Australian investment pays for Credit Suisse
Why the Swiss banking giant brought its wealth management expertise to Australia.
When asked about the business growth of his international bank in Australia, Credit Suisse Private Banking Managing Director Shane Galligan gets to the point.
“In a word – exponential,” he says. “And long may it continue. We are very happy with our growth in Australia. Our clients here appreciate our investment model.”
Galligan explains that Australian investors and high net worth individuals (HNWI) were seeking what Credit Suisse Private Banking offers – a wider range of investment services outside the usual property and equities markets so popular in Australia.
Credit Suisse finds Australia’s growing number of HNWIs as sophisticated as any investors in the world. Despite its relatively small population, Australia offers a competitive regional location for providing wealth management services. It also has the third largest market of HNWI population and wealth in the Asia-Pacific, after Japan and China, with almost 6 per cent of the region’s HNWI wealth, valued at US$519 billion. In fact, Australia’s HNWI population is 27 per cent higher than Hong Kong and Singapore and 29 per cent higher than India, the next largest markets.1
This is fertile ground for Credit Suisse, making Australia an obvious choice for the bank’s recent expansion.
Headquartered in Zurich, