Swiss’s loss, Singapore’s gain

Khalil Adis
Property Report

Forget Swiss bank accounts, having an offshore Singapore bank account is now the rage amongst the super rich.

If you noticed more Lamborghinis and Ferraris revving up Singapore’s roads lately, don’t be alarmed. It’s just the super rich making Singapore their playground.

According to Boston Consulting Group’s latest Global Wealth Report, released September 2008, Singapore has the highest density of millionaires in the world, with an astounding one in 10 households having an investible asset of US$1 million or more. This is followed by Qatar, Switzerland, United Arab Emirates and Kuwait. Even the United States pales in comparison, ranking sixth.

“Singapore is going through a major transformation. It is going upscale and is getting into the highest league of world’s hot spots for the high net worth individuals. It is going to be a happening place, a non-stop party cosmopolitan city. There are many more upscale and very high-end residences and condos coming up, that just a few years back were simply nonexistent, creating more choices for the real rich,” Alex Shlaen, founder of Panache Management, explains.

Singapore has always set its sights on attracting the rich. In 1993, the Urban Redevelopment Authority (URA) approved the Master Plan for Sentosa Cove to develop über luxurious residences. In 2005, the Singapore government announced plans to develop two casinos – the Marina Bay Integrated Resorts and Resorts World at Sentosa. To support the expected arrival of the wealthy, the Singapore Tourism Board (STB) announced more plans to develop the cluster of six islands near Sentosa into a hot new destination in 2006, possibly a super exclusive enclave for billionaires much like Italy’s Isle of Capri or Dubai’s The Palm Island. And why not? Sentosa Cove’s success has witnessed its residential property prices increasing 75 percent since the first homes were sold there in 2003. Some 60 percent of its buyers are wealthy foreigners.

Ironically, the financial scandal that is currently rocking Switzerland, is expected to bring more of them to our shores. In November 2008, Switzerland’s flagship bank, UBS, became the target of a US probe, which alleged that its wealth management chief Raoul Weil helped 17,000 Americans hide about US$20 billion of dollars in offshore Swiss bank accounts. Weil was subsequently charged along with other unidentified UBS bankers, leaving many investors to look elsewhere to park their funds – Singapore.

“In Europe the changing private banking regulations are scaring the high net worth, while here in Singapore the stability of the regulations and the banking sector’s proven success to withstand this massive world economy storm is a magnet for big private banking money,” Shlaen says. “The financial markets and real economy look really bad, especially for the west. Now, many feel that it will take more time for the west to recover then estimated earlier. However, recovery will come eventually. The more the situation deteriorates, the more dramatic the recovery will be. Asia is well positioned and will be a strong engine of the world recovery, with bigger share of money coming in, more than ever before.”

The recent Merrill Lynch Capgemini Wealth Report supports Shlaen’s comments. It estimated that global high net worth financial wealth will grow at an annual rate of 6 percent to reach US$44.6 trillion by 2010. Asia is expected to reach US$10.6 trillion by then, close to the European wealth market. These trends favour Singapore as a leading wealth management centre and so far, the results are promising.

According to the Monetary Authority of Singapore (MAS), total assets under management (AUM) in Singapore’s fund management industry has grown from about S$280 billion in 2000 to more than $600 billion as of 2007. The growth in private banking AUM has been strong, with anecdotal feedback suggesting Singapore private banking AUM averaging 20 percent per annum over the past few years to about US$200 billion currently.

In March last year, Macquarie Bank officially launched its Asian private wealth business with its first office in Singapore. The business is headed by one of Asia’s leading private wealth advisers, Joseph Poon, former JP Morgan Private Bank head for South Asia.

“The decision to establish Macquarie Private Wealth Asia in Singapore followed extensive consultation with the Singapore market over the last several years,” Guy Hedley, head of Macquarie Private Bank Australia, says.

“Singapore is the world’s fastest growing private banking and wealth management centre and in the future will be one of only two global private banking and wealth management hubs, the other being Switzerland,” Poon says.

While the MAS’s 2008 figures aren’t available as yet, banks in Singapore are hiring wealth management staff in Singapore to cope with the demand now that jobs cuts are happening in London and New York. According to Kees Stoute, managing director of EFG Bank Singapore, the hiring of wealth management staff has increased.

“It has increased by 30 percent as of 2008 and is set to continue growing. When it comes to managing wealth, EFG distinguishes itself more through its business model rather than through its products,” Stoute says.

While wealth management centres may be flourishing in Singapore, banks are facing a daunting task ahead in winning back investor confidence. Already, several high net worth investors have seen their wealth eroded due to the current economic crisis, bad product selling and making misinformed decisions. As such, independent financial advisory firms are slowly gaining headways as they tend to be less biased in their financial advisory process, are not obligated to any particular product providers and will not professionally accept deals and sponsorships. One such independent firm is PromiseLand Independent Pte Ltd, who has increased hiring of its financial advisers targeting for growth in 2009 and armed with an impacting range of products to support the Accredited Investors’ (see box for explanation) market.

“Between last year and this year we have increased our hiring by 40 percent. Ten percent of our advisers’ clients comprise high net worth individuals, translating to 40 percent of their total business contribution,” Benedict Tan, manager for PromiseLand’s business development & operations, in an exclusive interview with Property Report, said.

However, Stoute is confident that banks with healthy balance sheets will ride out the storm. As of 30 June 2008, EFG Bank’s net profit was CHF 178.7 million, up 13 percent year-on-year.

“EFG Bank is sound, solid and robust – our healthy balance sheet speaks for itself and this gives comfort to investors,” he concluded.