Helping Asian Wealth Management Communities interact

Thailand

KBank Private Banking’s Mission to Achieve ‘Perfect Wealth’ through Holistic Private Banking

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Triphon Phumiwasana, PhD, is Managing Director and Private Banking Business Head at Kasikorn Bank in Bangkok. He arrived at KBank’s Private Bank Group in 2016 armed with an impressive resume spanning several high-profile roles that included five years as the Director of Foreign Investment and External Fund Management at the Thai Government Pension Fund, running a portfolio of USD4 billion. He met with Hubbis to offer some valuable insights into the world of wealth management in Thailand and to explain how KBank’s private banking mission is to deliver a holistic, balanced vision of private banking for Thailand’s growing ranks of high-net-worth investors.

Triphon begins by looking back over the past year when the bank expanded its concept of Perfect Wealth. ‘Perfect Wealth’ is ‘wealth without worry’ or ‘wealth with happiness’, he explains. Our clients have large, sometimes great wealth, but it is not always the case that this gives them the freedom to focus on what really matters in life like family, the community, helping make our society a better place.  The concept has evolved dramatically over the past year with the launch of a nationwide advertising campaign, developed in the splendour of their new state-of-the-art offices in Emquartier.”

New offices for a new vision

The new offices, designed by interior design firm DWP and spanning nearly 19,000 of sumptuous, tailored space in Emquartier are a physical manifestation of the image KBank Private Banking wishes to project. “And in this location,” he notes, “we are physically close to so many of our clients, in fact, I usually bump into clients every day downstairs. We are aiming to project an image that is modern, sustainable and responsible, with no plastic bottles, with as little paper as possible, meeting clients with our iPads and laptops, and therefore being highly efficient and fully mobile.”

He explains that KBank Private Banking has even launched new funds under the headline ‘K-CHANGE’ that focus on positive impact investing. “And the bank launched the first ever private equity mutual fund that we know of in Asia,” he explains. “With a subscription minimum of just Bt1 million it provides a new avenue to many investors that could not previously access such opportunities. We are proud to have raised USD100 million through that fund alone, which was manufactured by Lombard Odier, KBank Private Banking’s international private bank partner for Thailand.”

Risk mitigation

He also points to the bank’s promotion of a risk-control China ‘A’ share fund, which he describes as one of the best performing risk-adjusted funds on the market. He explains that the fund, which the bank launched in 2019, has smart features to control volatility already built-in, whereby the fund incorporates mechanisms for controlling sharp movements and thereby helping the investor stay in without worrying about the shorter-term volatility.

Another example is that instead of an open-ended fixed term fund, with mark-to-market and therefore potentially volatile NAV, the bank has been offering funds similar to a closed-end fund that sidestep the potential NAV volatility, and that also aid the investors in taking a longer-term view of the investment horizon.

Tailored to the clients

“We have in the past year refined our risk approach to three risk buckets - conservative, moderate and aggressive – with the latter two segments involving leverage,” he notes. “And later in 2019, we raised the equivalent of USD150 million through what we named ‘Multibond’, an uncorrelated bond fund working with the UK fund manager H2O.”

All these developments, and more, mean that Triphon can report that the private bank has a fairly full stock of product on its shelves today.

An evolving market

He also looks beyond that investment products to the key trends taking place in Thailand’s private wealth market. “Many wealthy Thais are ageing,” he notes, “and as they age, they want to pass on their assets and their businesses. Accordingly, the non-investment side of our private banking operation is central to engaging many of the clients, as we can offer them considerable help on their family wealth planning, right from family governance and constitutions, to succession planning.”

Surveying the landscape for the industry’s evolution amidst Thailand rapid accumulation of private wealth, he sees growing competition, the need to add value, and a world of opportunity for the smartest players.

Building the onshore proposition

It is certainly the case that as local and global regulatory pressures build, more money is either staying onshore in Thailand or returning from offshore. But as the domestic capital markets are relatively modest in size, even from a regional perspective, the wealth management market players are producing more local currency funds and other products that filter global opportunities into local investors. And Lombard Odier is also there to serve those domestic clients that need or want offshore access to global investments or structures.

“There is considerably more competition onshore these days,” Triphon remarks, “so our brand and our positioning need to be very acute. That is partly why we have joined forces with Lombard Odier, as the partnership offers us a considerably wider range of international products and global expertise, with more and more international investment now being accessed through a growing array of locally-denominated assets.”

The pursuit of excellence

“We need to position ourselves as the provider of excellent investment products and advisory,” he adds, “as well as the provider of a more comprehensive wealth management and planning service for individuals and families, and all our initiatives are directed to these ends.”

The core family wealth planning issues he refers to concern a variety of essential matters such as ownership, governance, the family council, the family constitution, optimal asset holding structures, succession planning, amongst others.

 

“We provide clients with a holistic and invaluable perspective on their wealth and provide an integrated, comprehensive service to help them manage this,” Triphon notes.

 

Landing soon…

He adds that a key immediate concern right now in Thailand is the new land and property tax. The visible wealth of HNWIs in Thailand is often the tip of the iceberg, as the majority of the assets that clients have are physical assets, including often huge holdings of land.

“We now provide a loan product with low rates with this illiquid land as collateral,” he explains. “We lend clients with loans secured against the land, we invest for them with the proceeds in relatively safe assets achieving a spread of about 1% above their costs, and they are able to retain the land but make it liquid and cover the land tax levies as well.

Planting lemons in Bangkok…

The new tax, due for the first payments from mid-year onwards, can be extremely low – for agricultural land, for example - or as high as 3% per annum for other land. “So,” Triphon quips, “rather oddly, you sometimes see previously unused land in the middle Bangkok nowadays turning to lemon farms.”

