Citigroup, UBS boosting ranks of private bankers

CONCENTRATED WEALTH: Taiwanese with assets of at least US$5 million own 15 percent of the nation's wealth, almost twice the figure in Australia, market analysts said


Tue, Jul 17, 2007 - Page 11

UBS AG and Citigroup Inc said they are hiring more private bankers to serve Taiwan, where the richest citizens hold more wealth than in any Asian country except for China and Japan.

UBS will add 30 private bankers here this year for a total of 80, Dennis Chen (陳允懋), who oversees the company's onshore private-banking business in Taipei, said in an interview.

Citigroup, Morgan Stanley, BNP Paribas and ABN Amro Holding NV said they will also add bankers to cater to the nation's wealthy.

Taiwan had 210,000 citizens at home and abroad with net assets of at least US$1 million in 2005, controlling about US$585 billion of wealth, according to the Boston Consulting Group, which advises private banks. Taiwan trailed China by only US$215 billion, but has only less than 2 percent of the latter's population.

"Taiwan is not only an amazing market when you look at its net-worth per capita, but also a very deep market in terms of wealth concentration," said Peter Tung, a managing director for Morgan Stanley's Private Wealth Management in Asia.

People with at least US$5 million in assets own 15 percent of Taiwan's financial wealth, Boston Consulting estimates, almost twice Australia's 8 percent.

Taiwan's rich also generate higher-than-average revenue for private banks because they use more services and trade investments more actively, said Tjun Tang, a Hong Kong-based managing director of Boston Consulting.

Private banks earn about 1.5 percent annually managing offshore assets of Taiwan citizens, compared with 0.95 percent for all of Asia, Tang said.

Taiwan's wealthy are seeking private bankers, often offshore, because of insecurity over tensions with China and high tax rates, Chen of UBS said.

Private bankers, who often require that clients have at least US$1 million in assets, provide customized services that include advice on taxes and managing investments and inheritance plans.

Taiwan's inheritance tax of up to 50 percent is among the highest in Asia. Hong Kong has no such tax, while Singapore's is up to 10 percent. Also, the nation's top personal income tax rate of 40 percent is more than twice that of Hong Kong.

High taxes make Taiwan "so unattractive" for the wealthy to park money compared with locations such as Hong Kong, said Sherry Lin (林淑娥), director of Credit Suisse Group's equity research in Hong Kong.

The nation's wealthy may try to move more money offshore before a tax on overseas income takes effect as early as 2009 and the government tightens monitoring of funds sent overseas.

Citizens can move up to US$5 million out of Taiwan each year without needing approval from the central bank.

Political tensions across the Taiwan Strait has also increased demand for safe havens.

"We have noticed accelerating outflows in the past two years," said Oliver Yu, a senior manager of PricewaterhouseCoopers LLP in Taipei, adding that the nation's rich most often stash their money in Hong Kong and Singapore, but increasingly also in Switzerland.

Offshore private banking has also flourished to serve successful entrepreneurs active abroad, including in China, Vietnam, Malaysia and Singapore. Citigroup keeps a "significant portion" of its team serving the island's rich in Singapore and Hong Kong, said Richard Straus, a global marketing manager for its private-banking business for Taiwanese.

Issues can arise for private bankers that operate offshore. They aren't allowed to solicit clients living in Taiwan by telephone or on visits to Taiwan, Financial Supervisory Commission Deputy Chairwoman Susan Chang (張秀蓮) said.

The restrictions aren't severe enough to slow the flow of individual assets overseas, said Sabrina Wang, who is a manager at PricewaterhouseCoopers.

Wealthy Taiwanese move money offshore partly because of a wider selection of investments than at home.

"People have far more and better opportunities to grow assets abroad," Wang said.