Published Date: 29 June 2006

Speech by Mr Ong Chong Tee, Deputy Managing Director, MAS, at Private Wealth Management Conference

Distinguished Guests, Ladies and Gentlemen

1   I am delighted to be here with you this morning at this Private Wealth Management Conference, jointly organised by CFA Institute (CFAI), Wealth Management Institute (WMI) and the Singapore Society of Financial Analysts (SSFA).

2   I will begin by outlining some of the key trends presented by Asia's rapid growth and wealth creation. I will then highlight some of the recent developments in Singapore, riding on these trends.  Of the number of issues, human capital development stand out, so in keeping with the conference theme of "Creating the Best Wealth Managers in Asia", I will then focus the rest of my speech on building a world-class talent pool to raise wealth management in Singapore to the next higher plane.

Opportunities and Challenges Presented by Asia's Wealth

3   Asia is doing well economically, powered by the rise of China and India.  With the growth in wealth of Asian High Net Worth Individuals (HWNI) at 7% a year, the latest Merrill Lynch Cap Gemini World Wealth Report estimated that Asia's wealth is expected to reach US$10.6 trillion by 2010, from about US$7.1 trillion in 2004.

4   As Asia's economic growth story unfolds, new opportunities will arise.  The business of Wealth Management will also have to adapt to tap this growth.  HNWIs in Asia are getting increasingly sophisticated.  Perhaps partly reflecting the acceleration in intergenerational wealth transfer to those who are younger, or who have lived and studied abroad - the trend is toward a more comprehensive service model.  HNWIs are looking for complete, integrated and global wealth management solutions, instead of opportunistic investments. This has prompted more active client roles in the management of their wealth, by diversifying their investments both across asset classes and across geographies; and adopting more complex investment strategies and products.

5   It has also been observed that high net worth portfolios have increased allocations into higher-yielding alternative asset classes such as hedge funds, private equities, commodities and real estates, from an estimated 3% to the current 20% over the last 5 years. According to the World Wealth Report that I referred to earlier, allocations to private equity in particular dominated, rising from US$42 billion in 2004 to US$174 billion in 2005. This is a 314% increase over just one year! As alternative investment allocations approach some optimal levels, other emerging areas will include international philanthropy and even more interesting investments like Art or Wine, which are much less correlated to the traditional investments in conventional markets.

6   So to summarize:

a) At the business level, there will be increasing competition to provide comprehensive and integrated services.  Private banks are pursuing ambitious growth strategies in Asia by competing for new clients, and at the same time, angling for a greater share of existing clients' wealth;

b) At the investor level, Asian clients are becoming more sophisticated and demanding of their private banking relationships.

Singapore as A Leading Wealth Management Hub

7   These trends favour Singapore as a leading wealth management centre, not just in Asia, but also globally.   Rising wealth in Asia, and the focus on Asian growth prospects have seen total assets under management in Singapore's fund management industry grow from about S$280 billion in 2000 to much more than S$600 billion now.  Growth in private banking assets under management has also been strong, with anecdotal feedback suggesting Singapore private banking AUM averaging 20% per annum over the past few years to about US$200 billion currently.

8   This strong performance can also in part be credited to Singapore's solid fundamentals.  Our location facilitates ready access to global and regional financial markets.  Our reputation for high standards of regulation and supervision and a robust legal and judicial framework, is trusted by financial intermediaries and clients alike to conduct wealth management activities.  Apart from our political and economic stability, HNWIs value our respect for customer confidentiality and the fact that besides being able to bank, they can school their children in reputable institutions, carry out high quality medical checks and enjoy the shopping and other amenities in a safe and friendly environment here in Singapore. 

9   Many of the major private banks are already here in force and growing rapidly. This is complemented by the expertise of more than 300 asset management firms investing throughout the region.  Moving forward, we expect an enlargement of the wealth management eco-system.  This will include trust companies, philanthropy, family offices and the ancillary service providers such as tax, legal advisors, consultants and technology platform providers. Together, these specialists will help deepen and broaden our offerings as a global wealth management centre.

