Tackling challenges in year of the Ox

As the rich and multicoloured celebrations of the Chinese New Year of the Ox are now a distant memory, superstition may lead to fears of further gloom. Many market players will remember 1997 - the last year of the Ox - when a financial crisis, which origi-nated in Thailand, gripped much of Asia. This time, the crisis has US roots and its impact on global economic growth prospects threatens to be even bigger. Even as Asian economies hold up relatively well compared to the Western world, their financial markets remain under intense pressure. But uncertain times can provide private banks with the chance to show what they are really worth as portfolio managers, as their wealthy clients have been traditionally reluctant to follow their basic advice of asset allocation and risk diversification in a booming market. “It is much easier to differentiate ourselves in a bear market than in a bull market,” is the message from Kathryn Shih, head of Asia-Pacific at UBS Wealth Management. “In a bull market, investors have their ideas and tell you what they want, but in a bear market they ask your advice.” The still widespread product-push mentality may perhaps no longer find such fertile ground. The banks which will benefit from this will be those which have developed the right business model, focussed on nurturing long-term, trusted client advisers. Naturally, the way relationship managers are motivated has an important impact on driving their behaviour and remuneration systems should be aligned accordingly. Indeed, wealth management must offer comprehensive solutions, which go beyond providing advice on clients’ assets. UBS claims to offer the holistic approach, where the management of an individual’s portfolio also embraces the concepts of physical and mental health, status and self-esteem. Fund houses may take this crisis as an opportunity to further strengthen their relationship with distributors, and perhaps gain greater shelf-space in key fund platforms, such as those of HSBC, Standard Chartered or Citi, which dominate the distribution arena in Hong Kong. What is more, asset managers, particularly foreign players, also need to adjust to local issues and the prevailing business climate in Asian economies. Several major overseas mutual fund groups with Indian operations had senior staff caught up in the Mumbai terrorist atrocities last November. And the practice of farming out non-core business activities needs to be particularly carefully handled, bearing in mind the uncovering of a major financial scandal in one of India’s largest outsourcing companies. All in all, 2009 promises to be a year of what the Chinese are said to have labeled as “interesting times.”

Elisa Trovato

Assistant Editor