Opening Address by Mr Ong Chong Tee,Deputy Managing Director, Monetary Authority of Singapore, at the 16th Private Banker International Wealth Conference
1 Good morning ladies and gentlemen. It is my pleasure to be here today. Allow me to first thank VRL KnowledgeBank for choosing to hold this Private Banker International Wealth Conference once again in Singapore. For those of you who are visitors, or who will also be attending the 2006 IMF-World Bank Annual Meetings (S2006) and related events, a very warm welcome indeed. We are pleased that VRL and a number of other organizations and financial institutions are holding their conferences, client-servicing events and even exhibitions at this time, which will add to the "buzz" in the run-up to and during the Annual Meetings.
2 I will begin my remarks with a few observations. It is an often heard view that in the next 10 years, the world will see more changes that will affect more people and more countries than the last 20 years. I think much of that excitement is not only about advancement in science or technology, but also the sheer fact of a rising Asia with its rapid economic growth and unprecedented wealth creation. 20 years ago, FORBES identified some 140 billionaires globally. As of end of last year, the list hit a record 793. They are now worth a combined US$ 2.6 trillion, up 18% from just a year ago.
3 According to the 2006 Merrill Lynch CapGemini World Wealth report, there are currently 2.4 million high net worth individuals (HNWIs) in Asia. These individuals accounts for almost a quarter of global high net worth assets. Estimates of Asian wealth put the figure at around US$7.6 trillion, and this is expected to grow at nearly 7% per annum to reach US$10.6 trillion by 2010.
4 The sheer stock of old wealth and rapid formation of new wealth, will present promising opportunities for private bankers in Asia. It has been estimated that more than half of the Asian wealth is not yet professionally managed. For many of Asia's wealthy, making money may be the easy part. What to do with the money could perhaps be harder. There is a Chinese saying, which literally means creating the business is easy, but upholding or keeping the business successful is much more difficult. This could perhaps apply equally to intergenerational wealth transfer.
5 So the rise in prosperity, changes in demographics and the increased sophistication of the Asian high net worth investor will raise demands on the private wealth manager. Let me elaborate.
The Private Banker
6 The first, which I briefly alluded to earlier, relates to the significant intergenerational wealth transfer taking place. In Asia, the post-war first generation business founders and family patriarchs have become increasingly attuned to the need for estate and succession planning, on top of growing and guarding their assets. Trust structures, dedicated family offices and specialized insurance services are being sought by many high net worth individuals. Private bankers extend niche services beyond the wealthy individuals' own requirements to include those of their spouses and children, where tailor-made programmes will provide that further value-add, to assure that the relationships - and not just the wealth - transcend from one generation to the next.
7 At the same time, the "internet age", reinforced by the opening up of some Asian economies and capital markets, have resulted in new businesses and new millionaires and billionaires; often younger, highly educated, well-traveled and IT-savvy. This pool of new wealth owners are generally more sophisticated and have different demands from their parents' generation. There will be greater multi-jurisdictional needs reflecting a more globally mobile group and broader business interests. The art of wealth management for these clients will shift from managing money in an opportunistic manner, to a much more comprehensive relationship built around integrated and global wealth management solutions. It can also be expected that these more sophisticated clients will want an active role in not just the 'how' and 'where' to invest, but also the "what" to invest in, that may include hedge funds, private equity, venture capital and even art, wine, or racehorses and so on. These individuals will contrast with those who prefer to entrust upon dedicated advisors the responsibilities of safeguarding and growing their wealth while the individuals themselves could channel their energies towards managing their core businesses or other interests.
8 In short, the business of private banking in Asia will increasingly take several forms and serve differentiated demands. A good private banker has to be even more innovative and ever current, to be able to fully engage his or her clients - demonstrating the ability of knowing everything and doing anything.
The successful private banker of today has to be able to juggle the new knowledge demands, with the old traditions of high service standards, integrity and sensitivity.
9 Then, there is the area of philanthropy. Economic prosperity, coupled with the process of intergenerational wealth transfer, has fuelled a growing trend among HNWIs to partake in philanthropic activities. We have all seen recent reports of individuals who have "made it good", but now also "doing good". Recent news of Mr Warren Buffet pledging an estimated US$31 billion to the Gates Foundation is still talked about. Mr Li Ka-Shing announced that he will give away a third of his estimated US$18 billion wealth. The top 50 philanthropists in China have donated a total of 5.1 billion yuan (S$ 1 billion) since 2003. In Asia alone, Datamonitor estimated that there are almost 24,000 HNWIs who could be interested in philanthropy. And, there are also more Asian corporates who are looking to contribute back to the societies and communities from whom they have prospered.
10 Giving is really not new to Asia. But how it is done has and will change. The old style of "cheque book philanthropy" will shift to more structured and organized forms of giving. For example, venture philanthropy, social entrepreneurship, etc. that twin strategic and business goals with social benefit outcomes. In the face of these developments, there are tremendous opportunities for wealth managers to tap this slice of the pie. There are many who want to give, but who are not sure how to give or how to make their contributions more impactful.
