IBF and MAS have launched a skills map for family office advisors to deepen specialist skillsets in order to better serve Singapore’s growing family office ecosystem.
"Future-Planning for the Future Generation" - Keynote Address by Mr Ng Yao Loong, Assistant Managing Director, Monetary Authority of Singapore, at the Euromoney Asia Private Banking Seminar in Singapore, on 13 September 2018
Mr Mu Naimi, Chief Operating Officer, China Construction Bank
Ms Harriet Green, Chairman and CEO, IBM Asia Pacific
Mr Clive Horwood, Editor, Euromoney,
Ladies and gentlemen,
1 A very good morning. Let me begin by extending a warm welcome to our overseas guests. It gives me great pleasure to be here at the inaugural Asia Private Banking Seminar.
2 The organisers have chosen very challenging topics for today, such as how technology would impact the industry, and how client needs will evolve as impatient millennials take greater responsibility of family wealth. There are no clear answers on how these trends will pan out.
3 One trend, however, is clear – rising Asian wealth will play a key role in shaping the global wealth management industry. Boston Consulting Group (BCG) has projected Asian wealth to grow at 14% per annum between 2017 and 2022 compared to 11% globally, with countries such as China and India leading the growth.
4 I am glad that after China Construction Bank launched its private banking centre in Singapore last year, it has taken the initiative this year to partner Euromoney in organising this seminar and to bring together fellow wealth managers in the region to engage in discussion on the future of this sector.
Future-Planning for the Future Generation
5 This seminar comes at a significant point for wealth management in Singapore.
- This month, Singapore commences automatic exchange of information (AEOI) with 64 countries, heralding an age of greater transparency for the sector.
- The move towards greater transparency is a reflection of changing attitudes of wealth management clients globally.
6 Euromoney describes these changing attitudes in a useful report titled “The death of private banking”.
- The report describes how clients no longer look at private banks for privacy and cover, but for advice and recommendations on how to deploy their assets in a way that is consistent with their family mission.
- Consequently, phrases such as “private banking” or “wealth management” may no longer adequately describe what clients expect of wealth managers or private bankers.
- Given the new-found expectations of wealth advisors, we could, perhaps, use the phrase “future-planning” to describe this new role. I hope this phrase captures the expectation to help the future generation plan and invest.
7 In this regard, Singapore stands ready to support future-planning for future generations by creating a conducive environment to do so. It has always been in our DNA to plan ahead. Specifically, MAS will work with the industry to:
- Position Singapore’s wealth management industry for the future;
- Professionalise family wealth management for the future; and
- Empower investments in the future
8 I will elaborate on these three areas next.
Positioning our wealth management industry for the future
9 First, let us look at how Singapore is positioning our wealth management industry for the future.
10 Against a backdrop of rapid technological developments, MAS, together with our industry partners, have developed the Financial Services Industry Transformation Map (ITM), setting out our strategies and targets, in making Singapore a leading global financial centre in Asia.
11 We are on track to achieve our ITM targets of which the wealth management sector plays a major contributing role.
- Financial services value-add grew an average of 3.3% per year during 2016 and 2017, somewhat lower than the target of 4.3%. But, growth rebounded strongly to 4.9% last year. Growth for the first half of this year was strong, underpinned by broad-based improvements across various segments. We expect growth this year to exceed target, putting us in good stead to achieve our 5-year target.
- For wealth management, it has also done well – private banking assets under management (AUM) expanded an average of 6.6% per annum in the last 2 years.
12 Maintaining our position as a leading wealth management hub is a key developmental priority. We will push forth on our transformation priorities for the wealth management segment which includes:
- Developing strong pools of expertise;
- Broadening product and service offerings; and
- Promoting technology and innovation.
13 Why do we do all these? It is so that clients are able to access solutions in Singapore that best meet their needs. They will be served by highly competent professionals who have the expertise and empathy to act in the best interest of their clients. Intelligent technology offerings will supplement the personalised service, providing individuals with timely information and advice. Individuals will also have access to a broad range of products that can help them achieve their investment and impact-driven objectives.
Supporting the professionalisation of family wealth management for the future
14 Next, we look at how MAS is planning to support the professionalising of family wealth management in Singapore.
15 As the mindset in Asia evolves from one of wealth accumulation to wealth preservation, issues such as succession planning and intergenerational wealth transfer have moved up the agenda. We see an increasing number of families consolidating their wealth through formalised structures, such as trusts and family offices. Professional managers are hired within these structures to optimise investments and carry out legacy planning for these families.
