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Personalized service: The name of the game in wealth management

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By Mark T. Amoguis, Researcher

YEARS of robust economic growth have given rise to a middle-class with increased disposable incomes. Some of these incomes are splurged on consumption and luxury items, while some are put off in savings accounts for good use. But with measly interest rates, who would want to let their cash sit idly by? What better use is saved cash for?

Enter wealth management.

Wealth management offers customized financial products and services such as investment, financial planning, portfolio management, and other trust service requirements for the affluent segment of the market. The operative word is affluent, meaning those who has net worth of at least P1 million.




The country’s big banks have already been servicing the affluent segment of the market for quite some time.

Sy-owned BDO Unibank, Inc. solidified its commitment to the upper segment of the market after its acquisition of the high-end Banco Santander Philippines, Inc. (BSPI), the local unit of Spain’s largest bank, in 2003 to become BDO Private Bank, Inc. Its assets under management (AUM) reached P300 billion by end-2017.

“We provide the service to high net worth individuals such as businessmen, professionals, heirs, retirees and wealthy families who may have investment, estate planning, financial planning, portfolio management, philanthropic and other trust service requirements,” said Stella L. Cabalatungan, executive vice-president and BDO Private Bank Relationship Management Group head.

Meanwhile, Ayala-led Bank of the Philippine Islands (BPI) spun off its asset management and trust group to a standalone trust corporation in 2016 called BPI Asset Management and Trust Corp. (BPI AMTC) — starting its operations in February 2017. As of December 2018, BPI AMTC’s has over P590 billion AUM.

BPI AMTC offers customized wealth management solutions like Personal Management Trust (PMT) and Investment Management Account (IMA) depending on its clients’ needs.

Sheila Marie U. Tan, BPI AMTC president and chief executive officer, said that “a client may open a PMT for various purposes like provisioning for a beneficiary’s living expenses, payment of educational needs, distribution of assets upon death, and the list goes on.”

A client can opt for an IMA if one wanted an account for income accrual and growth.

“It is the best way to gain access to a wide range of financial instruments, and effectively be able to diversify his/her portfolio,” Ms. Tan said.

“Clients may also opt to have their accounts managed by portfolio managers who implement rigorous investment strategies to deliver the best risk adjusted returns and to meet clients’ financial goals,” Ms. Tan added.

Meanwhile, Security Bank Corp. started servicing the upscale market in 2016.

Binky R. Mirabueno, first vice-president and Wealth Management head at Security Bank, said the bank “onboards” customers who have at least P10 million relationship balance, which can be a mix of deposits and investment products, to its wealth management services.

“We ensure that this mix is equitable and well-diversified to reduce the overall risk of the portfolio,” Ms. Mirabueno said.

NOT YET ‘WEALTHY’
For those who are still building their wealth, banks and trust companies offer a slew of various financial solutions to get them covered.

“We will also provide our services to emerging wealthy and next-generation high net worth individuals by educating them from basic Investment 101, investment advisory and actual execution of their investment decisions,” said Juan Sabino P. Lizares, senior vice-president and head of BDO Private Bank Wealth Advisory and Trust Group.

Security Bank’s Ms. Mirabueno said that the bank has an array of investment products that have lower minimums.

“Profiling is key. We ensure that the product we offer to each customer is compatible to where they are in their life stage and their appetite for risk,” she said.

BPI AMTC’s Ms. Tan said clients who are not yet ready to avail of its wealth management products may take advantage of unit investment trust funds (UITFs).

For as low as P10,000, clients may choose and diversify their UITF portfolio that consider different strategies, risk profiles, investment horizons, markets, and currencies.

Ms. Tan said they can also help clients build up their wealth through their Regular Subscription Plan (RSP).

“With RSP, clients may set their subscription schedule either monthly or quarterly and these will be electronically processed for them. There is no difficulty in sticking to their schedule, timing the market manually processing subscriptions.”

To add, there is also no penalty for missing out funding their account or for changing or terminating their RSP set up,” Ms. Tan explained.

PERSONALIZED SERVICE
In wealth management, banks focus on effectively deepening its relationship with its customers. For banks, transparency, personalized services and effective investment management is their way to compete.

“The challenge…for the clients is finding the right advisor who can provide unbiased advice and meet their objectives. It should not be about selling a product but providing expert advice to preserve and grow an individual’s assets,” said Security Bank’s Ms. Mirabueno.

“We want to be known in the industry as being the best in the basics (of customer service), delivering excellent customer service and superior portfolio solutions based on the needs of our customers in every life stage and across generations,” she said.

For BPI AMTC’s Ms. Tan, she said, “Competition is tough but AMTC employs state-of-the-art technology to strengthen our multi-strategy orientation in investment management.”

“Moreover, we have one of the most advanced portfolio management, risk management, and investment accounting systems in the country,” she added.

