Julius Baer Group Ltd. (BAER) Chief Executive Officer Boris Collardi enters the 18th-floor meeting room in the bank's Hong Kong offices lugging a suitcase that contains a clue to the soaring pay of Asian private bankers.
“I don't like to talk and not show things,” said the head of Switzerland's fourth-biggest wealth manager, reaching into the black bag for the bank's Asian wealth survey. The snapshot of spending by the region's growing ranks of millionaires, released last week, tells a tale of rising consumption in the past year: bottles of Lafite Rothschild 2000 up 22 percent to $3,336; 500-person wedding banquet up 19 percent to $92,146; Hong Kong golf club memberships going for $360,400.
Asia-Pacific millionaires outnumbered those in Europe for the first time in 2010, according to a survey by Capgemini SA and Bank of America Corp. More millionaires means more spending and more demand for private wealth managers from banks such as BSI SA, JPMorgan Chase & Co. (JPM), UBS AG (UBSN) and HSBC Holdings Plc. (HSBA) Recruiters say too many banks are hunting too few experienced staff in the region, pushing up salaries and crimping profits.
“Good bankers have at least one offer on the table, if not two,” said Collardi, 37. “Today, if you want to be successful in hiring, you need to be forceful.”
Global demand for client relationship managers is expected to rise 13 percent over 2011 and 2012, while growth in the Asia- Pacific region will be double that, PricewaterhouseCoopers LLP said in an e-mail. That's pushed top salaries in Singapore to almost twice the level in Switzerland, the world's biggest offshore wealth manager, according to London-based recruitment firm EMA Partners International.
Beating Swiss Pay
Senior private bankers in Singapore earn between $160,000 and $410,000 a year, while the comparative range in Switzerland is $152,000 to $210,000, EMA estimates.
“People are simply paying too much and that cannot be justified from an economic point of view,” said Thomas R. Meier, Zurich-based Julius Baer's CEO in Asia. If a bank pays 30 percent more than a person's salary at his previous employer, and the new recruit ends up adding just 5 percent more to revenue, the bank will feel the pinch, the 48-year-old said.
The premium to attract somebody new in Asia is 20 percent to 30 percent of their base compensation, said Matthew Streeton, partner at The Consulting Partnership, a Singapore-based recruitment firm. Usually, private bankers get a guaranteed bonus in their first year on top of the base salary and thereafter earn an annual bonus based on performance, he said.
If new hires can move 30 percent of the assets they handled to their new employer in the first 18 months, the banks are lucky, said Noor Quek, Asian associate of London-based executive-search firm Sulger Buel & Co.
Those who can't move client assets tend to keep moving jobs “on and on and on,” said Quek, the 61-year-old founder of Singapore-based family office and wealth-planning adviser NQ International Pte.
In Singapore and Hong Kong, only 25 percent of relationship managers are able to bring more than 60 percent of the assets they manage to their new employer, PricewaterhouseCoopers said on Sept. 5 in a media release.
Experienced advisers who could bring in business to a new employer are harder to recruit, said Hanspeter Brunner, chief executive officer of Lugano, Switzerland-based BSI in Asia.
“Why should somebody working for a good bank, being well taken care of, and having a good base of clients, move?” said Brunner, 59, who has recruited almost 70 private bankers between Singapore and Hong Kong in the last 18 months.
Overtaking the Boss
As an example of the discrepancy in salaries between Europe and Asia, Brunner cited BSI's Asia head of credit who makes more money than his boss, the group head of credit in Switzerland. “One's very well-paid for the Swiss environment and the other is well-paid for the Asian environment,” he said.
Switzerland had about $1.7 trillion in offshore private banking assets at the end of 2010, according to The Boston Consulting Group, which counted those with over $1 million in investable assets. Singapore, the fifth-largest offshore destination, had $512 billion. Including domestic clients, Switzerland was the third-biggest with $2.6 trillion, while Singapore was sixth with $966 billion.
Asia's star has been rising as Europe struggles with the sovereign debt crisis and regulators in the U.S. and Europe crack down on tax evasion. The Swiss government agreed in March 2009 to adopt international standards on the exchange of information on tax evaders after being accused by Germany and the U.S. of helping to shelter cheats. That was the biggest change to Swiss banking secrecy laws since their introduction in 1934.
In 2007, before the financial crisis, costs for private bankers in the Asia-Pacific region, including salaries, were about 57 percent of the revenue they generated, according to PricewaterhouseCoopers. This year, cost-to-income ratios are forecast to be 82 percent in Singapore and Hong Kong, and about 70 percent in Switzerland, the firm said.
The principal factor adding to costs, especially in Asia, is compensation, said Roman Scott, founder of Singapore-based alternative investment firm Calamander Group. “Labor makes up about 60-65 percent of the costs of a private bank,” he said.
Rising costs “will be an important factor in determining compensation packages” in future, said Alex Fung, the 53-year- old chairman of Societe Generale SA's private banking division in Asia Pacific.
Firms across the region are looking to expand private banking teams.
Zurich-based UBS, Switzerland's largest bank, is expanding its team to 1,200 from 900, said Kathryn Shih, regional head of wealth management. JPMorgan intends to add 100 to the 140 it had last year, said Hong Kong-based Andrew Cohen, CEO of the division that caters to those with more than $30 million in investable assets. HSBC has expanded headcount in Singapore to 450, from 370 three years ago, according to Nancie Dupier, chief executive of private banking in South Asia.
The global banks are competing for staff with local rivals. United Overseas Bank Ltd. (UOB), Singapore's smallest bank by market value, has 40 relationship managers and is looking to add another 160 in five years, said Wilson Aw, the 47-year-old head of the division.
Asia's 3.3 million high-net-worth individuals had $10.8 trillion in assets, compared with the $10.2 trillion accumulated by their 3.1 million counterparts in Europe, according to the report published in June by Capgemini and Bank of America's Merrill Lynch Global Wealth Management.
The number of millionaires in Asia's 10 major economies, excluding Japan, may more than double in the five years ending 2015, when half of them will be in China, according to the Aug. 31 study by Julius Baer, compiled with CLSA Asia Pacific Markets. Chinese millionaires alone will hold $8.76 trillion by 2015, the report forecasts.
Recruiters say private bankers need an apprenticeship because wealthy clients expect to be advised by someone with experience who can understand their goals.
“If the client is 65, he might want to talk about different topics than going out drinking on a Friday night,” said Brunner of BSI. “He might want to talk about his dreams, his fears and what might happen if he falls off the chair tomorrow.”