Kamis, 05 Juli 2012

Managing funds of super-rich customers

A Kijang van pulled up in front of the BCA Asemka branch in Jakarta and modestly-dressed man alighted. Lugging a plastic bag, he rushed into the special room for VIP or private banking customers. No one would ever guess that this gentleman, who was wearing sandals, was a premium customer and could have a deposit worth billions of rupiah at this the bank.
The man -- just call him Handi Wijaya -- is an electronics merchant operating several outlets in various places, such as in Glodok, Central Jakarta. Just like many wealthy people who live by old traditions, Handi still carries hundreds of million of rupiah in cash on his person. He has only a term deposit with BCA and does not invest money elsewhere or diversify his wealth into various investment instruments.
""All kinds of investments have their risks. I don't want to take the trouble and run the risks. The profit I get from my trading activities is more than enough,"" he said.
Handi is not alone in Jakarta, or for that matter, in the whole of Indonesia. Quite a lot of premier-class people own great amounts of money, although their numbers are small in proportion to the country's entire population. At BCA alone there are some 80,000 premium customers whose accounts hold more than Rp 250 million. Meanwhile, Citibank, HSBC, BNI, Bank Mandiri and other major commercial banks each record between 10,000 and 20,000 premier bank accounts.
The potential is indeed alluring. Amid the difficult macro-economic situation we are currently experiencing, it is demanded of banks that they illustrate creativity to push forward with their businesses. Attracting premium customers is the most probable short-cut, although developing this service is not always easy. Banks must spend quite a lot of money to develop it, but they stand a good chance of increasing their earnings.
To attract premium customers, BII, for example, has launched an exclusive and comprehensive banking service package. Through its BII Platinum Access, its premium customers can feel as if they own a bank. Just pick up the telephone, send a fax or an e-mail or present yourself at any of the BII Platinum Access centers, and all your banking matters will be easily handled. This product, said Rudy N. Hamdani, managing director of consumers at BII, is the bank's latest innovative service package and manifests the bank's commitment to loyal individual customers by giving customers in the premium category (Platinum Access customers) extra and specific services. Better customer relations is the main focus of this particular service.
Thanks to this program, which up to late 2005 had 5,000 premium customers each with a minimum deposit of Rp 1 billion, BII has increased its earnings and at the same time augmented its fee-based income. Not only BII, for which this special program for super-rich customers is relatively new, but also many other banks are now offering priority banking services, which have developed into wealth management services, in their attempt to attract the super-rich. Under the wealth management service scheme, a bank not only relies on its main function as a place where customers keep their money and obtain loans but it has also developed its function to include various financial services. A number of banks offer their premium customers mutual funds or bank assurance products while other banks offer them a synthetic deposit, a swap-based investment product. This is possible because the funds of bank clients in this category are of long-term growth in character and the money can be categorized as idle. Obviously, a bank can make the management of this idle money a very attractive and lucrative business.
However, these high net-worth clients tend not to place their funds in one basket. In other words, they usually deposit their money in several banks. This means that only banks that offer the best wealth management services will have the best opportunity to manage these huge funds. In terms of products, there is a great variety of them as the category of structures products has begun to be introduced. In terms of services, the staffers of the wealth management program must serve as partners who manage the wealth of customers.

However, some people suspect that the growth of this wealth management industry is not in line with the process of education that goes with it. Many banks claim to have financial planners, but the reality is quite different. In April, for example, when there was a run on mutual funds, at the time the most popular investment product among wealth management customers, most banks suffered a big blow because the majority of the funds placed under their management were withdrawn in large amounts. This was not solely the mistake of the customers, who generally are not fully knowledgeable about this matter, but it was also the mistake of relations managers, who were short of the required skills and in-depth product knowledge.
To invest is not without risk. However, if these premium customers have too many bad experiences, it is only natural that will they deposit their money abroad, such as in Singapore.
According to Johny Djohary, a banking practitioner and member of the Financial Planning Association of Indonesia, wealthy customers often have mixed and unexpected expectations.
""That's why wealth management services must be suited to the customers' more personal needs and desires and must not simply be a matter of selling a product. Wealth management services must be geared toward comprehensive financial planning that gives a total financial planning solution to a premium customer and his family,"" he says in his analysis in Bisnis Bank magazine.
Meanwhile, William Jahnke, a financial expert from California, the U.S., refers to three main things that a bank must do in providing wealth management services. A financial and investment planning solution must first of all be analyzed and then continued to be evaluated so that it will be suitable to a customer's actual financial goals. Second, this solution must illustrate the best composition of income, spending, insurance and investment at each stage of and for the life span of a customer. Third, this solution must always be monitored and adjusted to changes in investment opportunities. It must always follow changes in macro financial and economic conditions.
In Indonesia, wealth management is indeed new but it is demanded of bankers that they adjust to this global banking trend. Ideally, wealth management services are designed as holistic financial planning, namely a comprehensive service covering almost every aspect of a customer's life.
Someone like aforementioned Handi must first of all enjoy dealing with a bank, which, in this case, would be one that shows high integrity and credibility, before being able to do more with the money he deposits at a particular bank. (Lily G. Nababan, Contributor)

The Jakarta Post, Jakarta | | Tue, April 25 2006, 10:47 AM

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