In the second of two articles, Terrance Lui talks to Irene HY Chen about the desires of the wealthy, technology and the advent of the multi-dealer platform
Do you also see homogeneity of preference among Asia’s wealthy? How would you categorize these investors in their degree of education in structured products?
Customer needs are also dependent on portfolio size. For the top-tier mega-rich, they typically have a whole team of financial specialists and trading capabilities at their disposal. They know specifically what they want and hence are inclined to develop their own product ideas, actively seeking product components in the open market. For the second tier group, namely the ultra-high net worth individuals, they go for both flow and bespoke products that can be efficiently executed. At the same time, they value exclusiveness in how they are serviced as well as portfolio management. High net worth investors are more receptive to large volumes of daily trade-in, trade-out using flow products and they always shop for the best in the financial supermarkets. For them, having a well-rounded pricing and trading platform is the main differentiating factor.
In general, private banking clients in Asia are very sophisticated and they understand and are comfortable with structured products. The negative publicity surrounding structured products after the 2008 financial crisis does not necessarily apply to the clients of private banks. Rather, private clients view structured products as a sensible subset of financial instruments, one that allows unique customisation to reflect their risk-reward profile.
What is Barclays Private Bank’s unique value proposition and how does technology help differentiate it from the competition?
Our structured products platform is a one-stop shop for flow transactions, with the aim of offering an exhaustive list of products that suit all client needs. The extensive range of offerings is made possible by the high degree of automation and integration in our supply chain. We also focus on the end-to-end process as efficiently as we do for flow versus bespoke operations. The robustness of our systematic post-trade process is another source of our service differentiation. For example, we would proactively inform our clients much earlier on any event notification, such as trade early termination, than the formal settlement process. This enhances the client experience and drives recurring business.
What is your forecast on the upcoming changes regarding distribution? To what extent do you support the notion of open-architecture, whereby private banks carry more than one label in their offerings?
The open-architecture model is here to stay in private banking. Nowadays, it is common for private banks to source products from different manufacturers in an open market according to their clients’ preferences. The majority of private banks have a mandate that calls for serving the best interest of clients, either initiated internally or in response to regulatory requirements, which, in turn, has paved the way for the development of open-architecture.
The pace of platform innovation has also accelerated the adoption of this model in Asia. At Barclays, we have open architecture and regularly review our distribution model and constantly seek ways to improve our processes and improve the client experience.
How would you expect multi-issuer platforms to look in five years’ time?
In the next five years or so, I would say all the key attributes of platform trading, such as price discovery, trade execution, information management will continue to be critical to success and continue to evolve in terms of efficiency and user-friendliness.
The development of electronic platforms is relatively fragmented today with a large number of individual operators each developing their own in-house systems and codes. It is still early to expect an ideal world where one multi-issuer platform will serve the trading needs of all players, not to mention the challenges of integrating various standards.
I expect that front-end activities - from ideation to post-trade services - will be increasingly migrated onto platforms, while straight-through product life cycle management may take longer to achieve.