Claude Haberer of Pictet & Cie discusses the key characteristics of Asia’s private banking landscape today, and explains why he thinks the independent model is the way forward.

Date: Nov 2011

Tags: Strategy, Differentiation, Value proposition, Business model

• When looking at the components of a profitable and sustainable strategy in private banking in Asia today, two models are evolving – independent firms and large banking groups
• Given the rising competition, costs and regulatory pressures in the Asian market, consolidation is likely – yet such activity is destablising for a private bank
• Pictet is the only independent firm within the top 15 private banks globally, with such scale being reassuring for Asian clients

When looking at the components of a profitable and sustainable strategy in private banking in Asia today, Claude Haberer said in an interview that he sees two models evolving.

One of them is the traditional, client-oriented approach to private banking through specialised firms – which he said are the minority – with the other, more common model, is via the large banking groups which are optimising resources, revenue and synergies to bring their various businesses closer together.

This creates two very different environments for the client relationship, said Haberer. The first model leads to an independent strategy based on the relationship with the client where there is no outside interference. The second model, meanwhile, creates a private bank which acts mainly as a distribution channel for other parts of the group, with a lot of interdependence – which he said leads ultimately to a lack of independence.

Consolidation looming

Given the rising competition, costs and regulatory pressures in the Asian market, Haberer said that consolidation is likely.

However, for a private bank, he said that such activity is destablising, both for staff and clients alike, which inevitably has consequences for the clientele.

Yet within large banking groups, the private bank is typically relatively small, so consolidation is driven by looking first at the rationale for the investment and retail parts of the bank – and the private bank then has to follow suit.

And in such a concentrated marketplace as Hong Kong or Singapore, Haberer said consolidation brings with it overlaps in terms of clients, and usually a new type of management which has an impact on client relationships.

For a private bank, however, clients prefer reliability and safety, he added, so changes in management or relationship managers, combined with a change in the rating of the institution, can be destablising for clients.

Pictet’s differentiation in Asia

For Pictet, its partnership structure, with each partner having a tenure of around 25 to 30 years, means it can carry business plans over decades, said Haberer. And combined with a double-A rating, he said this provides a good foundation for the business in Asia.

Plus it is the only independent firm within the top 15 private banks globally, said Haberer, adding that such scale reassures Asian clients.

Further, in its 200-year history, Haberer said Pictet has never conducted an acquisition, which is in line with its management philosophy that to grow in this way is destabilising for client relationships and can dilute the corporate culture.