Several years ago, executives with Singapore’s major private banks came to the government with an enviable problem. Asia was minting so many rich people, and the lucrative business of managing their wealth was growing so rapidly, that there weren’t enough skilled private bankers to go around. The talent shortage was so acute that banks reportedly were hiring local hairdressers and car salesmen and turning them into private bankers. They were also stealing employees from rival banks. “There were a lot of complaints to the Monetary Authority of Singapore about poaching,” says Annie Wee, a former private banker with Credit Agricole Indosuez in Singapore. “Clients began to complain, too.”
The business-friendly Singaporean government came up with a solution: In 2004, it helped to establish a Master of Science degree program at Singapore Management University geared to churning out a stream of bright, socially savvy private bankers. Besides offering instruction in financial black arts such as macroeconomics and quantitative analysis, the one-year course teaches students “soft skills” needed to forge relationships with demanding clients, including cross-cultural etiquette tips. “All the bankers want hard-charging types, but our successful students are more low-key and soft with people,” says Wee, who today is CEO of the Wealth Management Institute, a government-backed educational organization that oversees the SMU program. That’s why students are taught, for example, that “if you go to a Chinese birthday party, you don’t wear black,” says Wee, or that “Thais don’t like to have their heads touched.”
To keep its economy chugging, the Singapore government in the past has implemented farsighted policies to attract electronics manufacturers and biotech start-ups?and the masters program at SMU is part of another official quest: Singapore is determined to become a private-banking haven to rival Switzerland. Several years ago, the city-state’s leaders recognized that despite its transparent legal system, low taxes and stable government, Singapore really wasn’t big enough to challenge Hong Kong or Tokyo as an Asian center for investment and merchant banking. But tiny Switzerland manages to punch way above its economic weight in private banking. Why couldn’t Singapore exploit the same opportunity in Asia?
That’s what its bureaucrats set out to do. In an effort to create an atmosphere that would encourage the world’s wealthy to move their assets to Singapore, over the past several years “the government studied Switzerland very closely and created something as good,” says Roman Scott, a private-banking expert with Boston Consulting Group . Among other changes, family-trust laws were amended to make the transfer of wealth from one generation to the next easier?and to offer sanctuary from high estate taxes in the U.S. and Europe. In addition, rules protecting customer confidentiality were strengthened. Divulging private financial information is now punishable by a fine of up to $78,000 and a prison sentence of three years, significantly more draconian than Switzerland’s maximum punishment. “You’re given an extra measure of confidentiality in Singapore,” says Leslie Menkes, a Singapore-based managing director for Morgan Stanley’s private-banking arm.
One feature of the Swiss banking scene was deliberately left off the blueprint: Switzerland’s increasingly burdensome taxes. Under pressure from the European Union, which was worried that many of its residents were stashing money in Swiss accounts merely to evade taxes, Switzerland last year began phasing in a 15% withholding tax on personal interest income for E.U. citizens . Singapore, meanwhile, was lowering taxes. Nonresidents who park money in Singapore banks pay no taxes if that money is earned outside Singapore, and investment gains earned in the city-state are also exempt from tax.
That doesn’t mean that legions of rich Europeans are suddenly closing their Swiss accounts and moving their money to Singapore. After Switzerland implemented the withholding tax, “very little happened in terms of asset migration,” says Sebastian Dovey, managing partner of Scorpio Partnership, a London-based consultancy to the wealth-management industry. “The big gain for Singapore is not to take assets away from Europe,” he says. “The big gain is to attract assets from within its own region. And [Singapore] is doing that tremendously.” For now, though, it still has a long way to go before it can claim to be a wealth-management capital on a par with Switzerland. Assets under management at Singapore private banks total about $200 billion, says Ong Chong Tee, deputy managing director of the Monetary Authority of Singapore. That compares with $3.71 trillion in Switzerland by the end of 2005.
But according to Ong, assets under management in Singapore are growing by 20% a year. Growth rates like that make it the fastest-growing private-banking market in the world, says Scott of BCG. And the world’s largest financial institutions?among them HSBC, UBS and Citigroup?are expanding their Singapore presence. Credit Suisse, for example, currently employs roughly 500 private bankers in Singapore, more than any place outside Switzerland?and the bank has plans to hire 100 more this year. Bank Julius Baer, the venerable Swiss private bank, has similarly high expectations. “We’re trying to position Singapore as a second leg [after Zurich] to our operation,” says Thomas Meier, head of the company’s private-banking arm in Asia. Says Didier von Daeniken, head of private banking for Credit Suisse in Southeast Asia: “The [Singapore] government is the smartest on earth in terms of promoting the place as a center for private banking.”
Among those who are reaping the benefits is Singaporean Lim Chee Hoong. After earning an undergraduate law degree in Great Britain and working at law firm Clifford Chance Wong in Singapore, Lim, now 28, had a change of heart about his choice of career. “I found litigation aggressive and contentious,” he says. Seeking a less confrontational career, he plunked down the $30,000 tuition fee needed to enroll in the private-banking program at Singapore Management University. Before he had even graduated, he’d bagged a job with Morgan Stanley’s private bank in Singapore. “The way to move forward in this competitive industry,” he says, “is to think out of the box, to do things outside your conventional portfolio.” That’s a lesson Singapore knows by heart.
