BRINGING THE SWISS HERITAGE IN FINANCIAL INTERMEDIARY BUSINESS TO SINGAPORE
In the classic EAM business model, there are three parties: the client, the custodian bank and the EAM legally contracted to one another. The EAM typically offers investment advisory and discretionary portfolio management, as well as succession planning services to clients. The clients of the EAM can choose the custodian bank where they would like to maintain their account and assets. The clients then appoint the EAM to manage the assets with the custodian bank, based on a limited power of attorney (LPOA) over the account. Besides responsibility for safekeeping and reporting on the clients’ assets, the custodian bank enables the EAM with its suite of products, services, advice and platform access – for the EAM to best serve the joint clients’ needs.
UBS has more than 40 years of experience in the global financial intermediaries business (GFIM), servicing more than 1500 FIMs globally in 11 booking centres as custodian banks and prime brokers. We chat with Mr Markus Haeny who heads up the GFIM department in Singapore on the unique positioning of UBS to the external asset managers.
Disclaimer: This article is purely for educational purposes and should not be misconstrued as promoting EAM.
Markus joined UBS Global Financial Intermediaries (GFIM) in Singapore in 2007. In his current function as Executive Director, Head GFIM Singapore, he is leading a team of 20 people who focus on services provided to Multi Family Offices, External Asset Managers and Fund Managers globally with a focus on Singapore and Hong Kong. He has more than 20 years of experience in the finance industry in Switzerland and Singapore where he gathered extensive knowledge servicing end clients and Financial Intermediaries. Markus holds a Master of Science in Wealth Management from University of Rochester and a Master of Advanced Studied (MAS) in Finance from University Bern.
Q. How does UBS define a financial intermediary (FIM)?
A. A FIM is a licensed investment advisor / manager which provides wealth management services to third parties on a professional basis. Third parties can be individual End Clients, a private investment company or an investment fund. There are several terminologies such as External Asset Manager (EAM), Independent Asset Manager (IAM) or Multi Family Office (MFO) used in the industry which are summarised as FIMs within UBS.
Q. Can you describe the FIM business at UBS?
A. UBS is a Swiss bank with more than 150 years of experience in Wealth Management. This also includes more than four decades of servicing FIM Clients globally. FIM Clients which decide to partner with UBS benefit from a bespoke IT infrastructure catered to their needs, UBS research, access to a wide range of investment specialists and innovative products, state of the art reporting capabilities and curated access to other divisions such as our Investment Bank or Global Asset Management.
Q. What are the value propositions of UBS for the FIMs?
A. Our value proposition can be summarised as follows:
Focus: a dedicated global team servicing only FIM Clients, with products, services, advice and platform all aligned, enabling these FIM Clients to best serve our mutual End Clients.
Comprehensive offering: as the largest Wealth Manager globally, the breadth and depth of our offering is unrivalled, empowering our End Clients with solutions that meet their individual and diverse needs. To illustrate this, we were one of the first banks which provided access to a wide range of sustainable investment capabilities.
Connectivity and service quality: we leverage our global network of experts to ensure a consistent level of service and advice. Our teams are committed to providing a superior service quality to FIM Clients and their End Clients.
Technology: it’s our objective to empower our FIM Clients with a technology platform that is easy to use and effective in providing access to the full scope of our offering within a few clicks, so that our FIM Clients can focus on their End Clients and business. UBS Connect is the E- banking software which is used by our FIM Clients. It allows them to trade online, get access to corporate action events, research, security information, lending values and End Client portfolios. FIM Clients who prefer to use their own portfolio management system are provided with daily data feeds. Trading via third party platforms (e.g. Bloomberg) or institutional custody complete our offering.
UBS brand: being among the market leaders in Wealth Management leads to high brand recognition. I consider this as a decisive factor in the FIM model which is still in its infancy in Asia. End Clients are becoming increasingly comfortable to be serviced by independent FIMs, this is all the more powerful in combination with a custodian bank they trust.
Q. Would you be able to share some significant differences between the EAMs in Europe and the EAMs in Singapore?
A. I see some main differences as follows:
Investment style / risk appetite: In Asia, transactional volumes are higher compared to Europe where ‘buy and hold’ strategies are more the norm. This might be linked to the fact that in Europe lots of wealth has been built up over several generations. Wealth preservation is more important than high returns.
FIM set ups: UBS started to service FIM Clients in Switzerland more than 40 years ago. Over all these years FIMs have grown in staff strength, AUM and defined bespoke offerings. Often, there have also been significant investments made to client relationship management (CRM) tools and portfolio management systems (PMS), their own in-house investment expertise or the launch of their own products such as Actively Managed Certificates (AMCs), private label funds, etc. In Asia, we see many new market entrants and their main objective is to break even as soon as possible, as such investments into the set up take place at a later stage. Asian FIMs rely more on the infrastructure from the custodian banks.
Market penetration: In Asia major FIM hubs are in SG and HK. According to external market surveys FIMs manage about 5% of the total private banking pie. On the other side, the FIM business model is well known and established in several European countries such as Switzerland, UK, Germany, etc. External surveys claim that in Switzerland approx. 15 - 20% of the WM business is managed by FIMs.
Q. What are some of the key challenges in servicing FIMs?
A. Firstly, big banks are process driven and sometimes a simple perceived task from an outside perspective may take time to implement. It’s well understood that a FIM with 10 people is more agile and has faster turnaround times than a bank with 70,000 staff. However, I believe that UBS's commitment to technology, client centricity and constant efforts to simplify working processes will pay off. Let me illustrate this with an example: Last year, when Covid broke out we launched an application which allowed us to perform End Client identifications. Our FIM Clients appreciated this innovative approach as it ensured business continuity.
Secondly, being at the forefront to embrace regulatory changes may sometimes lead to unpopular decisions. However, I am very glad to see that many FIMs see added value in having a custodian bank like UBS which acts and implements new directives professionally, quickly, transparently and always with the best interests of our End Clients in mind.
Finally, being a market leader in Wealth Management doesn’t mean that we offer everything to everyone. I believe that the UBS value proposition is one of the most comprehensive which a FIM Client can get. However, this doesn’t mean that we will always have a solution for all requests or that we have to accept every new End Client case. As for every successful business, focus is key. This also applies to our FIM business.
Q. Lastly, how do you see the growth of the EAM sector in the next few years?
A. In two words ‘very positive’. Whilst the FIM business model may not be the right model for all End Clients I believe it offers a compelling range of advantages. Looking at established FIM markets in the US or Europe and the growth rates in Asia, I remain positive, in particular for Singapore. The Government has created an environment which encourages a dynamic FIM industry whilst maintaining its excellent reputation of financial market leadership and integrity. Newly launched programs such as S13 schemes or VCC fund structures are further catalysts for the FIM business. UBS is very well positioned to add value to FIM Clients and their End Clients.
Background
This interview was conducted by the research team comprising Dr. T Mandy Tham, Assistant Professor of Finance (Education), Academic Director, Master of Science in Wealth Management, Sino Suisse Fellow, Lee Kong Chian School of Business; Ms Esther Kong, Senior Deputy Director and Ms Juliana Koh, Research Associate, Business Families Institute, Singapore Management University, with Mr Markus Haeny, Executive Director, Head, Financial Intermediaries (FIM) Singapore, UBS.