As Singapore’s wealth management sector booms, WealthBriefing has been talking to some of the key players in the city-state to take the temperature. This is the latest article in a series about Singapore.

Whatever the worries about a slowing global economy, Asia is a hotspot for wealth managers and few places are hotter than Singapore. The number of private banks in Singapore has more than doubled to 42 since 2000.

The trick, however, is keeping up with strong demand without sacrificing quality - a tough challenge.

A rising number of high net worth individuals is propelling the region and hence, Singapore's attractions as a wealth management hub. According to PricewaterhouseCoopers, the accountants, most private banks expect revenue growth in the region to be 26 per cent or more and asset growth to be 29 per cent or more between now and 2010. With China adding 30,000 new millionaires to its population each year – and many of them looking to park some of their assets outside the country - Singapore is superbly placed to profit from this trend.

Singaporean financial services showed a double-digit annualised growth rate in total assets managed over the last six years, according to Standard Chartered. Assets managed by Singapore-based investment firms grew by 24 per cent to reach S$891 billion at the end of 2006 from S$720 billion as at the end of 2005, it said. A large amount of the growth involves foreign money.

“About 80 per cent of these funds are sourced offshore with Asia being a major contributor. In particular, funds sourced from the Middle East exhibited a staggering growth of 30 per cent,” Rajesh Malkani, head of private banking, Standard Chartered in South East Asia, told WealthBriefing.

Rapid growth has come with its problems, however. PwC, for example, says a lack of talented client relationship managers could derail growth; Standard Chartered, which has offices in Singapore, says the task of finding sufficiently high-quality managers has not been easy.

“We need an army of well-trained private bankers to help manage their wealth. In addition, just about every major private banking player in the world has set up shop in Singapore,” Justin Ong, leader of wealth management practice at PwC in Singapore, told WealthBriefing.

He is not exaggerating. In recent months, a slew of banks have set up in Singapore or expanded existing operations, recruiting CRMs and other executives, in many cases poaching from rivals.

Earlier in April, for example, Tan Su Shan rejoined US bank Morgan Stanley after she left Citi Private Bank’s wealth management business in Singapore. A team of six wealth managers from UBS, the Swiss bank, joined rival Swiss bank Julius Baer in early January. Goldman Sachs, meanwhile, significantly boosted its presence in Singapore late last year by promoting David Ryan to the newly-created position of chairman of South East Asia which is to be based in Singapore. The list goes on.

Filling this demand will be difficult, particularly if PwC’s prediction that demand for private bankers will expand by almost 60 per cent between now and 2010 proves to be accurate.

“PwC expects the demand for client relationship managers to soar by 57 per cent in Asia-Pacific alone in the next two years. The global demand over the same period is expected to rise by only 32 per cent,” said Mr Ong.

Like everything else, rising demand and static supply produces the same result: rising prices. “With a finite pool of trained relationship managers in Asia and in a market where many openings for wealth managers remain unfilled for over 12 months, compensation and quality would be affected,” says Mr Ong. “Costs are forecasted to rise far above inflation, hurting profitability. The lack of experienced, mature staff may also hamper the ability of banks to provide their clients with the level of service they would traditionally expect in their home offices in Europe or the US,” he said.

Some private banks are not quite so blunt. "It continues to be a challenge,” said Standard Chartered’s Mr Malkani. He says about half of the private bank appointments come from within the bank and its group, and says: “We are fortunate in that we have a large pool of senior staff looking to expand their careers into private banking.” As his remarks suggest, however, Standard Chartered has to look outside to fill its staffing needs. “We are also selectively recruiting senior talents from major players outside of the bank - senior bankers with particular skills and expertise,” he said.

A particularly encouraging development, he says from the point of view of recruitment, are efforts by the Singaporean government to educate a new generation of financially literate graduates. For example, the Monetary Authority of Singapore in 2006 launched a finance scholarship programme to develop a skilled workforce for financial services.

In August last year, Nanyang Polytechnic joined forces with the Investment Management Association of Singapore to create training programmes for the fund management industry. UBS and Credit Suisse have created their own Asian campuses to train staff. The Singapore Wealth Management Institute also offers training courses.

Whatever the efforts to fill rising demand, banks are not predicting the market to hit saturation yet, even though weaker global economic growth will have some impact eventually.

“I would not say that it is a saturated market. Wealth is growing at a rapid rate in Asia. Increasingly, clients are looking to invest in Asia as they seek diversification in terms of where they book assets,” said Mr Malkani.

In keeping pace with demand, different banks take a different approach to how they segment their clients. EFG, the private bank, says it does not segment between high net worth and ultra HNW individuals. On the other hand, Standard Chartered does divide them, with ultra HNW individuals defined as those with more than $20 million and HNW individuals with between $1 million of investable wealth and $20 million.

PwC says this approach to segmentation is still pretty crude because clients’ interests can be overlooked. “There is still insufficient emphasis placed on segmenting clients based on client needs – for example, age profile and lifestyle needs or based on their geography of origin, cultural background and preferences,” said Mr Ong.

These issues demonstrate that Singapore's wealth management market, having grown so far and so fast, still has work to do to get to the highest possible standards. Getting over the hurdle of recruiting enough top quality CRMs looks to be an essential step in reaching that goal.