Morgan Stanley Asia wealth push faces family-office poaching

Asia's swelling ranks of mega-wealthy are proving to be a mixed blessing for Morgan Stanley.
Asia's swelling ranks of mega-wealthy are proving to be a mixed blessing for Morgan Stanley.PHOTO: REUTERS

SINGAPORE (Bloomberg) - Asia's swelling ranks of mega-wealthy are proving to be a mixed blessing for Morgan Stanley.

The firm's Asian private banking unit has boosted assets under management and revenue this year, according to Vincent Chui, who oversees the business. But because top bankers keep getting poached by family offices set up by the richest people, a plan to increase headcount has fallen flat.

At least 10 relationship managers left in 2017 for family offices, leaving headcount in Hong Kong and Singapore unchanged from the end of last year at about 100, Chui said in an interview.

Morgan Stanley's earlier plan was to add 20 this year, he said, adding that some others left by what he described as "natural attrition".

The Asia-Pacific region's 42 family offices, which oversee US$445 million on average, are luring top relationship managers from private banks with the prospect of higher pay, more varied work and a bigger influence in decision making, according to Campden Wealth.

The number of managers running offices for ultra-rich families can't keep up with the region's expansion of wealth, said Rebecca Gooch, London-based Campden's head of research.

Private banking arms of UBS Group, Standard Chartered and Deutsche Bank have also been boosting headcount in Hong Kong and Singapore. Chui said he chose to wait out the rush to obtain talent at all costs that peaked earlier this year, but remains determined to add staff.

"Given the irrational exuberance of hiring relationship managers in 2016 and the early part of 2017, we preferred not to participate in the bidding game," said Chui. "With banks now focusing more on costs, notwithstanding good revenue growth, it's time for us to step up the quest for talent."

CEOs at a family office in Asia can demand greater pay because there is a shortage of top professionals running such operations in the region, where the industry is less mature than in Europe and North America, Campden Wealth's Gooch said.

They also tend to help the family run its business as well as manage its wealth, she said.

Total annual compensation of family office CEOs, including salary and bonus, averages US$362,000 (S$492,000) in the Asia-Pacific region, according to the Campden Wealth report published this year in partnership with UBS.

A senior relationship manager's pay is at least S$230,000 in Singapore, according to the 2017 Robert Half salary guide.

There's a silver lining for Morgan Stanley: Many bankers who leave for family offices end up doing business with the New York-based firm, according to Chui, who has been with the company since 1996, rising to a managing director four years later.

While declining to disclose how much the Asia team looks after for wealthy clients, Chui said assets under management rose more than 10 percent this year and revenue generated by the team based in Singapore and Hong Kong grew almost 30 per cent. Those two cities make up the bulk of managed assets, and Chinese clients are the biggest contributor, he said.

With US$71 billion in assets under management, Morgan Stanley was ranked ninth in the greater Asia-Pacific region including Australia last year, according to Asian Private Banker. A typical wealth client at the firm has a minimum of US$35 million of investable assets and funds their account with at least US$5 million in cash within the first few months of opening one, Chui said.

Asian wealth clients are also a source of investment-banking business for Morgan Stanley as they take their companies public, Chui said. "About a third of our Hong Kong and China-based IPOs and other capital-market transactions are sourced by our private bank," he said.