BDO Private Bank’s CEO Spells out His Vision for Wealth Management’s Evolution in the Philippines
Albert S. Yeo has been President of BDO Private Bank (PB) since January 2017 and arrived at the bank with a highly impressive resume, including 17 years at Merrill Lynch, mostly in the US where he lived for many years and where his wife and eldest daughter now work together in the family-owned dental practice, and where their second daughter is at Graduate school in Journalism. Although he visits the family there as much as possible, and vice versa, Yeo’s eyes are firmly on his role at BDO in Manila, where he has been at the cutting edge of the bank’s thrust into private wealth management, which is enjoying rapid growth and development as the country’s economy and private wealth both continue to expand apace. He met with Hubbis recently to offer some invaluable insights into the evolution of the industry in the country.
Yeo begins the discussion by setting the scene. “Private banking up until about 10 years ago was all about product sales,” he reports. “And it was all rather basic and not very international in outlook at all, the market was very much in its infancy then. We have advanced, but frankly we remain well behind some of our ASEAN neighbours, and today many of the HNWIs and ultra-wealthy use foreign private banks, and of course also work through Switzerland, Hong Kong and Singapore, sometimes even as far away as New York and Los Angeles.”
From simple to more sophisticated
Yeo reports that even today, many of the products being sold to wealthy investors are money market cum Treasury products, mainly local instruments in Pesos, and some in US dollars.
BDO Private Bank, he reports, emerged out of the sale of Banco Santander’s local operations to BDO in 2003, and that BDO began with these treasury type products. Since then, PB has been building out a much broader product and service proposition to include the typical range of services most private banks aim to provide clients these days, including wealth structures, discretionary asset management, estate and legacy planning, and so forth. “BDO PB stands on its own as a regulated unit, we are today the clear leader amongst domestic banks here, we have our own annual report, our dedicated corporate mission and I have my independent board overlooking us, it is all highly organised and transparent. In short, I can say we are at the forefront of this industry here, and, hopefully, we are going to move closer and closer to the global standards, although we still have some way to go.”
A solid base
As an aside, Yeo notes that the Philippines, being a Catholic country, has enjoyed dramatic population growth, and still is, driving the demographics forward, which is of course driving the economy and private wealth generation. “We follow the broad Asian model,” he reports, “and while of course we are not anywhere near the Singapore or Hong Kong wealth, things here have been developing rapidly, and a great reduction in corruption has helped the mainstream economy develop very well in many key areas.”
He comments that the bulk of the Philippines population is below 40 years old, and domestic consumption is still the major engine of GDP growth.
“I am very positive on the Philippines,” he reports. “I think we could arrive at a middle-class type society in the foreseeable years ahead, we are growing fast, and we are increasingly competitive within the region and heading to global standards.”
As to the bank’s ability to compete effectively, Yeo explains that BDO has to put up with some regulatory limitations and, of course, is far smaller than many of the global or regional banks. “Sometimes regulations are behind the curve, hindering us here,” he reports, “or better capitalised private banks from overseas are tough competitors. These factors can undermine the pricing structure of our model, as we might be a pioneer and a leader, but we are not globally or even regionally scaled. One day we hope to see foreign clients coming to Manila to doing some of their private banking with us, and then we could truly say we have arrived on the global stage.”
Getting the act together
There are many facets of working life and the financial sector that Yeo considers in need of upgrading in the country, including the internet and telecommunications infrastructure. “And as to regulations,” the regulators are working hard, they realise money is fungible, but I think they must be careful not to restrict the flows and then create what is effectively a parallel economy, or black market. More openness will actually help encourage the growth of our industry in the Philippines, helping the Filipino HNWIs and wealthier foreign residents to keep their money here. We need to have local bankers covering their full needs, onshore and offshore investments in a transparent manner, especially as global and local regulation, particularly FATCA and CRS, mean tax evasion is on its way out, while tax optimisation in an open manner is now the name of the game.”
