the past six years, “While we are worried about the falling value of our clients’ assets, there is no dearth of jobs for us. I still get calls from 2-3 headhunters every day.”
The total wealth of Asia’s high net worth individuals is estimated at $11 trillion, according to the Capgemini Merrill Lynch 2011 World Wealth Report, and a large proportion of that is managed out of Singapore.
“Singapore is now a proven magnet as the Asia Pacific operational hub for the wealth management businesses,” says Sebastian Dovey, Managing Partner of global wealth management consultancy, Scorpio Partnership. “Many European institutions are banking on Asia, via Singapore, being their engine of growth for the next decade.”
But he adds that a lack of quality and depth in Singapore’s labor market is pushing up recruitment costs for private banks that have either expanded operations or entered the market in the last couple of years.
“The high cost of hiring relationship managers in Singapore is putting pressure on banks’ margins,” says Roland Ruiz, Mercer's Asean Business Leader, Human Capital Consulting.
A high attrition rate isn’t helping either, according to Justin Ong, the Asia Pacific Leader for Private Banking and Wealth Management, at PwC. Thirty three percent of organizations that participated in the survey in Singapore experienced an attrition rate of between 20 and 40 percent over the last two years.
According to industry sources this compares with an overall attrition rate of 10 percent for the banking industry in Singapore.
Frequent job-hopping among relationship managers has created a feeling of uncertainty among clients and employers, as the norm in the private banking industry is that relationship managers take a large portion of assets, which they have been managing when they move jobs.
According to a private banker in Singapore, clients are getting fed up of moving their investment portfolio from bank to bank as their relationship manager changes. “The client will move with you once, twice, thrice, but after that he is going to say no,“ says the 38-year-old private banker.
According to industry sources when a relationship manager moves jobs he usually takes 50-60 percent of his clients with him because “your worth is largely based on what you bring,” says another Singapore-based private banker who covers the South Asian market.
Banks are responding by trying to institutionalize their clients so as to retain them even when the manager handling their portfolio moves to another bank.
The findings of the PwC report confirm that clients are now increasingly becoming less sticky with their relationship managers. The proportion of assets under management (AUM) a relationship manager brings into a private bank is reducing, says the report.
Currently in Singapore and Hong Kong, only 25 percent are able to bring more than 60 per cent of their AUMs to their new employer. That’s much lower than the amount a relationship manager was perceived to be able to bring in several years ago, says the report.
Besides poaching of employees and clients, the industry is also facing problems because of the relative inexperience of relationship managers. “In Singapore you can find a lot of fresh graduates, who have good technical skills and product information, but they find it difficult to understand and deal with different kinds of customers, which comes with experience,” says Ruiz of Mercer.
According to the PwC survey 55 percent of relationship managers in Asia have less than five years of experience. Only 21 percent have more than 10 years experience.
As the world and Asia gear up to face a possible recession, the private banking industry in Singapore is reducing the pace of hiring. According to industry watchers private banks in Singapore don’t want to be overstaffed when the crisis comes. That could help ease the industry’s current talent crunch.