Human Capital - The Key to Differentiation and Business Growth

10   Good infrastructure and sound fundamentals will continue to propel the wealth management industry forward, but at the heart of a successful industry or financial sector is the need for skilled manpower.  This is crucial for the wealth management industry, which is a people-centric business built on trusted advice and deep relationships.  Private banks compete for clients based on differentiated service. Integral to this strategy is talent, which is the key enabler to delivering differentiation services, innovation and growth.

11   This leads us back to the conference theme of "Creating the Best Wealth Managers in Asia".  We first need the warm bodies - and more of them - to make them the best.  To succeed as a leading wealth management hub, it is critical to strengthen and grow skills - both quantity and quality.  Ideas and execution are what will set one apart from the competition, and in aggregate, will take the industry to the next stage of growth.  The MAS is therefore taking steps with industry to build the wealth management talent pool in 2 broad ways:

a) First, by focusing on the pipeline of talent flowing into the industry.

b) Second, by raising the capabilities of our existing talent stock.

Let me elaborate briefly on each.

a) Building a Strong Talent Pipeline

12   Private bankers have to think of expanding operations beyond recruiting relationship managers who bring existing clients along.  It is vital that we build a strong pipeline of fresh blood and increase the inflow of new but competent people into the industry. This is a key challenge since the industry is facing competition not only from other financial segments, and non-financial industries, but also across borders. In other words, it is the cliche "the global war for talent".    The battle for experienced wealth managers in this part of the world is an intense one, as private banks gear up to capture a larger slice of the Asian wealth.  If left unaddressed, the talent squeeze will lead to wage spirals, that are unsustainable in the long run, and even in the interim, can lead to a dip in service levels; for example when wealth managers seek to cope with expanding business by increasing the number of accounts managed per wealth manager.

13   In view of the tight manpower market, MAS and industry players have heightened our collective efforts to expand the talent pool.   Let me highlight some of the initiatives.

14   At the pre-employment stage, we must continue to attract good graduates from our Universities, Polytechnics and so on, to enter the finance sector.  According to the Department of Statistics, the financial services industry has the highest average monthly earnings amongst all other industries in Singapore.  Despite the sector's attractiveness as a paymaster, it should not be complacent and leave recruitment to chance.   The MAS on its part have stepped up efforts to profile career opportunities in key finance growth sectors such as wealth management, through campus outreach events at the local Universities and business schools such as INSEAD. These efforts have to go beyond merely raising the profile and awareness of the range of job opportunities in the industry.  To keep pace with the rapid changes, it is imperative for students to understand the latest market developments, and be equipped with relevant competencies such that they enter the finance sector more job-ready.  To this end, the Institute of Banking and Finance have recently established a Taskforce involving financial industry players, institutions of higher learning and MAS and WDA, to collectively address the manpower and skill needs of the financial sector, with focus on the pre-employment talent pool. This partnership is an important first step towards bridging the training curricula with the demands of the finance industry, and sets the stage for future collaborations between industry and academia.

15   Besides building a pipeline of bright young graduates into the sector, there are also specific efforts to attract working professionals from other financial segments, and non-financial industries to join the wealth management sector. One key area is in skill conversion training. The Financial Sector Manpower Conversion Scheme that MAS launched two years ago has already prepared some 500 participants for entry into growth areas such as wealth management, settlement operations and middle office product control. The wealth management programme offered by Wealth Management Institute (WMI) alone has trained over 150 trainees for entry into the sector to-date. I encourage the industry to tap on these conversion graduates as an additional resource pool to support your expansion.  The conversion graduates, having undergone rigorous selection tests have been identified to have high potential.

16   Apart from grooming our own pool of indigenous talent, it is equally critical to keep attracting top people and good talent from all over the world. They add not just numbers, but also bring diverse perspectives, experiences and ideas.   Singapore has always welcomed talented individuals to complement domestic talent.  Our position as a choice location for global talent has been noted by The Economist's "World in 2005" Publication which rated Singapore as the best Asian city to live in; and the IMD World Competitiveness Yearbook 2005 which declared Singapore as the most attractive Asian economy to foreign-skilled professionals.  In the past year, MAS had also partnered some financial institutions in various overseas outreach events to showcase the opportunities in our financial centre. We will continue to work with industry to participate in outreach events in major cities around the world to engage overseas Singaporeans and foreigners alike.