He notes that foreign currency deposits, which enjoyed preferential tax rates for many years, will soon be taxed at the same rate as the local currency, ostensibly to help fund the government deficit. That may have a negative impact, as investors may eventually access investment vehicles in other jurisdictions with lower tax rates.
More funds likely to flow
On the other hand, Yeo says it is only a matter of time before the Philippines will be a signatory for the OECD’s Common Reporting Standards, so he predicts a flow of funds back into the country driven by that development. “We are already prepared at BDO PB to offer a more diversified range of choices for investors, including a wide range of foreign-denominated investments of all types,” he reports. “Even the local asset management firms have started to denominate their white labelled funds with foreign currencies, with sub-advisors from some of the asset managers around the world.”
He explains that in the past local banks did not offer much choice at all, but this is changing, spearheaded by his bank. “There has also been some help from the regulatory regime, so for example like our SEC has now defined the Qualified Investors Programme, allowing approved investors to buy into unregistered securities which we now offer more of on our platform.
Offering a wider service suite
The country is also facing the ageing of its wealthy and ultra-wealthy patriarchs and matriarchs. “We are significantly upgrading our capabilities to help these clients,” Yeo reports, “so, for example, we upscaled BDO PB’s family office last year, as part of this effort. We work very professionally now on a wide range of structures and financial advice, we even offer a full range of corporate ancillary services, corporate secretarial for the holding companies they might establish, and we work closely with the heirs, the next generation. We are now experts in family governance and constitutions, we have considerable expertise in the legacy area and wills and local and international rules with cross border regulatory sensitivities, we also have a large trust practice. All these areas combine to help clients and families plan and organise in great detail, which is especially vital for the extremely wealthy families here.”
Yeo explains that the bank’s pricing model is based largely on a percentage of AUM, while the transaction fees are more minor in importance. “Honestly,” he says, “we tend to be higher in pricing than those firms that are highly transaction-oriented. We try to encourage a portfolio type mentality, rather than product push to the clients. We encourage diversification, as we allocate money to different time horizons to ensure the clients have investments for the long-term, as well as funds for shorter-term liquidity. We are selling a customised, bespoke type approach and advice. We recognise that wealthy people like to keep control of things, that they usually think they know best, but we are gradually bringing more decision-making into the private bank. We emphasize to the client that unless they are really deeply in the finance world every day, they should not be DIY investors. Just the same as a homeowner might know how to tighten a washer, but they should know when to call in a plumber for the more complex challenges!”
A compelling proposition
He explains that BDO Private Bank’s proposition for newer clients is to encourage them to give the bank some seed money for DPM. “We are not the cheapest, nor the most expensive, but we aim to offer value and if after a while the client still thinks they can do better, then fair enough. But we have performed well for our clients, including the introduction of real asset classes like gold, whereas you will recall Hubbis introduced us to Joshua Rotbart when gold was at USD1200 roughly, and of course, we are far above that today and have many happy clients as a result.”
Yeo adds that as in any walks of life, the customers usually get what they pay for. “If the HNWI has all the time, all the expertise, all the information at his or her fingertips, then kudos to them, they might do well and not need specialists like us, but actually that is seldom the reality.”
Yeo also highlights the bank’s robust best-in-class approach via their open architecture platform and putting great emphasis on the quality of the people the bank puts in front of clients. “We adopt the mindset of continuously striving to be the best in private banking,” he reports. “We aim to offer the best solutions, the best people, the best service. Of course, we do not always achieve that, but we know that we are true to our mission for our clients. And it important to know that we partner with the right firms, and that we always seek to offer a bespoke, tailored service.”
He closes the discussion by reiterating the optimism he has for the Asia region and for his country, and how BDO Private Bank will continue its quest towards best-of-breed private banking.
Albert Yeo’s Key Priorities
Looking ahead on a time horizon towards that spans late 2021, Yeo says a key mission is segregation of the clients between those who are truly private banking clients and those who are more brokerage type accounts. “We are splitting our services to fit those categories, so we can give both sets of clients the optimal outcomes,” he elucidates. “Just like in America, almost all the private banks, all the big brokerage houses, are already well established in this type of organisation, and have a clear understanding of where they allocate people and resources to ensure that clients are properly analysed and allocated to the different arms. True differentiation means that the higher added value clients will be considerably better served in the future, while lower-yield accounts will receive a more focused type product and service range.”
