HSBC Global Private Banking: Asian wealth at heart
Jyrki Rauhio, Regional Head of Credit Advisory, Global Private Banking, Asia Pacific at HSBC, explains how the region’s ultra-wealthy benefit from the bank’s unique range of services including financing structures for superyachts and other ‘trophy assets’.
Jyrki Rauhio, Regional Head of Credit Advisory, Global Private Banking, Asia Pacific, HSBC
What’s the typical profile of HSBC Global Private Banking clients in Asia?
One of the core strengths of HSBC is our internal connectivity. We work closely with our Commercial Banking and Global Banking colleagues to support our clients across their corporate and personal banking needs.
For example, we’ll connect with an entrepreneur to discuss their wealth needs, from liquidity to financing, during the early stages of growth. We’ll work closely with our Commercial Banking partners to support the expansion of their business, including international growth. As they grow, they’ll either reinvest in their business or look to manage and protect their wealth, which is where Private Banking comes in with our investment and wealth solutions as well as our wealth planning and advisory team. It’s a very tried-and-tested model and sets us apart.
Of course, we also serve professionals and employees of companies. In Asia, sectors like finance, technology and healthcare are rising quite rapidly. And the wealth of these employees, which may be tied into shares as well, can blossom very quickly and unexpectedly. They need a trusted partner to help guide their long-term financial well-being.
We deal with clients from all backgrounds and industries. But the heart of our strategy is to support clients across their personal and corporate wealth needs, bringing human and financial capital to the table, to help them grow, manage and preserve their wealth.
What makes HSBC different to other banks in Asia dealing with such clients?
HSBC has been actively supporting Asia’s growth story for over 156 years. As part of the group, HSBC Global Private Banking is a leading global private bank, with a wide range of associations and established networks. We are unique in the industry by leveraging HSBC’s scale to provide end-to-end solutions and utilise the depth of HSBC’s global proposition and network.
As a global player with local expertise and our heart in Asia, we are committed to helping our clients grow, manage and preserve their wealth across generations and geographies. This year marks the 75th anniversary of HSBC Trustee in Asia. As one of the longest-serving Trustees in Asia, we are trusted by generations and have been a partner in helping many affluent families preserve their wealth and legacy for future generations to come.
Where does yacht financing fit in within HSBC’s services?
Yacht financing fits into what we call the trophy asset category. A couple of other key ones are private jets and art. They can all be categorised as ‘passion asset’ classes. I use that term because a yacht or plane can be hard to justify from a traditional investment return point of view, but they hold a different type of value, such as utility value, time-saving value or otherwise.
It’s a very important class of assets for our clients, especially the ultra-high-net-worth individuals (UHWIs), who have investable assets over US$30 million. It’s not about enabling purchase, like others would buy something on a payment plan. It’s about really making those assets work harder and releasing equity to get a return. We might suggest that instead of putting US$50 million into this boat or plane, why not put down a percentage of that and then put the rest to work to defray that cost.
Our clients, especially the UHNWIs, have collateral and a lot of debt capacity. They’re comfortable in having debt, even in assets like this, especially with low interest rates. A key is to make sure that the collateral is top end, whether it’s an aircraft or a yacht, and have a tight structure, so it’s being maintained and kept in top order.
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We’ve been very busy on the yacht financing side, talking to clients who are either buying their first vessel or upgrading. Since Covid, there has been a boom in demand for buying yachts, especially in Hong Kong, where getting out on a boat has been as close to having a holiday as you can get.
When clients seek to buy such assets, do you challenge them or pose questions to better understand the investment and costs?
We need to be realistic. We do often have a frank discussion with our clients when they’re looking to buy yachts or planes. For example, flying first-class is very affordable compared to owning a plane. For superyachts, we highlight the cost of ownership such as the classic rule of thumb, which is that annual running costs are about 10 per cent of the purchase price.
With Covid, people are feeling that ‘you only live once’ and are keen to own a yacht. It’s a fantastic way to spend your time and the types of clients that are looking at owning a yacht are in the wealth band where it works.
