The latest hot topic that Chinese Private Bankers argue about when they get together is which foreign destination is favored by wealthy Chinese clients. Undoubtedly, Singapore is way ahead of its rival destinations, having occupied the number one spot in the past and present and most likely in the future. This article aims at examining why and how the Island State has managed to occupy this enviable position.
Singapore has transformed itself very rapidly in the last decade in terms of services, compliance and reputation and is now viewed as the “Zurich or Geneva of the East”. After years of concentrating its efforts mainly on European clients demanding to have part of their assets out of Europe, it is now preparing itself for a booming period coinciding with the arrival of Chinese wealthy and ultra-wealthy clients. The decisive question is whether Singapore can reorient itself fast enough to new markets such as China and offer genuine global services in a 100% compliant world. Last but not least how will regulators be able to preserve the clean reputation of Singapore in a world asking for total compliance?
When looking at alternatives other than Singapore, one could argue that a place like Hong-Kong is probably too close to the Chinese Market. On the other hand Switzerland is too distant both culturally and geographically. Although, Luxembourg could be viewed as the place to be for the setting-up of investment funds, its geographical and cultural distance stands in the way of it becoming a true rival to Singapore. Indeed, Singapore has for itself the big advantage to share the same Asian mentality coupled with an important immigration from China. The high quality schools, the extremely up-market positioning of Singapore in terms of shopping, restaurants, social life, marina as well as its security are all assets and qualities requested by the new wealthy Chinese clients. To illustrate this, we could quote a recent study from PwC predicting that Singapore will manage more assets than Switzerland in a two year horizon; making it the world’s leading management center together with New York and London.
The current trend with Chinese multi-millionaires is to switch residence and move assets abroad. They first chose the USA, Canada, and Australia or to certain extend Switzerland to do so. But these traditional safe havens places are losing momentum, giving Singapore the opportunity to really emerge as the new prime location. Singaporean citizenship can easily be bought by wealthy Chinese nationals through an investment of at least 10 million Singapore$ to be managed by a financial institution regulated by the MAS (Monetary Authority of Singapore). Chinese nationals do not view this as a hindrance but rather as an opportunity to show off their wealth to friends and relatives. Investing in the Singapore property market is also in, and here again the entry ticket is very often in the range of 10 to 20 million S$.
To cope with this new clientele, Singapore is investing heavily in the professional and intellectual training capabilities and has created the WMI (Wealth Management Institute) set up by the state-owned investment company Temasek Holding (sovereign fund). Singapore is actively aiming at tackling the shortage of language skills (Chinese) and has as main objective to raise standards in the private banking industry while also adopting a very compliant policy in accepting new funds. The implementation of a severe code of conduct has recently been issued to this effect. Indeed, Singapore is keen on having a very effective regulation. David Lim of Julius Baer also points at the importance of offering high-quality and profitable investment strategies. Singapore is advised to learn from the Swiss mistakes and make tax evasion a criminal offence. There is too much at stake for Singapore not to be 100% compliant as the growth in the Asian region and especially from China will put the Island State under the fire of its envious competitors.
For Singapore, the challenge will not be to attract enough clients but the provision of the right staff and the up-market offerings, especially in terms of private portfolio management and family office related services. The new Chinese UHNWIs are requesting new services from their banks or asset managers. The family office types of services are a must as Chinese request amongst others limo services and offices in the most desirable location and with the adequate decoration and facilities etc. In analyzing the needs of the wealthiest Chinese individuals, one has to bear in mind that Chinese tycoons are requesting to have Dom Pérignon on tap at the private airport lounge and request even more attention while being in Singapore or travelling that at home. Furthermore, Chinese ultra-riches are known to like to buy their Hermès or Louis Vuitton in Singapore as it its more prestigious than buying it at home. Thus, prestige and status seem to be all that matters to this new clientele.
At Xeon, we are equipped to offer these services specifically with our Dynamic Asset Allocation Process (DAAP) and the one stop shopping including DAAP and state-of-the art private equity offering.
Pierre-Yves AUGSBURGER, CIO of Xeon
April 2012