For BDO Private Bank, it is important to provide the “best” options and transparency for its customers.

“The most powerful tool we consistently use is our open architecture platform where customers can avail of the services and products both domestically and globally,” Ms. Cabalatungan said.

“We will embark on an end-to-end IT solution that will provide up to date information for our front liners so that they can advise their clients with sufficient information to make their investment decisions,” Mr. Lizares added.

Furthermore, “other banks try to stay competitive by reducing or waiving their fees, accept smaller investment lot sizes below the standard minimums. We don’t. We adhere to the global market practices, charge applicable fees as required by regulation, quote live market prices, ensure full disclosure on all investments to stay competitive,” said Ms. Cabalatungan.

“We adhere to best practices of foreign banks by providing best execution, transparency (Our fees are transparent/no hidden fees and are discussed with clients) and through our open architecture, provide the best of breed products to our clients,” Mr. Lizares of BDO Private Bank said.

To effectively personalize their services, banks said full disclosure of financial knowledge, risk profile, and their financial goals are keys to fully take advantage of the wealth management services being offered.

“Clients stand to benefit from our trust, wealth management, and other fiduciary business as they gain access to a variety of products and services that capture a broad spectrum of investor risk profiles and multiple asset class preferences,” BPI AMTC’s Ms. Tan said.

“Whether a client is “wealthy” and sophisticated or simply starting out with investments, he will be able to find a product that will best suit his needs,” Ms. Tan added.

“To fully maximize the services available, qualified customers should fully disclose their financial circumstances, concerns, investment knowledge and experience, risk tolerance and appetite, time horizon and plans to help the wealth advisor develop a most suitable financial plan for them,” BDO Private Bank’s Ms. Cabalatungan said.

Security Bank’s Ms. Mirabueno said that the bank offers regular portfolio reviews to its wealth management customers.

“Customers can benefit from these sessions since their Wealth Manager provides them with updates and data-driven analytics of their portfolio,” Ms. Mirabueno said.

“Opportunities are identified, market insights are given, and rebalancing of the portfolio may happen during this time. Since our customers are very busy, these sessions provide them with valuable information about their hard-earned money,” she said.

PROSPECTS
As the Philippines’ economic growth prospects remain favorable, opportunities for wealth management business are endless according to bankers.

“There is an opportunity to expand wealth management business in the Philippines as economic fundamentals remain strong and regulatory climate is favorable,” BPI AMTC’s Ms. Tan said.

Ms. Tan noted that financial institutions with wealth management business are encouraged by the improving profile of customers whose net worth, which she said, now average P35 million to P40 million as compared to P2 million to P3 million fifteen years ago.

“Banks are also starting to look at the younger population who are now more aware of their financial investment options and who already start investing early so they can retire early. This has been a common sentiment. We expect these trends and needs to continue to grow in the medium to long-term,” Ms. Tan said.

For Security Bank’s Ms. Mirabueno, the country’s steady economic growth in the last ten years is said to have driven entrepreneurialism, which is a key to wealth creation.

“High net worth individuals prefer to seek the advice of professionals who can provide them with guidance on managing their hard-earned money and overall assets, which may include tax advisory and estate planning. We expect this need to continue to grow in the medium term,” she said.

Banks have also realized the important of having a wealth management business that caters to the high net worth customers following the enactment of Automatic Exchange of Information, which aims to fight tax evasion globally.

“With the new global standard on Automatic Exchange of Information already in effect, [the high net worth segment] has started bringing their offshore funds back to the country,” Security Bank’s Ms. Mirabueno said.

Together with the G20 countries, the Organization for Economic Cooperation and Development crafted the Standard for Automatic Exchange of Financial Account Information in Tax Matters (or AEoI Standard) in 2014 with the primary aim of fighting tax evasion worldwide.

It was modeled after the United States’ Foreign Account Taxpayer Compliance Act or FATCA, which requires foreign financial institutions around the globe to report account details of their US customers to the US tax administration.

The Common Reporting Standard (CRS), meanwhile, is an information standard under AEoI. It sets out the financial account information to be exchanged, the financial institutions required to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions.

However, the Philippines is not yet a signatory of AEoI or CRS.

“In effect, local banks have to step up on the products and services that will cater to these customers who are used to being provided with the highest standards in handling and servicing their portfolios,” Ms. Mirabueno said.

“We expect that more offshore funds will continue to pour in with political stability not being an issue anymore. The good economic prospects of the Philippines will provide the backdrop of funds being created in the system, hence creating more wealth in the country leading to the demand for Wealth Management services,” she added.

BDO Private Bank concurred: “We believe the CRS will be a major factor in the growth of the domestic wealth management business as offshore funds/investments of Filipinos are repatriated back to the Philippines.”

As long as BDO Private Bank “maintains its open architecture platform to be competitive against offshore private banks, the market will surely continue to grow.”