11 Philanthropy is in many ways not too different from making financial investments. Skills are needed to ensure that a philanthropic project will yield a social return or generate the desired humanitarian benefits. Expert advice will increasingly be sought especially by those wanting to establish a long term philanthropic vehicle. This includes advice on areas like where and how to invest, how to sustain worthwhile programmes, how to identify the right interest groups and allocate funds to ensure the greatest impact and so on. Financial institutions who offer philanthropic advisory and management services can play a big role here. We expect Singapore to play a bigger role in this space and would invite industry partners to share your thoughts with us on how we can facilitate this further.
12 Let me now turn to what these trends mean to the growth and development of private banking in Singapore. As a fund management centre - for both institutional and private wealth - Singapore has seen strong growth in total assets under management. Compared to about S$280 billion in 2000, industry AUM has now surpassed S$720 billion. Growth in private banking assets under management has also been strong. The strong growth, in part, reflects the "Asian story" where global investors diversify their assets into Asian markets to tap its growth. At the same time, the surge in intra-Asian wealth has also been a key growth driver.
13 Singapore is well positioned to grow further as an important wealth management centre. Our geographical location facilitates good access to global and regional markets. As a financial centre, we guard jealously our reputation for high standards of regulation, good corporate governance and a robust and trusted judicial system. We are cosmopolitan and people from all over the world can be comfortable here. Singapore-based institutions offer high quality banking services and customer confidentiality; and as a vibrant city state, we offer a favourable lifestyle built around reputable medical, education services and world class infrastructure.
14 As estate planning activities increases, we recognize the need for Singapore to develop as a global trust domicile. We have updated our trust laws, and introduced a regulatory framework for trust companies. These moves will also help pave the way for greater philanthropic activities here. More broadly, we can expect the "wealth management eco-system" to deepen and broaden, to include trust companies, family offices and ancillary service providers such as tax, legal advisors and technology providers.
15 As we ride the wave of growth, there will be a need to surf the new challenges that arise. An immediate challenge is to boost the pool of skilled manpower. As business prospects grow, the competition for talent and for accounts mount. Private banks understandably will want to pursue aggressive expansion strategies and compete for a greater share of wealth to be managed. Fair competition is not necessarily bad. But to sustain the growth of the industry, we also need to build a steady pipeline of talent and raise competencies. I would like to encourage industry participants to look long term and invest in training. I understand that there will be a presentation later by some of the speakers on staff recruitment, training and retention.
16 On our part, the MAS is taking a proactive stance towards working closely with industry bodies and financial institutions in the area of talent development. We have approached this in two broad ways:
(i) by focusing on expanding the talent pool, and
(ii) by raising capabilities.
17 For instance, MAS in conjunction with the Institute of Banking and Finance have embarked on a major initiative - the Financial Industry Competency Standards (FICS), to benchmark competency standards of financial professionals, including wealth managers, to international best practices. The standards cover the full range of jobs in the industry - from relationship management to product development as well as to trusts work and estate planning. MAS also offer co-sponsorships to encourage financial institutions to train their staff. We are heartened to note that some private banks here have also taken a strategic approach towards training and development for their staff by setting up dedicated corporate training centers in Singapore. On the wealth management front, we have seen the Credit Suisse Business School and most recently, the UBS Wealth Management Campus for Asia Pacific was launched just yesterday.
18 In the area of capability enhancement, we believe that it is equally critical to develop specialist skills to meet the demands and increasing sophistication required of the job - be it private banking or other areas. Built on a tripartite partnership between MAS, industry and the universities, the Finance Scholarship Programme was launched this year to help groom a critical mass of specialists in targeted fields such as financial engineering, risk management and actuarial science. The scholarships are available for top-ranked universities in these fields.
19 We also launched the Financial Sector Manpower Conversion Scheme two years ago. This scheme aims to help those who are keen to transit into certain growth areas of the financial sector, having done some other areas of work whether in the financial or non-financial sector before. The scheme has since prepared close to 200 professionals for the wealth management sector.
20 To augment efforts on the domestic front, Singapore continues to be open to talent from other parts of the world. Our Prime Minister in his most recent National Day Rally reiterated this. Singapore has built a reputation for being a destination of choice - to work, live and play. Recently, you may have come across the The World Bank's "Doing Business" report that ranked Singapore as the easiest place in the world to do business. The Mercer Consulting Quality of Living Survey 2006 ranked Singapore the best Asian city to live in. It may be worthwhile for me to mention a key development of the city around the Marina Bay Area. This will extend the existing city seamlessly into the new downtown. We will have a Garden City by the Bay. In the vicinity, we will also have our future Business and Financial Centre (BFC). The first phase of the BFC is expected to be completed in 2009. It will provide state-of-the-art offices with purpose built features catering to the needs of the business and financial tenants, complemented by space for luxury retail units. And come 2010, we can expect to see the new Integrated Resort at Marina Bay, and enjoy its fine selection of restaurants, bars, theatres, dance clubs, chic boutiques and gaming facilities.
21 In conclusion, let me reiterate that I believe the prospects for private wealth management is bright. The industry is well poised to see continued strong growth. Singapore remains committed to creating a pro-business environment based on high standards.
22 The tagline of Singapore 2006 is "Global City, World of Opportunities". I think this encapsulates much of what I have shared this morning. I am sure you will all have most fruitful sessions ahead during the rest of this conference. But do take some time to soak in the sights and sound of Singapore during your stay here.