Speech by Mr Tharman Shanmugaratnam, Minister for Education and Second Minister for Finance, at the Launch of the Standard Chartered Private Bank held at Standard Chartered, 28 May 2007 at 11am
Mr Mike Denoma,
Mr Vis Shankar,
Mr Peter Flavel,
Ladies and Gentlemen,
I am delighted to join you here to celebrate the inauguration of the Standard Chartered Private Bank.
Standard Chartered’s presence in Singapore
2 Standard Chartered has a strong footprint in Asia and globally with an established franchise in 56 countries around the world. It now derives 90% of its profits from Asia, Africa and the Middle East, some of the fastest growing markets in the world.
3 With its strong and unique positioning in Asia, we are happy to see Stanchart’s growing commitment to Singapore. The decision to base the global headquarters of the Standard Chartered Private Bank here marks yet another important milestone for the bank and for Singapore as the key wealth management centre in Asia. I hope that Standard Chartered will continue to scale up its activities in this area in the coming years, especially in view of the growth of wealth from Asia and around the world seeking global diversification.
The buoyant growth of the wealth management industry
4 The Merrill Lynch Capgemini Wealth Report estimated that global high net worth financial wealth will grow at an annual rate of 6% to reach US$44.6 trillion by 2010. Asia is expected to reach US$10.6 trillion by then, close to the European wealth market.
5 Standard Chartered is well poised to take advantage of these opportunities. Besides launching its HQ in Singapore, the Standard Chartered Private Bank will also be established in Hong Kong, India and the Middle East, with Jersey, Korea, China and London on the cards.
6 However, besides the macro growth trends in private wealth and the growing Asian wealth factor that all major private banks are taking advantage of, banks are also having to differentiate themselves in a highly competitive market and gain a strong brand in specific areas of opportunity. Let me touch briefly on 4 points in this regard.
The wealth management industry in Asia
7 Firstly, the changing face of private banking. The focus of private banking has hence moved beyond free investible financial assets and to an increasing focus on total client wealth; advising in areas beyond just financial assets to a client’s real estate investments and business needs.
8 The emerging class of entrepreneur-clients, most often younger and more sophisticated, prefer to play an active role in their financial investments. To satisfy these clients, many private banks have moved beyond classic private services to offer a full range of expertise to deliver new products and solutions to clients, whether through an internal investment banking platform or an open architecture approach.
9 Second, the opportunities for private banks in the ‘silver’ industry. According to one industry wealth report, the purchasing power of the over-60s has increased 7 times in the last 20 years. The silver market of high net worth individuals can be quite different. Most will want to stay active in work. But they will tend to have less active income and instead, a desire to spend on leisure and other needs in retirement. They will also often want to transfer part of their wealth to the next generation. Taking into account rising longevity, individuals expect to spend up to a third of their lives in retirement. This would require tailored financial advice, investment portfolio and wealth planning solutions to meet their needs. This is a major opportunity for private banks.
10 Closely related to the needs of the silver industry is the need for wealth transfer and this brings me to my third point – the opportunities in wealth transfer. Some estimates indicate that wealth transfer amounting to US$41 trillion to US$136 trillion is expected to take place over the next 50 years. Besides wealth management for the first generation, the next generation also has to be better prepared to manage, preserve and grow the wealth. Private banks will want to cultivate and educate this next generation of wealth.
11 Singapore has seen good growth in the wealth transfer industry. Our regulatory regime for trusts and trustees have been updated to ensure that there is increased legal clarity and guidance to provide high standards of business conduct, professionalism and competence in the trust services industry. That’s crucial for the industry to flourish. There is also growing awareness in the family office arena, with a number of Asian family offices already set up and Asia becoming a hotbed for conferences on such topics. The high net worth insurance industry is also attracting interest, and we have seen the set up of specialist insurance companies like Transamerica, Zurich Life International and Friends Provident. AIA has also expanded into this space.
12 Finally, let me highlight the emergence of philanthropy as another growing opportunity. For the private bank, whether it is through advising high net worth clients on philanthropy, or being an active participant in giving, there is no doubt that philanthropy is gaining importance in Asia. I would like in this respect to commend Standard Chartered for setting an excellent example, making corporate social responsibility a central part of it business. I’m told that in 2006, Stanchart has made a total community contribution of US$21.2 million.
13 Singapore is well positioned to help donors give within Asia. As we announced in our 2007 budget, we have modified our tax and charity rules to facilitate giving from Singapore. We are also starting to see an emergence of philanthropic thought leadership in Singapore.
14 The extent to which a private bank can excel in any of the opportunities that it focuses on depends of course on the quality of its people. As the industry saying goes: “the business of private banking is only as good as the private bankers you have”. So let me in closing say a few things about manpower.
15 Manpower remains the most talked topic in the industry. The market for people is tight. And given the optimistic prospects for the industry this will remain the main critical issue that has to be addressed for the sustained growth of the industry.
16 Singapore is committed to help build a strong pipeline of new and competent people in the wealth management industry. We have approached this by focusing on both the expansion of available talent pool and the enhancement of capabilities and skills in the industry.
17 To expand the talent pool in Singapore, we launched the Financial Sector Manpower Conversion Scheme 3 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 over 250 professionals for the wealth management sector. Besides looking just at the local pool, however, Singapore also continues to be open to talent from other parts of the world. Attracting Asian and global talent must remain a key priority for the industry.
18 To raise capabilities, MAS launched the Finance Scholarship Programme last year to help groom a critical mass of specialists in targeted fields such as financial engineering, risk management and actuarial science. Co-sponsorships from the Financial Sector Development Fund (FSDF) are available to encourage financial institutions to train their staff for the industry. MAS in conjunction with the Institute of Banking and Finance also 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.
19 It is equally critical that the industry takes proactive measures to grow its talent pool. We are thus heartened to see the increasing interest from private banks to set up their wealth management campuses in Singapore, training staff at all levels for their local and regional operations. Many financial institutions have also come forward with innovative and attractive retention packages to ensure that the best talents stay and grow with the organization.
20 We are hopeful that the combined efforts of the industry and the government will help to produce a breed of high-calibre private bankers who can manage the increasingly complex and sophisticated demands of the wealth management industry.
21 To conclude, I would once again like to extend my congratulations to Standard Chartered on the launch of its Private Bank. The challenges of the wealth management industry are immense but so are the opportunities. I wish Standard Chartered every success and we look forward to a continued partnership in expectation of the bright future ahead.