GPB: The global wealth management industry had a relatively difficult year in 2022 given ongoing economic uncertainty and market turbulence. What are your current priorities in terms of driving new growth for the business and expanding Standard Chartered Bank’s reach with affluent customers across Asia, the Middle East and Africa?
Marc Van De Walle: Our priority is to be a top 3 wealth manager across our footprint. We aim to deliver the best-personalised wealth advice to our clients to help them prosper and achieve their life goals.
We leverage three key strengths: (1) a strong, trusted, brand built over more than 160 years of presence in our footprint markets, (2) an open architecture product platform enabling unbiased advice and best pricing, and (3) our ability to serve a continuum of client segments, who can evolve with us and benefit from more sophisticated services as they become wealthier during their lifetime.
We are building world-class digital wealth capabilities for our RMs and clients to provide an intuitive experience and scale our growth
To enable end-to-end digitization, we are investing in a single wealth platform to drive technology convergence across segments and markets, harness scale and cost efficiency, automate operations, and increase the speed of deployment.
By adopting a digital-first approach, we aim to deliver omnichannel, seamless and integrated RM and client experiences with intuitive design starting from client needs. We are scaling up our advisory capabilities with advanced RM tools, such as myWealth Advisor, automated client portfolio health monitoring, and direct-to-client content to provide personalized client experiences.
Our wealth propositions are advisory-led, not product-led. We are embedding a portfolio-based advisory process with SC Wealth Select. This is our advisory framework that leverages a broad, open architecture, best-in-class product offering that is anchored in CIO thought leadership. Our Today, Tomorrow, and Forever framework helps clients to look at their financial needs through a whole-life journey.
GPB: Standard Chartered Bank’s Half Year Report (2023) records wealth management income up by 10% (constant currency basis) reversing five quarters of YoY decline. What has contributed to this turnaround and catapulted the Bank as a top-three wealth manager in Asia?
Marc Van De Walle: Last year, we witnessed the exceptional confluence of 3 shocks: historically high inflation, the transition from a unipolar world to a multi-polar one, and the continuation of COVID lockdowns, particularly in North Asia. These shifts resulted in one of the worst years in financial markets performance history, which weighed on our wealth management business, after a record year in 2021.
With improving market conditions this year, our wealth management business has continued on a recovery trajectory. In particular, the rebound in Hong Kong and Mainland China is aided by the China reopening at the start of this year.
But beyond macro factors that affect everyone, there are three things that contributed to our good performance.
First, we are constantly getting better at harnessing the benefits of our client continuum and engaging with more clients to help them navigate the markets and manage their wealth. As of the first half of 2023, we have acquired 3x new Priority clients in Hong Kong, 2x new Priority clients in China, and 2x new Priority clients in Singapore (YoY).
Second, we are leveraging Standard Chartered’s unparalleled network and improving our international banking offering to help clients manage their cross-border wealth needs.
Third, our investments in digital wealth capabilities are bearing fruit: they greatly increase the productivity of our RMs and Investment Advisors and improve client experience. Digital tools such as MyRM enable clients to communicate with their RMs more conveniently anytime, anywhere; more trading tools are getting automated, and advisory tools such as MyWealth Advisor and MyInsure support RMs to give better advice in a fraction of the time required before.
We see this reflected in our H1 2023 Client Satisfaction Survey, where clients rated us Best-in-Class in 8 out of 9 markets that participated in the survey. In particular, clients indicated that they like access to personalized wealth advice and that our wealth products are well supported by a strong digital platform.
GPB: Wealth managers today often focus on client empowerment through self-service digital platforms, hybrid customer engagement models and collaboration tools that help customers navigate a complex investment landscape. How is Standard Chartered Bank helping make this possible for clients (through simplified digital platforms and processes)?
Marc Van De Walle: We have continued to invest in technology and our people, despite market uncertainties. Our transformation work to build a single integrated wealth platform underpins our endeavor to continually improve the client experience through a simple interface that is easy and intuitive.
There are three components to our wealth platform:
- The core platform where all products are booked. It is the foundation on which all other components rest and we strive to converge it across segments and geographies to lower costs and improve time to market
- The execution platform, enabled by straight-through-processing allows for a trading capability that is fast, cost-effective and, where possible, self-directed by clients.
- The advisory platform supports relationship managers with tools such as myWealth Advisor and MyInsure that help them assist clients with holistic portfolio analysis. myWealth Direct even gives clients direct access to portfolio recommendations for portfolio rebalancing.
