Mr Daniel Lo: The World of Private Banking – “Treat your clients’ money as your own”

Daniel Lo, Senior Vice President of CIC (Crédit Industriel et Commercial) Bank

By Neo Teng Wei and Andy Ho (ECONews Student reporters) 

The private banking industry is undergoing phenomenal growth and Singapore is now even dubbed as the “Switzerland of Asia”. The ECONews met with Mr. Daniel Lo, who is currently Senior Vice President of a French bank, CIC, and learnt about the less-well-known world of private banking.

Most of us are not familiar with private banking. What is it?

I will compare it to airlines. We have economy, business and first classes. Retail banking is the equivalent of an economy class, which is the biggest segment but with the least privileges. Services rendered are limited. Similar to economy flights, you get a limited choice of the standard set meals. Business class is equivalent to priority banking. DBS calls it Treasures, UOB calls it Privilege Banking while OCBC names it Premier Banking. For most banks, the minimum requirement is a deposit of US$200,000. You have a relationship manager (RM) assigned to you. The ratio is usually 1 RM to about 100-200 customers. The services and products provided are also limited. You can deal in a few generic products such as foreign exchange, mutual funds, unit trusts, dual currency deposits and equity-linked notes.  

Private banking is the equivalent of first class in the airline industry. The ratio is generally 1 RM to 20-30 customers. These customers are usually known as high-net-worth individuals and will open an account with a minimum of US$1 million in investable assets. Investable assets usually refer to assets that are rather liquid and normally include bonds, equities and cash. In private banking, the sky is the limit in terms of product offerings. The product spectrum ranges from foreign exchange, funds, bonds, equities to exotic structures and derivatives. Essentially, as long as you have an investment idea, the financial engineer can create a product to match your idea. At the tip of the pyramid, we have people who go into antiques, paintings, and are frequently seen at auctions. 

So what does a private banker do?

A private banker is essentially your financial advisor. He is your relationship manager who knows much about you including some of your little secrets. Your wealth is basically under his care. Here, the relationship between the private banker and the client has more breadth and depth as the RM interacts with his clients more frequently on more products of bigger ticket size.

One of the most rewarding features is when your clients gradually grow to become friends. It is not uncommon for some private bankers to manage the family office of their key clients after leaving the bank, given the trust and understanding established over the years.

How would a private banker find clients, or how would clients find you?

It is mostly through word of mouth. It is unlikely for private banking clients to attend to cold calls unless you are a celebrity perhaps. It is most effective if your existing clients introduce you to their friends and relatives since they bear the best testimony of you as an outstanding private banker. Therefore, if you serve your clients well, more clients will naturally be added to you.

Another common source is through a referral agent. Occasionally, you might find a retired private banker who may introduce his/her contacts to a private bank in return for a referral fee.  Other common routes are via the accounting firms or law firms, or people with very strong networks with HNWIs (High Net Worth Individuals).

Sounds like quite a job! How can you become a good private banker? 

It boils down to sincerity, integrity and your character. If you just drink and party with your clients, it’s not going to go far because, ultimately, you need to perform. The money they have entrusted you with must grow. If it doesn’t grow but dwindles over time, it will not be long before you lose this customer. In private banking, like in any job, you have to deliver performance.

Personally for me, what matters most is sincerity. The client knows whether you are treating his money as your own, or if you are just doing it to generate revenue for the bank. Once the client realises that you are sincere and trustworthy, he will gradually commit more funds for you to manage. Such clients will also be more understanding on occasions when your performance is adversely affected by market movements.

What is the size of the private banking industry in Singapore?

It’s huge. It’s in trillions. Singapore is not just attracting Asian funds. Money is coming from all over the world. As one of the largest financial centres in Asia, Singapore faces many key challenges, including money laundering and tax evasion.

This explains why private banks in Singapore perform very strict due diligence when it comes to signing on clients with the bank. ‘The Know Your Client (KYC)’ is very thorough and comprehensive. With most banks, clients who are engaged in primarily cash transactions such as gold/diamond trading are not welcome, as it is difficult to determine the source of funds.  The penalty faced by the bank for accepting funds from dubious sources is more than just a big fine: there could be a loss of reputation as well. Therefore, private bankers make great efforts to find out about their clients – not only to understand them better so that they can better serve them, but also to protect themselves from potential compliance issues.

Private banks also generally don’t deal with politicians and people in government positions. For this category of clients, the same issue of source of funds remains – are these monies clean?  Besides, it is not uncommon that these people are investigated under a new government and banks do not want to be involved in such investigations. Personally, I have encountered a case in one of my previous employments, where I came across an account with over USD10 million. We did our usual KYC and discovered that the account holder was a police superintendent of Cambodia. From search reports, we uncovered that this client was responsible for many deaths during his time. The bank committee deliberated and decided to close the account. The bank did not want to have anything to do with money tainted with blood.

How did you start your career as a banker?

I stayed in Boon Keng during my university days. To go to the Bukit Timah Campus at that time, there were only two bus services, 175 and 182. The starting point was at Queen’s Street where the DBS Rochor branch was located. When commuting to and from campus, this particular DBS branch was always within my field of vision. Gradually, I told myself that I wanted to join this bank because banking was a rather glamorous job back then, and DBS Bank also carried a strong branding.

In my Honours year, DBS would hold tea parties and invite the top 5 Honours students in every department of the faculty by recommendation of the Dean. I was not among the top 5 in Economics but fortunately for me, the Dean decided that anyone could sign up for the tea party. Eight of us submitted our names, attended the tea party and all eight of us got the job offer before Christmas. It was really the best Christmas gift. I could not wait to start working and I found myself sitting in the Corporate Banking department of DBS Bank at Shenton Way immediately after my final examinations.

