Hsiao-Yun Lee of Societe Generale Private Banking explains how the bank first established its business in China, and how it is now growing the platform and brand.

Date: Apr 2011

Tags: China, Hiring, Training, Regulation, Differentiation, Value proposition, Branding

• After three years obtaining various licences, Societe Generale Private Banking is now eligible to offer RMB products as well as all types of offshore foreign currency-denominated products
• For private banks to be successful in China, they need to have a clear client segmentation strategy – especially given the size of the country and diversity from one city to the next
• The lack of talent in China’s wealth management markets forces firms to do “creative recruiting”

In 2001, after China joined the World Trade Organisation and made a promise that after five years it would open up the local banking market, most foreign banks started to contemplate getting a full licence incorporated, said Hsiao-Yun Lee in an interview.

Around this time, Societe Generale started to look at China as a market for the future, especially in terms of the wealth market, she said.

For Societe Generale Private Banking, therefore, this is its third year of operation in the wealth management space in China. After being transferred to China in mid-2007, Lee said she had to wait for one year to get a full licence. And it wasn’t until just over a year later that the bank got its RMB personal license. Without this, she explained, it isn’t possible to deal with high net worth (HNW) individuals.

Now, the bank is eligible to offer RMB products as well as all types of offshore foreign currency-denominated products, said Lee.

Further, the bank’s Qualified Domestic Institutional Investor (QDII) licence enables it to collect RMB funds from both individual and corporate customers to invest on their behalf overseas. This also facilitates the bank to be able to do proper asset allocation for its customers, said Lee.

Growth challenges in China

Out of the 23 to 24 foreign-funded incorporation banks in China, Lee said only seven have a private banking business.

At the same time, the local Chinese banks clearly have a scale advantage in terms of numbers of staff and their network, putting them in a position to help them upgrade their retail banking customers to private banking clients very quickly, she explained. On the flipside, foreign banks have had to start from scratch.

According to Lee, for private banks to be successful in China, they need to have a clear client segmentation strategy. Given the size of the country, different cities have their own characteristics, with different cultures, dialects and even the ways of making money, she explained.

As a result, Lee said banks need to adopt different strategies determined by their internal resources and capabilities to develop workable models – but it is not just about replicating what exists offshore.

Finding and training new staff

The lack of talent in China’s wealth management markets forces firms to do what Lee called “creative recruiting”. This means hiring people from other parts of the banking industry – not only to overcome the problem of the lack of experience in private banking, but also the concern over the fact that if people move frequently between firms, this shows their lack of loyalty.

Also, given that so many people applying for private banking jobs are well educated and have MBAs and even higher qualifications in some cases, Lee said she looks beyond these to try to identify a person’s honesty and integrity.

When she finds the right people, it is then important to train them on-the-job, as well as give them social networking opportunities to upgrade themselves.

Enhancing the brand

According to Lee, she doesn’t want to be the most visible private bank in the market, but rather to maintain a niche and certain positioning.

This is important given the type of business the bank has, to ensure it maintains a high quality of service, she said.