Bespoke Banking

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The biggest challenge for now is not, in fact, attracting clients but finding and training enough qualified staff to service them. Asian private bankers differ from their European counterparts, according to Credit Suisse industry analysts. They tend to be relatively young (average age: 35). Yet, because of the proliferation of esoteric investment choices, their work is becoming more complex than ever before. "The technology in private banking has evolved tremendously," says SocGn's Truchi, exacerbating the need for more sophisticated bankers. "It's gone from simple brokerage services to hedge funds and derivatives." Says BCG's Scott: "The biggest pitfall is that customers are getting more demanding, but the talent base isn't able to [meet] their demands."

The problem has become so acute in Singapore?which aspires to become a regional hub for wealth-management?that the government has helped to create a vocational school to groom aspiring private bankers (see next story).

One result of this gap between client demands and the ability of a single bank to satisfy them is that many savvy Asian clients open several accounts and play bankers off each other to get the cheapest price. "Some of the serious guys have four to five accounts," says Scott. Another result is rising salaries as banks tussle with one another for talent. Industry consolidation may be the inevitable endgame. Only the biggest banks will be able to satisfy the growing salary demands of private bankers, so middle-tier players may gradually be squeezed out. "The big will only get bigger," says Didier von Daeniken, head of private banking for Credit Suisse in Southeast Asia. "As a middle player, it's not easy to make money because [staffing] costs have risen."

For now, though, there's a sense that the party has only just begun, with much of the expansion opportunity driven by the recent opening of the financial sectors of China and India to foreign private banks. Having joined the World Trade Organization five years ago, China is required to start making its banking market more accessible to foreign firms in 2007. In anticipation, Citigroup opened a private-banking office in Shanghai in March?the first such office on the mainland?in a bid to attract some of the 300,000 Chinese millionaires that it reckons are currently underserved. "With the kind of wealth that's been created in the last 10 years or so, clearly there is a lot of raw material," says Citigroup's Leung. "There's a high savings rate, just under $1 trillion in assets have been accumulated, and it looks like that number will double in the next decade or less." Citigroup expects China to become the single largest private-banking market in Asia outside Japan.

India, too, is becoming a hot spot. Its pool of millionaires is growing roughly three times faster than China's, according to the 2005 World Wealth Report; Indian assets under management stand at $307 billion and have been growing roughly 15% a year, according to BCG. Much of the activity is now focused in Bombay, but Citigroup, for one, is planning for rapid expansion in other key Indian cities, too. "You need to be on the ground in Calcutta or Delhi to offer domestic products," says Citigroup's Sharma. In the next three to five years, he aims to have as many as 100 offices and roughly 1,000 employees across India, up from about 100 employees in the private-banking operation today. The next generation of private bankers had better learn fast. Asia's burgeoning band of millionaires will be counting on them.