17   It is worth reiterating that it is not in our collective self-interest for each firm to embark on aggressive musical chair hiring, by poaching teams from one another as the only way to grow capability.  MAS will continue to work with the industry to enlarge the wealth management pool, to upgrade skills and raise capacity.

b) Raising Capabilities of Existing Talent Stock

18   Let me now elaborate on the second priority of raising the capabilities of our wealth management professionals who are already working in the industry. In line with clients' growing sophistication, the demands and expectations of wealth managers have increased. They are expected to be knowledgeable about not only of a broad array of financial instruments, but also have the critical 'soft-skills' to deepen client relationships.  These factors translate into greater demands for well-trained wealth managers, and pressures on the industry as a whole to raise the quality of training.

19   As we set the stage for further growth in wealth management and private banking, Singapore is well placed as a training ground for wealth management.  This will not only raise the quality of our workforce, but also attract professionals from all over the world to upgrade and excel in the trade. The Singapore Management University (SMU), Wealth Management Institute (WMI) and the Credit Suisse Business School are shining examples of the diversity and depth offered by the wealth management training network here.  Besides training providers, MAS has been and will continue to work closely with industry associations and professional bodies like CFA Institute (CFAI), Singapore Society of Financial Analysts (SSFA), the Association of Banks in Singapore (ABS) and the Singapore Trustees Association (STA) to raise the quality and professionalism of our wealth management professionals.

20   Apart from establishing a vibrant and self-sustaining training and education hub, it is equally important to inculcate a systematic and institutionalized approach to upskill the capabilities of our financial sector workforce. With this in mind, the Institute of Banking and Finance, with the support of MAS and industry, launched the Financial Industry Competency Standards (FICS) last year to benchmark competency standards of financial professionals, including wealth managers, to international best practices. Wealth management has been identified as a key component of the initiative, and competency standards have been established for the full range of job families in the industry - from relationship management to product development to trusts and estate planning. To add momentum to the effort, the FSDF, which is the MAS-administered Financial Sector Development Fund, will co-fund 70% of the training and assessment fees for FICS-accredited programmes incurred by financial institutions for their Singapore-based staff. I strongly urge your firms to make use of the funding scheme and to encourage your staff to consider the FICS certification.

21   At the macro-level, I have briefly outlined the steps being taken to broaden and deepen skills.  Yet, we all know that equally if not more important, each financial institution will need to review and fine-tune its own HR policies - to attract, develop and retain staff.  In other words, it makes good business sense for industry participants to focus on proactive employee retention programmes that go beyond dollars and cents. Banks would need to look at the "hygiene factors" of people management and offer their staff opportunities for personal and professional growth.  This does not refer only to training and promotions, but also involves other aspects such as flexible work arrangements, possibility of new assignments and even the chance to work overseas.


22   To conclude, the wealth management industry is in an exciting phase of growth. There are many priorities and challenges to be considered, alongside the strategies to be taken.  However, I cannot emphasize enough the importance of devoting sufficient management time and corporate resources to grow and develop talent including fresh ones.  People are, and will remain the most important factor in delivering quality advice and solutions, and cultivating valued client relationships - key elements to give a private bank that sustained edge in this competitive business.

23   MAS remains committed to creating a pro-business environment where the different players in the wealth management community can thrive and succeed but without compromising on high professional standards and conduct.  We look forward to continued partnerships with key industry stakeholders and industry associations in the area of financial manpower development. 

24   Allow me to thank the organisers again for inviting me here to share my thoughts this morning.  I know that there is an exciting programme ahead covering investment and other themes.  May I close with a quote :  "If you're happy, you're wealthy.  Happiness doesn't need a bank account".  So have a happy time, not least over the next two days of the Conference.