Credit Suisse Private Banking plans to use its new digital advisory platform, CS Invest, to “tackle” the non-discretionary business in Asia, Francesco de Ferrari, head of private banking APAC and CEO of Southeast Asia at the bank, tells Asian Private Banker.
“In Asia, the structure of the market is such that for DPM (discretionary portfolio management), the penetration is still in the high single-digit to low double-digit range,” de Ferrari says, adding that on average, 90% of assets in Asia sit in non-discretionary mandates. “We see CS Invest as an intermediate stepping stone from transactional to discretionary portfolio management.”
According to APB Mandate data, DPM penetration rates averaged about 8% in 2016 and 15% CAGR over the past five years.
Francesco de Ferrari
The digital advisory platform, which Credit Suisse rolled out to its HNW clients in Asia last month, was built to provide clients with a “professional” and “institutional” offering by delivering portfolio investment ideas and strategies consistent with Credit Suisse’s CIO house view, portfolio quality reports, and access to retrocession-free share classes. The advice is client-directed, with clients being able to access CS Invest directly on the Swiss bank’s digital private banking app.
The platform targets clients across two different wealth tiers: CS Invest Partner caters to those with minimum investment amounts of US$1 million, while CS Invest Expert is for clients who invest US$10 million or more. Those using Expert have dedicated investment consultants who operate like “mini CIOs”, in addition to relationship managers who schedule strategic reviews and outlook meetings up to four times a year. The Partner version includes only a relationship manager, bi-annual meetings, and access to a portfolio solutions specialist team, de Ferrari says.
CS Invest was first launched in Switzerland and other parts of Europe two years ago. Clients on Credit Suisse’s Swiss booking platform hold CHF 45 billion (US$46 billion) in assets under contract on the platform, according to the bank.
Over the past two years, the bank has been “fine-tuning” CS Invest for Asia, de Ferrari says, adding that the main difference between the two versions is that in Asia, the advisory portfolio and advice is curated and distributed to clients via an app.
Hybrid pricing model
Like the bank’s DPM offerings, CS Invest operates on a flat-fee model. However, Tan Wei Mei,
Credit Suisse Private Banking’s APAC head of portfolio solutions, says the platform uses a hybrid pricing model, with fees determined by investment values, with reduced brokerage fees and is a tiered approach. For example, clients with less than US$5 million in assets are charged 1% a year, while clients with more than US$30 million in assets are charged 0.4% per year.
And despite the average private bank still struggling to secure long-term recurring income streams, Tan says she is encouraged by the performance of the bank’s discretionary and advisory units, noting that the two business lines have been growing at a 50% CAGR over the past three years. “But in the intermediate stage, we need something to address the gap,” she says. “The hybrid pricing structure helps us do this.”
Tan Wei Mei
“CS Invest is not robo advice”
Though at first blush CS Invest may resemble a robo-for-advisor platform, the market for which has mushroomed in recent years, Tan says CS Invest is not a robo advisor as the advice is not templated and the role of the relationship manager is core to the offering.
“There is still a lot of customisation, for instance, setting of investment preferences, such as if you are only interested in US equities, you can review ideas only of those nature,” Tan says.
Relationship managers are involved throughout the process and are alerted via the platform when a client wants to get in touch with them after receiving an investment idea through CS Invest, she explains.
Targeting the mass millionaire segment?
When asked if CS Invest aims to target the HNW segment through the automated distribution of advice, de Ferrari says that while the digital platform takes a bifurcation approach, “it is very much available to our UHNWs as well”.
However, de Ferrari is realistic about the initial client reception, acknowledging that “no client will be one-size-fits-all”. As such, he hopes to slot all clients into one of the bank’s three service offerings – transactional, advisory and discretionary. “Ideally, I would love for a client to receive all three levels of service from us: a part of the portfolio that they can play with, a part where they can delegate and the core of the portfolio we manage with CS Invest.”
He explains that the objective of the rollout is to make sure that the bank’s RMs become “more professional” and to bring “more efficiencies” to the way portfolio information is disseminated.
No regulatory hurdles
Due to the non-transactional nature of the platform, Credit Suisse did not have to overcome the regulatory hurdles facing robo advisors when launching CS Invest, according to de Ferrari and Tan.
However, in light of greater regulatory scrutiny of client risk profiling in the region, the bank dedicated time and resources to building a set of rules underpinning the platform’s suitability checks in Asia, de Ferrari explains.
“From a suitability standpoint and regulatory requirements around knowledge and experience, our infrastructure has built in a series of rules that enable us to check for clients’ certain circumstances, risk profiles, whether they are suitable to take part in a particular product, while also taking into consideration cross-border requirements as we have clients with assets booked in Hong Kong or Singapore but domiciled across the region,” says Tan.
“These parameters are already built within our rules engine and we did not have to cross through regulatory hurdles.”
Competitors in the region
UBS Wealth Management is another major private bank with a digital advisory platform in the region, having launched UBS Advice in Hong Kong and Singapore in March 2014. Three months after it was rolled out, UBS Advice had close to US$500 million invested.
Asian Private Banker understands that the main difference between the two banks’ platforms is that Credit Suisse’s will deliver advice directly to clients through its app, while advice from UBS’ platform first reaches the bank’s relationship managers, who then use their discretion in order to meet client needs.
While de Ferrari says he is optimistic about CS Invest’s success in Asia, noting that building the platform was the “right, ethical thing to do”, he declines to set AUM targets.
“We do not have an AUM target at this point. It is an education process and it’s about changing people’s behaviour. We will judge the success in two years.”
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