If there were a contest for the most popular term in Taiwan's banking sector in the Year of the Pig, "wealth management" would likely replace "consumer credit abuse" as the hottest buzzwords.
This is because banks in large numbers, both foreign and local, have vowed to increase their wealth management businesses after being hit hard in the past two years by losses from consumer bad debt.
"We have to transform by moving the focus onto fee-based income and providing more tailor-made financial services when the interest margin is under high pressure," Jason Wang (
PHOTO: LI CHING-HUI, TAIPEI TIMES
Chinatrust Financial is vying with Fubon Financial Holding Co (富邦金控) and Cathay Financial Holding Co (國泰金控) as well as other foreign financial institutions such as Citibank NA, UBS AG and HSBC Holdings PLC to manage the growing private market in Taiwan.
According to McKinsey & Co's Bank in Asia report in 2003, Taiwan is one of Asia's fastest growing wealth management markets -- with a predicted annual growth rate of 14 percent until 2011.
With a stable growth in the nation's GDP at around 4 percent annually and an above-average 20 percent household savings rate, the number of so-called "high net-worth individuals" in Taiwan with at least US$1 million of assets on top of their own residential property increased by 6.7 percent year-on-year to 59,000 people in 2005, as reported by Merrill Lynch & Co last year.
According to the US investment bank, these high net-worth individuals possessed combined assets worth US$190 billion (NT$6.27 trillion), or US$3.3 million per person on average.
But, only a tiny slice of this affluent market has been approached by wealth management services -- a ratio of less than 3 percent as estimated by HSBC in 2005.
Another positive factor for the booming wealth management business is that Taiwan's population is aging fast and needs retirement planning for the future as well as financial advice on issues like health insurance and child education.
But the problem is that the private sector's plentiful capital has not been put to good use, except investing in stocks or opening bank savings accounts.
The statistics provided by the Directorate General of Budget, Accounting and Statistics (DGBAS) office showed that Taiwanese have a high household sector saving rate that has consistently reached more than 20 percent of the GNP since 1964.
The gross national savings reached a record high of NT$2.93 trillion in 2004, accounting for 26.32 percent of GNP. The figures fell to NT$2.88 trillion in 2005, or 25.19 percent, but climbed to NT$3.17 trillion last year, or 26.68 percent, and are expected to increase to NT$3.32 trillion this year, at 26.78 percent, according to DGBAS' tallies.
While people in Taiwan need to change their attitude to make the expansion of domestic wealth management possible, another key challenge for this emerging business is how financial institutions can work to generate more novel, comprehensive and appropriate services for their potential customers, under more relaxed government regulations.
Sophia Cheng (
"Taiwanese households have financial assets amounting to US$1 trillion and we need to create channels into which these funds can willingly be invested, as well as import professionals who are paid to manage assets," the magazine quoted Cheng as saying last September.
Then comes another challenge even if there are enough people -- whether they are called financial specialists, advisers or consultants -- this booming industry needs to provide the best professional service available.
Chinatrust Financial, for instance, plans to add up to 200 new people to its wealth management unit and has plans to strengthen its central Taiwan operation with a special focus on the north of Taichung County, which, it is said, holds over 70 percent of the nation's wealth.
The company hopes to boost total assets it manages for clients who possess more than NT$1 million in investment portfolios to exceed NT$1 trillion this year, up from NT$820 billion last year and more than NT$500 billion in 2004.
Chinatrust predicts a 15 percent to 20 percent growth in the earnings of the wealth management segment this year, Wang said, after the company posted a record loss last year due to mounting defaulted unsecured loans.
Shin Kong Bank (
To lure potential wealthy customers, the bank's VIPs with savings exceeding NT$3 million will also enjoy the privilege of an advanced purchasing opportunities of upscale housing projects such as Da An Jasper (大安傑仕堡) which will be sold to conventional customers beginning in May by Shin Kong Financial.
Foreign banks are also eager to get a slice of the booming market as well.
UBS AG, Europe's largest bank by assets, said earlier this month that it will hire an additional 30 experienced wealth management consultants to add to their current 50 this year in preparation for future business expansion.
The consultants will be trained for more than one year in UBS branches worldwide in order to bring sophisticated services to local customers, said Dennis Chen (陳允懋), head of UBS Wealth Management Taiwan.
The Swiss bank also plans to expand its target customer base to those who enjoy assets of US$1 million in the next two to three years from current upscale private banking that provides services to ultra high net worth individuals with assets of more than US$10 million, he said.
As the wealth management market increases, so does the competition for business. Financial institutions are setting up customer relationship management (CRM) software solutions to keep track of their customers.
Taishin International Bank (
ABN AMRO Bank NV in 2005 installed new relationship workstation software to help its financial advisors manage clients, while Cathay United Bank (國泰世華銀行), the banking unit of Cathay Financial, has used its PEC wealth management system since 2003 to improve client relationships and the investment portfolio management process. One unspoken secret in the fierce competition between financial institutions is the onset of price wars.
"We do sense the price cut pressure," Lee said, "Taipei City is the first-degree war zone to compete for rich customers."
Understandably enough, the bank offers "flexible" prices to corporate customers that buy lots of products. Discounts may be inevitable when the wealth management market is getting increasingly crowded, but bank executives said it is still important for institutions to offer right process, combined with the qualified and experienced specialists to ensure clients with both what they want and what they really need.
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