KBank is actually the first bank to initiate what it calls Land Loan for Investment, which is essentially therefore a solution for convert non-performing land into liquid investments that create cashflow.

“The clients thereby achieve a positive carry allied to sensible leverage,” Triphon adds.

In some ways, this is a similar idea to the Lombard Finance structure, but rather than using the investment portfolio as collateral, the bank uses the raw land as surety. “The solution becomes part of the overall wealth planning service we offer our clients,” Triphon remarks.

Another concern for wealthy Thais is the new 5% inheritance tax for all wealth transferred above Bt100 million, or roughly USD3.1 million.

Offshore still beckons

With the limited solutions available in Thailand, and no trust laws, Triphon explains that many families begin with the formation of family constitutions and some then establish trusts in offshore locations such as Singapore or Hong Kong. “Our role is to give basic advice on how to manage all this, and then point to our partners, mostly lawyers that can actually help the families draft these family constitutions, and then for the trusts, if they go offshore, we will direct them to Lombard Odier.”

So far, the activity level in this regard is rather modest, but the potential for KBank is significant. “We have 10,000 families that we’re looking after here,” Triphon remarks, “but thus far only a handful of clients have begun this process, so there is a lot more to do.”

Offering genuine value

Triphon comments that success in private banking must ultimately come down to value, however, the providers charge their fees, whether purely advisory or with commissions embedded in the products. “My clients are in Thai Baht, whereas their offshore holdings are already offshore, in US dollars mostly, or other leading currencies. Accordingly, we focus on risk mitigation in Thai baht investments, we help the clients take a longer-term perspective on their holdings rather than spending large amounts on fees by trading in and out of assets regularly.”

Ultimately, Triphon observes on concluding the discussion, wealthy clients want to boost their returns, but to do so more importantly with risks appropriately management.

Onshore to the world

“I see more of the wealth in the future in Thai baht denominated assets, even if they represent international assets ultimately,” he reports. “And even though they will continue to access plenty of offshore global assets as well. And remember that we position ourselves as helping clients to ‘Perfect Wealth’, and to do so actually the wealth management for these clients need not be so complex, not so fancy. We want to help these clients achieve diversification, risk mitigation, and a better perspective on the time value of their investments, as well as embark on a healthy and broad wealth management and planning journey.”

 

Key Priorities for 2020

“Our brand is of paramount importance,” he reports. “So, you will see a lot greater visibility regarding our ‘Perfect Wealth’ and branding in general.”

The second priority, he notes, is the product suite, so the bank continues to hone its expertise and, as he says, “sharpen its knives’ to ensure that they deliver clients market-leading products. “this means we also need to make a great effort at educating the stakeholders, not only our clients but also the regulators, asset managers, in short, all the key parties, to ensure we can bring the right products at the right time and with the right reception. We need to keep at the forefront of the market, to be continually innovative, and to keep the client at the epicentre of that thinking. It is vital for us to be seen as offering more and more value-added products and ideas to clients.”

The third priority, he reports, is to attract and retain the bank’s talent. KBank has been pushing what it calls its ‘long-term incentive programme’, upgrading skills to international standards, and enhancing the bank’s own skills at attracting and retaining top talent.

“Happy and fulfilled private bankers are core to our culture, as those bankers will then keep the clients happy. And they will help the clients beyond simply monetary goals. Accordingly, our new offices are also part of this culture, as they represent quality, integrity, a pleasant and productive environment. After all, our people spend a lot of their time here, so it must represent both a culture of excellence and contentment.”

 

Getting Personal with Khun Triphon

Triphon was born in Bangkok but moved to the US when he was 14 years old to stay with relatives in California and to enjoy his education through high school and university. That proved immensely rewarding, as he later earned his doctorate in International Finance from Claremont Graduate University, having achieved his undergraduate degree in Economics.

He working life in the US through to the age of 35 was equally as impressive, as after obtaining his PhD he rose through the ranks for 10 years to become the senior economist at the Milken Institute, the global capital market think tank. During his 10-year adventure at the institute, he published regularly and co-authored The Rise and Fall of US Mortgage and Credit Markets in 2009. “I am one of the five co-authors of the bank,” he explains, “and it tracks the rise and fall of the mortgage and mortgage-backed markets leading up to the global financial crisis.”

On his return to Thailand, he was privileged to join the external fund department at the Government Pension Fund as the director of external fund management. “That was a wonderful five years there,” he recalls, “as I managed the equivalent of USD4 billion and was sought out by leading salespeople from all the top financial institutions globally. It is amazing how many people wanted to meet me, given my role handling what was a significant slice of the roughly USD18 billion the GPF controlled then.”

That very prominent role led to him being headhunted to become CEO of Maybank Asset Management in Thailand, a role he enjoyed for three years before KBank attracted him to his current role.

Married with two children aged 16 and 12, he has high hopes for their education and future. “The older one is in the US living with our relatives in California, and the younger one will likely later follow,” he reports.

He has many interests, but a great passion is investing in and also imbibing single malt whiskies. “My all-time favourite is Ardbeg 10, and my current indulgence is Clynelish 21,” he remarks, jovially.

A more occasional passion is cooking some of his favourite Hakka Chinese foods, such as pork belly with preserved vegetables. “My grandfather was Chinese, so my father’s side is all of Hakka Chinese origin. The pork belly dish takes a long time to prepare, but it is a family tradition of mine to share with family and close friends once or twice a year.”

Outdoor activities include golf at his favourite Windmill Summit Golf Club outside Bangkok, although he professes to be more enthusiastic than talented, having taken up the game again only recently after a multi-year hiatus.

Triphon Phumiwasana

Managing Director at Kasikornbank