Private banking institutions are yet to fully tap the opportunity to provide philanthropic advisory services to high-net-worth individuals (HNWI), Standard Chartered Bank plc (02888.HK) said on Wednesday.
Even in financial and personal wealth advisory services, private bankers have some way go in meeting the needs of the rich, it said. High-net-worth individuals generally refer to those having liquid financial assets of more than US$1 million.
“The current sentiment towards private banking involvement in local philanthropy is ambivalent, either because of ineffective communication or the lack of a proven model for providing philanthropic advice,” Standard Chartered’s private banking arm said in a report.
About 96 percent of HNWI are currently not involved in philanthropic activities through their private banks, with a quarter claiming the services are not offered by their banks.
StanChart’s private bank has worked on a survey with Campden Wealth Research on 60 HNW business owners across Asia, Africa and the Middle East. More than 60 percent were owners of privately-held, family businesses with turnover in 2012 ranging between US$25 million and US$500 million.
As HNWI are expanding in number in the three regions, private banks should work harder on philanthropic support, the official said.
StanChart believes Asia’s HNWI population will surpass that of North America and become the largest HNWI wealth market in the world this year. The region could see the world’s largest concentration of HNWI wealth by next year.
China’s economy is expected to top that of the United States by 2022 while the standard of living should be similar to that of South Korea today. Meanwhile, India is likely to be the world’s third largest economy by 2030 with its per capita income similar to that in China today.
Indonesia, the largest economy in Southeast Asia, will be the world’s ninth largest by the same year, with its standard of living matching that of South Korea today, according to the StanChart report.
“Some participants welcomed the idea of a bank that can enable their efforts and commitment to their communities while others were less convinced, and felt that private banks should keep to their existing areas of expertise,” the lender said.
“The unexplored opportunity for private banks might include educating HNW business owners on the risks, considerations and best practices, in order to professionalize their independent philanthropic efforts… or supporting financing for capital intensive projects such as school building in rural,” it said.
Education has topped the causes to fund among the participants, ahead of healthcare, poverty and food safety.
“Their approach is more likely to extend beyond financial or one-off donations, allowing them to become more deeply ingrained within the communities and causes they choose to support,” StanChart said.
Apart from philanthropic support, HNWI are also yet to full tap private bankers for financial and wealth advisory services.
Most respondents from Asia, Africa and the Middle East identified board of directors, accountants and lawyers as their top three business financial advisors while for personal wealth advisory it is the accountants, family members and lawyers that are relied upon.
“The reliance on legal and accounting professionals is perhaps due to their ability to deliver independent advice that the business owner views as genuinely aligned with their interests,” StanChart said.
It cited an unidentified participant as saying that family business advisors at private banks “in reality are never going to be ever be truly independent and will be always associated with garnering assets for management”.
Meanwhile, only half of the respondents who are currently with a full service bank use their commercial or investment banking segment. For those who don’t, the predominant reason was to segregate personal and business wealth.
Financing appears to be the main requirement when it comes to business-related financial products. A majority of them said they require cash management, credit lines, trade-finance and term loans, with more than half of all participants also seeking project finance abilities, the report said.
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