However, in my career, I’ve seen situations where people have had a windfall through an IPO or a liquidity event, and they rush to buy some of these assets. The reality is that buying a yacht or a plane is not like buying a sports car. It’s a very complex purchase, so we highlight that. When we structure the transaction and write up the analysis, we look into that and provide our take on the individual’s ability to service this.
At the end of the day, I’m not in the business of pure asset-based finance. We’re in the relationship banking business. We’re doing this because of who the client is. Our offering is quite unique in the market.
How are ESG (environmental, social and corporate governance) considerations changing among your clients?
ESG has been increasing in importance for quite some time and one of the reasons is the emergence of younger wealth, the tech and financial entrepreneurs, and the next generation. If you look at the traditional billionaire tycoons in places like Hong Kong, their children or grandchildren are now taking over. They may have a very different world view and background to their parents and grandparents. This is very important.
When we look at yachts and builders, are they taking ESG into consideration when sourcing the teak for the decks? What are the carbon emissions on a yacht or a plane? The awareness around this topic is rising rapidly and I can see it evolving more widely. ESG is now a factor in almost all the investments our clients are making.
Do younger clients have a different mentality when investing?
An increasing number of our clients in the regions, especially the Next Generation clients, express strong interest in the durability of sustainability-related themes, because climate change is a scientific fact which will take decades to address. And our clients also like the fact that all stakeholders now seem to be aligned: governments, regulators, voters and consumers are now all committed to the net zero transition.
What are the current business priorities for HSBC Global Private Banking in Asia?
I want to highlight three areas. Firstly, we’re investing a lot in ultra-high-net-worth individuals, as you have to offer a lot more beyond a Private Banking platform. You need to be able to connect Commercial Banking and Investment Banking, bringing top-grade products, services and solutions to these clients.
Secondly, we’re earmarking a third of our Private Banking investment for mainland China. We already have teams in Beijing, Guangzhou and Shanghai, but we’re aggressively growing on the ground to become embedded into the financial system within mainland China itself, as opposed to just relying on the offshore banking model. Investment opportunities for individuals on the mainland are starting to diversify, so we want to be there to capture that opportunity.
Thirdly, we’re scaling up in Southeast Asia which has over half-a-billion people and some of the fastest-growing economies in the world, especially pre-Covid. When we think about Asian wealth, we look at the entire Asian opportunity, not only China, but other parts of the region, such as Singapore as an international wealth hub.
What else should people know about Global Private Banking at HSBC?
The Asian consumer and their growing wealth are the heart of HSBC. We’re investing US$3.5 billion into the Asia wealth franchise over the next five years to accelerate the growth of the wealth and personal banking business. We want to be the leading wealth manager in Asia.
We have all the ingredients, unique in the industry, by leveraging HSBC’s global proposition and network, including access to capital financing, capital markets participation, pre-IPO/direct investments, real estate and a tremendous balance sheet, which is hugely important for the ultra-high-net-worth segment. All this enables our clients to put their money into motion, whether it’s to buy assets or dispose of assets.
So, if you’re looking for one of the world’s largest international banks with an extensive global network and its root and knowledge in Asia, which understands you as an entrepreneur, HSBC is the bank for you. Combined with our commercial heritage, global and regional reach, capabilities and expertise, that makes HSBC Global Private Banking unique.
Disclaimer: The information contained in this article has not been reviewed in the light of your individual circumstances and is for information purposes only. It does not purport to provide legal, taxation or other advice and should not be taken as such. No client or other reader should act or refrain from acting on the basis of the content of this article without seeking specific professional advice. Issued by the HongKong and Shanghai Corporation Limited.
Yacht Style’s Issue 61 features New Models and World Premieres 2021, Cannes and Monaco show specials, Camper & Nicholsons CEO Paolo Casani, VP Yachts founder Vivian Chan, Galeon and Tony Castro, PMG Shipyard in Thailand, ONE°15 Marina Sentosa Cove, Reviews of Ferretti Yachts, Sanlorenzo, Aquila and Bali boats, and Yacht Style Awards 2021.