Nonetheless, we also see that the “last mile” of a wealth conversation is largely still RM-led. Therefore, we are committed to not only equipping our RMs with tools but also investing in the training of our RMs and wealth specialists under the SC INSEAD Wealth Academy. The training equips them with not only financial and technical knowledge but also advisory skills and other soft skills such as client communication so they can take client conversation to a higher level.
GPB: India is proving to be an exciting market for wealth managers with different players including Standard Chartered Bank expanding their presence onshore to better service HNWI/UHNWI clients. How is the Bank looking to strengthen its wealth management offering in India and other similar markets that are seeing robust growth in the size of affluent customers yet remain relatively underserviced?
Marc Van De Walle: Standard Chartered is in pole position among foreign banks in India on wealth management. India remains a strong affluent growth market for us. We have seen a nearly 2X growth YOY in our investment net sales for India. SC Invest, our online funds platform has seen transactions and new AUM grow in double digits YOY.
We are also scaling up our Private Banking presence in India. We have opened new private banking booking centres in Kolkata and South Chennai this year and have correspondingly grown our Relationship Manager bench strength.
In India and other markets across our footprint, we continue to expand our product suite, in particular in alternatives and ESG funds, to cater to the evolving and more sophisticated needs of affluent clients.
Importantly, our digital-first strategy is vital in reaching out to the growing affluent customer group across different markets. While digital solutions and tools are critical in today’s world, we are also cognizant of the need for the personal touch and will continue to complement digital with personalized advice.
GPB: In terms of your investment outlook, with further interest rate hikes, a potential US credit downgrade and S&P 500 rally all on the horizon where do you see opportunities of wealth preservation for investors? Are there any asset classes or markets that still remain attractive in the short to medium term?
Marc Van De Walle: We believe major central banks are largely done with their rate hikes. Inflation is cooling globally, as seen from the latest data from the US and China. Indeed, growing deflationary pressures in China should sustain this global disinflationary trend in the coming months. At the same time, job markets in the US and Europe remain tight, sustaining the consumption-driven growth.
We expect this ‘goldilocks’ scenario of cooling inflation and moderate growth to sustain the risk asset rebound in the next few months. Nevertheless, over a 6-12-month horizon, elevated wage pressures due to tight job markets and rising crude oil prices are key risks to this benign outlook. Then there is the drag on growth itself from the past year’s rate hikes, which raises the risk of a recession in the US and Europe over the next 6-12 months.
Given these divergent drivers, we believe a balanced asset allocation is still the best way investors can prepare themselves for any uncertainty. Maintaining a diversified asset allocation and rebalancing at regular intervals (say once a quarter) is the only battle-hardened and time-tested way to preserve and grow our wealth over the medium-to-long-term, without taking undue risks.
Within this, we see an opportunity to add to Developed Market government bonds and rotate from expensive US equities to depressed Asian stocks and Asia USD-denominated bonds.
The global disinflationary trend is particularly positive for US and European government bonds. Although yields have risen lately, partly because of oil price-driven rise in inflation expectations and concerns about rising US government bond issuance, we expect slowing global growth to eventually cap yields.
At current yield levels, the risk-reward balance from investing in US and European government bonds is attractive. For example, the US 10-year yield could rise to a new cycle high of 4.5%, in line with nominal trend GDP growth, and bond investors would still not lose money on a 12-month horizon. Meanwhile, a drop in the 10-year yield by an average 260bps experienced during past recessions would imply a 14% total return in a year.
We believe China’s deflationary pressures raise the prospect of more stimulus measures to boost domestic consumption. We expect increased incentives to build self-sufficiency in China’s high-tech infrastructure. These factors explain our preference for the Consumer Discretionary and Communications Services equity sectors in China. Overall, China’s 12-month forward P/E ratio is almost half that of US equities and 35% lower than global equities. Given this, we see favorable risk-reward in locking in some of this year’s gains from US equities and rotating into China equities.
We also like Japanese equities. Improving corporate governance means companies there are increasingly focused on delivering strong profitability, dividends, and share buybacks to investors. The Bank of Japan is also likely to keep the economy running hot for a while longer.
Asia USD-denominated bonds also offer a good opportunity for investors. The asset class is predominantly investment grade. More stimulus measures in China, especially further support for the property sector, are likely to boost the asset class. Additionally, a weaker USD, aided by a peak in Fed rates, is likely to provide a fillip to fund inflows into Asia and other Emerging Markets.
