UBS is the world’s largest manager of private wealth, with about $2.4 trillion of assets under management worldwide.
The industry’s outlook in Asia is especially bright, with mainland Chinese emerging as a huge driver of new growth, along with plenty of billionaires from the rest of the region. Singapore and Hong Kong are rated the most competitive centers for investment management, behind only Switzerland, and they are growing faster.
But Amy Lo, the bank’s co-head for Asia Pacific at UBS Wealth Management, is worried that the spoils in the coming five to 10 years may not necessarily go to the top private banks – unless they innovate.
“If we don’t do anything,” in terms of investing in digital transformation, “we’re out of the game,” she said.
Lo is probably the highest-profile private banker in Hong Kong, who also chairs an industry body, the Private Wealth Management Association. She has been championing a wide array of investments and initiatives at UBS, despite the lack of immediate financial returns. One is the opening of the firm’s “Digital Hub” in Hong Kong’s Kowloon district, where the bank brings clients together with startups, innovators and entrepreneurs.
I really feel the threat of digital disruptionAmy Lo, UBS
The biggest roadblock is the bank’s legacy I.T., which makes it hard for it to work with fintechs, adopt new, leaner tools, or change the way it treats data or handles client services. It’s not clear when concerns about client confidentiality are legitimate and when they are being used to resist broader change.
These issues are hardly unique to UBS. What’s notable is that the bank has chalked up a number of changes. Lo has a sense of urgency. The way she talks about the industry is broader than most private bank executives.
Threat of disruption
“I really feel the threat of digital disruption,” she said. “The traditional model won’t get us to where we need to be.” She cites Hong Kong introducing virtual banking licenses.
“It’s for retail now, but I challenge my team to look at what’s next: which is going to be wealth management. We have to embrace this. Virtual banking will lead to universal banking and the entrance of mainland techfins. That will disrupt us.”
Then there’s the generational challenge, as the new set of clients is digitally savvy and, increasingly, new entrepreneurs are mobile-native. UBS has its incumbent strengths, not least its banking license, “but the model has to be built differently to cover this growth segment,” Lo said.
One of her biggest projects now is to build a digital wealth-management business in China, where UBS owns its own securities business. “I can’t talk about it, but it’s a very different model,” she said. But it will be based on mobile and cloud technology.
UBS has embarked on probably the most wide-ranging set of projects in Asia to transform what a private bank is all about. At a global level, the bank is incubating startups and giving rich clients access to startups, or helping them become venture capitalists.
Her sales teams are becoming increasingly focused on tech entrepreneurs, but this type of client is different to wealthy people in more traditional sectors such as real estate, retail, healthcare and finance. They are, obviously, ready to be serviced digitally.
Virtual banking will lead to universal banking and the entrance of mainland techfinsAmy Lo, UBS
This does not mean uniquely so: wealth management is still a high-touch, personal, bespoke business. But how they receive information, how they interact with relationship managers, what they know and like, are different.
For several years now, UBS has promoted its app with portfolio content, research themes, and its “health check” alerts, in support of its advice and portfolio construction. Lo says the app is a competitive edge because products are now commodities. R.M.s can use user data to deliver more tailored, specific advice, and help clients stick to financial goals.
It’s a balance, though: go too far down this way, and private banks risk becoming Interactive Brokers. Privacy, confidentiality and other forms of advice remain relevant. But they are relevant in a digital context now.
Lo is also optimistic that technology will not only help UBS remain relevant, but should enhance the value proposition of top private banks that embrace it.
In Asia, wealthy clients tend to view private banks as glorified brokers: as Interactive Broker types who also throw champagne parties at art galleries. But financial volatility and a maturing clientele are reminders of the need for expertise and advice.
A good digital experience can reinforce that message. Private bankers like to talk about being part of client’s lives. UBS is trying to do so in the digital realm as well, by trying to support clients’ desires in areas such as healthcare or education via WeChat and WhatsApp communities. Lo believes this is leading to more touchpoints with clients – and more wallet share.
And more business done on the basis of lifestyle or financial advice means UBS is now earning relatively more revenues from flat advisory fees and less from transactional fees.