IT is obviously is great to be a rich customer as you get special treatment from banks. For one thing, you don’t have to join the queue in a bank to make a transaction. Just phone the bank and you will get all the service you need. If, once in a while, you do have to go to the bank, you can sit back and relax in an executive lounge and a customer officer will take care of your requirements.
This service is made available by major banks in Indonesia for super rich customers. It is called wealth management. Not only do foreign banks provide this service, but major local ones do as well. “Although wealthy customers are few in number, their contribution to the bank’s assets is large. Sometimes the contribution is the largest portion of a bank’s assets,” said one banker.
Wealth management is the management of a customer’s money to anticipate any current or future economic changes. It is an ongoing process of maintaining and accumulating money and other assets for the customer’s benefit. And just who are these customers?
According to a survey by Merrill Lynch and Capgemini, a rich customer or a high net worth individual has at least US$1 million, while a super rich person has a minimum of $30 million. These amounts, according to Merrill Lynch, an investment bank headquartered in the U.S., are the prerequisites for deposits in a Singaporean bank. Again, according to Merrill Lynch, 18,000 rich and super rich Indonesians have deposited their money there.
It is not surprising, therefore, that Indonesia’s major domestic banks as well as foreign and joint venture banks have rushed to provide private banking products and services to lure such customers due to their huge potential. All this means the money remains in the country.
Of course, local banks have to compete with foreign banks with offices here or with those that have no branch office but send representatives to approach potential customers. ABN-Amro Bank, for example, offers the Van Gogh Preferred Banking. “We are not imitating anyone, Van Gogh products and services are already available in our other offices in New York, Hong Kong and Singapore,” said the bank’s country manager for consumer banking here in Jakarta. Meanwhile, one major Singaporean bank with offices here also offers wealth management products.
The competition in wealth management services is quite stiff. The competition is not only among banks with offices here but also with foreign banks abroad. Singapore has indeed succeeded in becoming an attractive money base due to its flexible regulations and innovations.
Singapore does not tax nonresidents who deposit money in any form of financial instrument. This is attractive for foreign customers, especially since European Union countries have charged tax on interest earned on savings since 2006. The regulation means each European Union country has to share information for cross-border investment income for the purpose of a 15 percent income tax, which will be raised this year to 20 percent, and to 35 percent in 2011. Naturally, a huge amount of money, about $1.2 trillion, has left the European countries for other international financial centers such as Singapore.
This is a challenge not only for banks here but also for the government in relation to the macro policies for finance and banks. However, rich customers present huge potential and a special strategy to serve them has to be created.
Offering unique services is the only answer and that is why Bank Mandiri has set up priority banking for these customers. Omar S. Anwar, consumer finance director of Bank Mandiri, estimates that the bank’s super rich customers account for 5 percent of the more than six million customers of Bank Mandiri. The 5 percent super rich account for 60 percent of the bank’s total assets. This ratio is about the same in other banks. With such a large contribution, it’s no wonder banks actively look for such customers and give them special treatment.
One foreign bank that is aggressive in its wealth management promotions is Standard Chartered (Stanchart) Bank. The facilities here are included in its priority banking service, while the minimum money required is Rp 500 million per customer. The bank’s portfolio is showing improvement as the number of customers is increasing year by year.
For its effective wealth management, Stanchart applies a strategy called Plan, Grow and Secure, in which a customer and the bank plan the investment, let it grow and develop safely. Another major bank offering priority banking is BCA, which calls it BCA Prioritas. This bank, which is sophisticated in its banking technology, requires a minimum balance or deposit of Rp 200 million. A customer of BCA Prioritas automatically gets a priority card or Kartu Prioritas with the following perks: access to an executive lounge at the bank, mutual funds products, medical services in Jakarta and Singapore, free subscription to Prioritas magazine and various special offers, such as purchases of BMW and Jaguar cars.
Stephen Liestyo, senior general manager of BCA, said wealth management is strong in payment transactions and reliable in intermediary banking and reflects BCA’s efforts to achieve relationship banking. The purpose of relationship banking is so that in the near future BCA’s network is even more widespread. That is why the bank’s management feels there is a need to be more expansive and advanced in developing its wealth management services.
For the rich, wealth management services indeed promise a lot and are quite profitable. All, of course, depends on how the bankers and their investment managers win over their customers. If wealth management services and related products offered by local banks are good then why should super rich Indonesians line up to deposit their money in Singapore or elsewhere? (Eddy P. Kasdiono)
The Jakarta Post, August 21, 2008