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A tougher game

Small updates on the precarious art of wealth management

by Thomas Schellen

It is no secret that the management of other people’s money — especially of very rich people’s money — can make you a living, yet it is fraught with hazards. Swiss banks are, and have long been, the epitome of wealth management in service to high net-worth customers. But as Executive noted in our latest special report on private banking, the art of Swiss banking has been caught in a process of transformation for a good number of years and the number of private banks with head offices in Geneva, Zurich and Basel has been shrinking since the global financial crisis and is set to contract further. 

But the challenges to private banking, both of the Swiss variety and in all other money hoards where assets under management are inordinately larger than in plain vanilla financial institutions, have much deeper roots than the Great Recession of 2008. These challenges have been growing over the past quarter century due in large part to the expansionary interventions of governments in developed economies.

From the G8’s creation of anti-money laundering pit bull FATF (Financial Action Task Force) to the European Union’s Savings Tax Directives (EUSTDs) and the United States’ famed FATCA invasion of client data bases at so-called FFIs (Foreign Financial Institutions — meaning every entity anywhere that offers financial products with cash redemption value), banking and wealth management in particular have come under pressure to the same degree to which governments of developed countries have awoken to the presence of untapped tax bonanzas in their potential reach.

In yet another dimension of its ongoing systemic change, the Swiss private banking model, which nota bene most Lebanese private banking concepts are aligned or entwined with, is exposed to global shifts in a) the concentrations of wealth from developed to new growth markets, led by China; and in b) the professed wealth cultures and self perceptions of high net worth (HNW) families and individuals.

Limited wealth management in Beirut

In the latter discussion, which is perhaps still faint in comparison with the vigor it deserves, questions on the value of personal hoards and the not physically tangible values of the “one percent” and other top wealth holders have gained in prominence as the world has witnessed the engagement of the Occupy movements and the more cerebral “global wealth tax” debates of 2014 that were spurred on by French economist Thomas Piketty.

As we have found in our special report, Beirut for the foreseeable future is likely to remain a very limited sub-center of wealth management. But this somewhat remote status makes keeping up with the leading trends and pressing questions of private banking, if anything, even more interesting for Lebanon’s private bankers and inquisitive business minds. Executive was fortunate to be able to investigate perspectives of two top Swiss financial institutions in September, in the follow-up to our report.

In one encounter, Kelvin Tay, Swiss banking stalwart UBS’ managing director and regional chief investment officer, Southern Asia and Pacific, provided us with his perspective on Asian potentials and the Middle East’s current lack in attractiveness for investment.

As Tay confirms, the twin guiding stars for today’s private banking industry are regulations and compliance, which makes being a banker in the wealth management systems of this new brave financial universe “a lot tougher” than it used to be.

“It is no longer as exciting or as attractive as it was before. Regulations are a lot stricter and there is a lot more scrutiny on what we do. Still, the wealth management industry is the only sector that is still growing and they are actually hiring,” Tay tells Executive in the rep office that UBS maintains in Beirut’s posh downtown district. 

Tay is a representative of a generation that has been immersed in the transition of private banking since the turn of the millennium — a twofold transition in terms of the rising regulatory regimes and also in terms of the rise of Asia as a wealth market. Having entered the banking sector 10 years ago during a stint at Deutsche Bank in his native Singapore, he decided to make wealth management his career and joined UBS in Asia because of the Swiss institution’s focus on this banking specialty.

It is his first visit to Lebanon and when compared with his home turf of South Asia, investments in the Middle East are clearly neither his expertise nor his mission. When asked if he has a favorite Middle Eastern stock or sector to invest in, Tay explains that his time does not permit him to look at individual stocks. As far as evaluating sectors for investment purposes, he adds, “yes, [we look at] sectors in Asia, Europe and the US but not in the Middle East because we think that Middle East markets are too small.”

His role as investment strategist entails serving clients in South Asia with advice and he also covers UBS clients in Europe, the Middle East and Australia if they want to discuss Asian investments. “I am responsible for the Asian strategy. If a client in Europe wants to talk about Asian strategy, it is my responsibility to go there and talk to them,” he gives as an example.

Negative investor perspective in the MENA

During his Beirut visit at the start of September, Tay met with investors and with officials at Banque du Liban for an exchange of views. “They like to hear from me what I think is going to happen with regard to oil prices and what our [UBS] expectations are for the [Middle East] conflict. Basically I was telling them that we don’t expect the conflict to get any worse, so we don’t expect oil prices to go up sharply.”

In the view of UBS there is a higher chance of the Russia–Ukraine conflict escalating than there is of the Middle East crises escalating. However, this is pretty much the limit of positive notions on the region for the strategist. Investor perspective on the Middle East and North Africa are in Tay’s view “more negative today than they were 12 months ago” and the entire MENA region is in his perception “not likely to be on the radar screens of a lot of international investors right now.”

According to Tay, the lack of growth in MENA markets explains why a bank like UBS has grown its workforce in Asia to nearly 7,400 employees out of its total headcount of 60,000, but according to its second-quarter report for 2014 has posted a mere 153 people in the Middle East and Africa region.

Citing the example of Indonesian growth in the past few years, the Singaporean expert says that the Middle East shares some of the same characteristics with Asian growth economies and could become a larger investment destination if regional unemployment rates were to drop and income levels to rise as was achieved by Indonesia. He is adamant, however, that this will require political stability as a key factor, which he sees as elusive in the Middle East.

As to his own performance goals in the UBS organization, Tay identifies them as “to outperform benchmarks as far as my investment strategies are concerned and make sure to speak to media on a regular basis so that UBS is seen as a thought leader in the media.”

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Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years. Send mail

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