Digital transformation is the second mission, and that like the first priority, is already well underway. Product expansion, diversification and enhancement is a third priority, with those tailored more optimally to the individual clients’ needs and expectations.
Getting Personal with Albert Yeo
Albert Yeo, CEO of BDO Private Bank in Manila, spent 17 years at Merrill Lynch, mostly in California and partly in Manila, before taking up his current role as leader of BDO Private Bank in early 2017. He also worked with UBS Securities and Prudential Securities Inc. (now Wells Fargo Advisors) in various capacities. And further back in his career, he was an interest rate swap trader with IBJ Schroder Bank and Trust (now Mizuho Bank) in their Capital Markets Group in New York City for five years.
He earned his MBA in Finance from the Wharton School at the University of Pennsylvania after completing his undergraduate degree at the Ateneo de Manila University, BS Management Engineering, graduating with magna cum laude distinction and was the Departmental awardee of his class.
His background is a true Asian story. Born in the city of Zamboanga in the region of Mindanao, his father was a first-generation Chinese immigrant, and his mother a second-generation immigrant from China’s Fujian province. “We spoke Fujian at home,” he remembers, “and at school I learnt English and Mandarin concurrently, and I had to learn Tagalog, of course, our national language. I am therefore somewhat of a jack of all languages, but maybe master of none, although English is probably my main language.
He had hoped to become a doctor while at high school and even schooled at pre-med for a year, but then had a change of outlook and decided that he wanted to move on the fast track in the world of finance. “I said to myself I am not going to spend years working as a doctor and then reach my prime at 40 or 50, so I switched horses. Things are not set in stone, you make adjustments along the way, and that’s the philosophy I have always adopted.”
He later left Wharton Business School armed with his MBA. “It was New York or bust, as the old adage goes,” he recalls. “So I spent five years there working in a trading room environment on Wall Street. It was like ticking off my list of goals, so MBA, check, Wall Street, check, and that was the start of my working life, from which I have never looked back.”
His career then involved a long spell at Merrill, including some years with them in Manila from 1990 to 1992. “We were a representative office, actually,” he reports, “only a small office that they later shut down, when I asked to be sent back to the States instead of moving with them to Hong Kong or Singapore. I left Merrill at one point to join Prudential Securities which is now Wells Fargo and then UBS, also in LA, returning to Merrill in 2006. Actually, when I left Merrill in late 2016, I was eligible for their retirement, but instead of stopping work, which I could have done, chose to return here in this role at BDO, which has been fascinating.”
Of course, he admits there is a personal cost to the decision, as his wife and elder daughter work together now in the family dental practice in Marina del Rey in California, and their second daughter is soon to complete her Masters in journalism from the University of Southern California. “Maybe once both daughters are settled and both working, my wife might join me back here in Manila, but of course we spend as much time together as we can in a transoceanic relationship,” he reports.
He has always enjoyed outdoor life, and exercise as well as watching sports such as college football from the US, or following his favourite professional team, the Philadelphia Eagles, or in baseball the New York Yankees. “I used to watch them when in New York,” he explains, “when the sell-side customers would entertain us buy-side folks really well. That was well before all the regulations that restricted a lot of that type of entertaining.” In his younger days, he backpacked the USA twice from coast-to-coast, once by Greyhound bus and then another time via Amtrak, the US passenger railroad system.
Nowadays in Manila, when not helping build BDO’s wealth management business he enjoys more local pastimes such as walking on the beaches, enjoying the foodie scene, rekindling old friendships and meeting never-met-before relatives, and at home spending a lot of time on FaceTime with his family in the US; Yeo has indeed come home full circle and enjoying his passion – wealth management.
More from Albert S. Yeo, BDO Private Bank