Private banking opportunities draw increased foreign interest

More foreign financial organizations are eyeing opportunities in China's burgeoning private banking market, taking different approaches to tap into a unique and fast-evolving customer base.

LGT Group, a European private bank that also manages assets for Lichtenstein's royal family, is exploring the market's potential. One marketing technique it's using is to bring the royal family's art collection to Beijing and Shanghai, two of the richest cities in the country.

"The art exhibitions contribute to cultural exchanges between China and Lichtenstein. It's even better if they contribute to the business relationship between the two countries," said Prince Max of Liechtenstein, who is also the group's president.

"More wealthy Chinese families are thinking for the next generations, and they are seeking advice from us about succession planning," he said during a visit to Shanghai. "The engagement of a wealthy family beyond financial activities, such as into philanthropy and cultural activities, is needed to give the family more identity and meaning," he said.

Although many wealthy Chinese are emigrating, the prince said it's not a good idea to copy what others are doing in terms of investing abroad. "If everyone else is buying a property in London, it might be a little late for you to do so."

While the first generation of China's wealthiest eyed fast growth, the second generation is more concerned with preservation and transfer of assets from a risk diversification standpoint, said Vincent Duhamel, head of Asia for Lombard Odier & Cie, a Switzerland-based private bank.

According to a joint report last year by China Merchants Bank Co Ltd and consultancy Bain & Co, "maintaining wealth" has replaced the goal of "increasing wealth" as the top priority for private banking clients, followed by "quality of life" and "children's education".

"The demand from China's wealthy people for private banking is shifting from pure products to more complicated and diversified services," Duhamel said.

In March, Lombard Odier established a strategic partnership for private banking with Shanghai-listed Industrial Bank Co, which is expected to help Chinese with high net wealth invest globally.

Singapore-based DBS Bank Ltd announced in March that it had agreed to acquire the Asian private banking business of Societe Generale SA in Singapore and Hong Kong, as well as parts of its trust business, for $220 million.

A growing middle- and upper-class population in Asia is lifting demand for wealth management, said Chng Sok Hui, chief financial officer of DBS.

For private banks, China is a market with a vast number of potential clients. As of 2013, there were more than 1 million individuals in the nation with assets available for investment exceeding 10 million yuan ($1.6 million) each, the China Merchants-Bain survey showed. But those individuals have had few private-banking options so far.

According to commercial banks' 2012 annual reports, Bank of China Ltd had the largest number of private banking clients (40,000), while Agricultural Bank of China Ltd had about 35,000 and Ping An Bank Co Ltd had 6,000.

Cartier Lam, vice president of BEA China, a division of The Bank of East Asia Ltd, said China's private banking mainly serves the newly affluent. But it's tough to identify core customer needs for this market, and most banks offer similar products and services.

For foreign banks, private banking mostly refers to managing personal wealth. But according to Dai Xiaohong, managing director of Standard Chartered Plc's private banking operations in China, nearly 60 percent of their clients are entrepreneurs, most of whom don't separate their business and personal wealth.