When you first entered DBS, did you know what you wanted to do?

I just wanted to work in a bank. Fortunately, I was posted to the Corporate Banking division where I performed credit analysis on corporates in the real estate and financial services industries. I was blessed to have a very good mentor, Mr Hong Tuck Kun, back then.  To this day, I remain in close contact with him. In this division, I dealt with many large property developers who are among the richest people in Singapore today. This job was really rewarding – I enjoyed interacting with the shareholders and senior personnel of each corporation, having lunches in almost every good restaurant in Singapore, and having an attractive pay package.   

How did you then move to private banking?

I must say I am very blessed. My path was, in a way, charted. I spent three years in Corporate Banking at DBS, after which I joined Bankers Trust in Regional Corporate Banking. At Bankers Trust, I was given the opportunity to join the Treasury Department, where I was first exposed to financial market instruments such as foreign exchange, bonds etc. Equipped with a good knowledge of financial products, I moved on to become a product advisor in private banking with Bankers Trust. In that role, I accompanied relationship managers to meet with their clients where I shared my views and recommendations on financial markets. When I rejoined DBS in 1996, I assumed two roles:  a team leader for the North Asia market, and assisting the private banking department to expand its suite of product offerings. Thereafter is really history. DBS private bank has come a long way. In recent years, it has acquired the private banking businesses of Societe Generale and ANZ to become the largest private bank in Asia.  

Who are clients of private banking in Singapore?

In the Asian context, somehow, the wealth is vested mainly with the hardworking Chinese.  More than 80% of private banking clients are business owners. Like Hong Kong, wealth in Singapore is also mainly generated from two asset classes, i.e. real estate and shares.  However, our small nation was able to attract the mega-rich from the neighbouring countries, particularly from Taiwan and Indonesia, and lately from China. Since the 2008 Global Financial Crisis  led to increasingly regulated environments, Singapore has also been seeing funds flowing in from Europe and the Middle East.

Why do Taiwanese tycoons want to park their money in Singapore?

When I marketed to these Taiwanese tycoons, I talked about 三保 (Three Treasures). First, 保障 (Security). Singapore is a AAA-rated country. It is a sovereign nation not aligned to any other country. The legal framework is strong and robust, so investors know that their money is safe here. In other countries, your money may experience ring-fencing, that is, the money cannot come out. Singapore doesn’t have that problem. Secondly, 保密 (Confidentiality). Taiwanese tycoons do not want to “put all their eggs in one basket”. Given the cross-straits problems, Singapore offers a neutral and viable option to park their money in. Thirdly, 保本 (Principal protection). As an international financial centre, Singapore offers many investment options, including those with principal guarantee.

Singapore has forward planning for as far as 20 years into the future. The Singapore Government adopts a business-like approach to managing its resources, with many success stories, such as Singapore Airlines, Singapore Telecoms, DBS. This way, it has built huge reserves under the umbrellas of Temasek Holdings and GIC. During the 2008 financial debacle, Singapore successfully rode out the crisis with innovative schemes like job credits. When companies wanted to retrench people, the Government said, “No, don’t retrench. We will help you pay 10% of your staff’s salary.” You save jobs. Jobs are critical. Without jobs, the economy cannot perform. 

Let’s go back to your career. You mentioned you were a team leader in relationship management in DBS…

Actually I never planned to leave DBS. During the 2008 financial crisis, DBS management took the view that market conditions could deteriorate further in 2009. DBS therefore made the painful decision to retrench 6% of its entire staff, about 900 people. I was one of them. For me, this turned out to be a blessing in disguise. I collected an unusually big retrenchment compensation (given my 15 years of service), terminated my service with DBS on 31st December 2008, and then moved CIC, a French financial services group, as a team leader on 2nd January 2009.

CIC is probably the best place I have worked for, in terms of work-life balance. Some banks just go for revenue and are very result-focused. Such banks are known for “hiring and firing”. They can hire 100 people and in 6 months’ time, 50 are out. European banks are generally more conservative and less demanding on performance. Very often, I have witnessed occasions where the staff were given a second chance. If you can’t produce results in 6 months, they will give you one year if you show a positive work attitude and good potential. Our local banks are increasingly more result-focused, unfortunately. 

When you move from one bank to another, do you keep your clients?

This is a given. That’s what you’re paid for! Your client is your asset that you have built and you are expected to bring them wherever you go. Let’s say I want to take in a new RM. I will see how many clients he/she has, how much AUM (Assets under Management), how much he/she can contribute to the bank’s revenue. With that understanding, we agree on the compensation package and the obligations that follow.

Private banking is very relationship-driven. The RM matters more to the client than the bank does. That’s why EQ is a lot more important than IQ. EQ brings you everywhere. If you know how to network, the world is your oyster. You can be very bright, but if you don’t know how to network, then you are better-suited to work in non-client jobs like research analysts. Any front-line job requires networking.

What is some advice you would give to current Economics students to become good bankers?

I always tell them that you need three things to be a private banker. First, your personality. You have to be personable. You don’t always have to look gorgeous, but you must be pleasant. Don’t put on a sulky, bitter look. How will the client converse with you? It will be challenging. Every client likes to meet and talk to someone who is pleasant and sociable. Secondly, you must have good general knowledge as well as knowledge of the financial markets.  However, this can be acquired over time. The third is networking. This refers to your circle of friends and contacts. You can also develop this by enlarging your social circle through participation in Rotary clubs, trade associations, and other groups.   

Ultimately, private banking is a front-line job – it requires selling skills, like it or not. You are marketing yourself and your bank. Personality is key.

This article was first posted in ECONews in October 2017