SYDNEY • Credit Suisse, which doubled assets at its Australian private banking business in the past three years, is focusing on a younger generation of internationally minded, tech-savvy customers to overcome the challenges that forced global rivals like UBS out of the market.
Despite being home to the third-largest group of millionaires in the Asia-Pacific region, after Japan and China, Australia remains an also-ran in the global private banking industry.
That is largely because older generations of high-net-worth individuals prefer to keep their money close to home and manage it themselves, rather than use a private banker, according to recent surveys.
Now, Credit Suisse and domestic wealth managers are betting this will change as a new, more globally focused group of investors is emerging - whether it is the heirs of the older generation or the wave of young entrepreneurs who are more likely to be fintech millionaires than property developers.
"Inter-generational wealth transfer is a very hot topic," Mr Michael Marr, head of private banking at Credit Suisse in Australia, said in a recent interview.
"It has turned the whole private banking market on its head, and we've had to respond to this."
A total of A$3 trillion (S$2.9 trillion) is expected to move between Australian generations over the next two decades, according to estimates from McCrindle, a consultancy that tracks demographic trends. This is an unprecedented shift in a young country that has little history of inherited wealth.
More than a third of the entrants on a recent list of rich young Australians are finance or fintech entrepreneurs.
Part of the response to the changing market is providing the right technology for a group that is accustomed to doing things by itself, Mr Marr said. In the major markets where Credit Suisse has introduced its private-banking mobile app, Australia boasts the fastest adoption rate, he added.
As well as having a greater interest in overseas investment, wealthy Australians are increasingly looking at new asset classes, according to Mr Jason Murray, the private banking head of National Australia Bank (NAB). He said NAB has set up an investment desk to give private banking clients access to transactions they would not otherwise see, such as venture capital deals.
"In general, high-net-worth individuals in Australia are chronically under-diversified," Mr Murray said.
Fewer than 20 per cent of high-net-worth Australians have a private banker, NAB data shows. That compares with 70 to 80 per cent in the United States and Europe, according to research by consultancy EY.
The older generations have tended to invest in local property or Australian shares, while keeping relatively high levels of cash. That investment style meant they could meet most of their needs by using an account at one of the local stockbroking firms, as opposed to a private bank, a hurdle that was cited by UBS for its decision to pull out of Australian wealth management three years ago.
The Swiss bank sold its Australian wealth unit in 2015, saying its global business model "has become increasingly difficult to fully operate on a sustainable basis in the local market, which is dominated by a brokerage-based system".
For Credit Suisse, which launched its onshore private banking operation in Australia a decade ago, the first four to five years were "pretty hard", Mr Marr said. The outlook has improved more recently, partly because of the growing interest in overseas investment and as competitors have pulled out, he added. While it does not break out precise figures, Credit Suisse's assets under management in Australia have doubled in the last three years, according to Mr Marr.
There is no denying the size of the potential pool of money. Australia's population of high-net-worth individuals rose 9 per cent last year to 278,000, according to figures from consultancy Capgemini. Their total assets grew 10 per cent to US$884 billion (S$1.2 trillion), the fifth-highest in the Asia-Pacific, Capgemini said.
Clear air, safety and attractive cities are some of the draws that have made Australia a popular destination for wealthy migrants.
"The Australian private market is very much in its infancy," Mr Marr said. "Most of the wealth that has been generated in Australia over the past 40 years is still sitting with the generation that made it."