- There is a wide range of estimates of the number of family offices globally but the trend towards more family offices, especially in Asia is quite clear. Asia is now home to a third of ultra-wealthy people but accounts for less than 5% of family offices.
16 The stable political environment in Singapore, clear regulatory regime, comprehensive network of tax treaties and a robust ecosystem of professional services, positions us as an ideal jurisdiction for families to set up such structures.
- Between 2015 and 2017, the number of family offices in Singapore quadrupled; we continue to see strong interest from families to set up in Singapore.
17 To strengthen Singapore’s value proposition as a centre of excellence for managing family wealth, MAS will:
- Raise the level of sophistication and professionalism of family wealth professionals by partnering institutes of higher learning to develop training targeted at family office professionals; and
Strengthen networks between family offices in Singapore, to facilitate mutual learning and participation in investments.
18 The increasing sophistication of family offices means that the services they require from their advisers and service providers, including private banks, will change. For example, family offices are now increasingly likely to hire an in-house investment professional instead of just allocating a portion of their assets to certain strategies. As such, private banks’ value proposition to their clients will have to change – they may have to help family offices set up these strategies, assist in operational requirements, hire the right investment professional and even offer prime brokerage services.
Singapore is facilitating investments in the future
19 Finally, I would like to share with you on how Singapore offers an attractive platform for facilitating investments in the future. We can look at this in two parts:
Private Equity / Venture Capital Investments
20 First, we facilitate investment into innovation and future businesses, by creating a vibrant private equity and venture capital (PE/VC) eco-system.
- As one of the top global innovation hubs, Singapore is a hotbed for innovative start-ups and a natural hunting ground for the next unicorn.
21 The promising opportunities in the private markets have led to strong growth in the PE/VC space in Singapore.
- Alternative AUM grew by an average 16.9% per annum over the last 2 years, led by PE/VC.
- There are currently around 220 PE/VC managers located in Singapore, with the majority of them focused on growth and buyout strategies in higher growth sectors such as consumer and retail, healthcare and IT.
- Around 85% of their investments are distributed across Singapore and the region.
22 We will continue deepening capabilities in this space to empower investments into the future.
- The Venture Capital Fund Management Regime was implemented in October 2017, which simplified the process of establishing and managing a VC fund.
- To connect people and facilitate deal-making, MAS will introduce the Global Investor Summit this year as a new component of the highly successful Singapore FinTech Festival in November this year. Through the Summit, we hope to foster greater investor appreciation of ASEAN private companies and generate greater regional deal flows through the curation and showcasing of promising ASEAN start-ups and enterprises.
- We are also working with industry players to establish private market funding platforms in Singapore to offer these companies access to a broader network of international investors, and enhance matching of early and later stage investors.
23 The second area we are looking at is to facilitate investment in sustainable endeavours.
24 The Asian Development Bank estimates that developing Asia will require US$1.7 trillion annually in infrastructure investments from 2016 to 2030 to maintain its growth momentum, tackle poverty, and respond to climate change.
25 I believe many of your clients have taken the lead in sustainable investing. Many have warmed up to the idea of aligning investments with personal values, and are keen to understand the environmental and social impact of their investments.
- According to BNP Paribas’ survey on business owners, interest in sustainable investing has almost quadrupled from two years ago.
- Standard Chartered Private Bank also found that investors in Singapore had the strongest understanding of sustainable investing in Asia. Nearly 4 in 5 high net worth investors reported being engaged in sustainable investing.
26 Ensuring sustainability is very much a part of Singapore’s ethos – making the best use of limited resources has, for a long time, been a key part of our nation-building process.
- In this regard, MAS has taken efforts to promote strong sustainability focus. We have:
- Pushed for the adoption of industry best practices for environmental, social and governance (ESG) standards,
- Developed competency building courses for ESG professionals in Singapore,
- Encouraged issuance of green bonds through the introduction of the Green Bond Grant Scheme last year.
27 To sustain our efforts in promoting sustainable investments, we will continue to:
- Push for deeper ESG integration within our financial institutions, so that they would integrate sustainability considerations into their core business and risk management practices;
- Expand the breadth and depth of green finance products and foster the growth of a green asset class in this region; and
- Deepen research and development in ESG products in Singapore to develop a comprehensive suite of ESG products catering to different investment strategies.
28 To summarise, the wealth management of the future will be one of stewardship and purposeful deployment of assets. We are positioning Singapore’s wealth management industry for the future. We will continue our efforts to support the professionalising of wealth management for the future and facilitate investments in innovation and sustainability. We will continue to work with our industry partners to facilitate future-planning for the future generation.
29 I wish you all a fruitful day. Thank you.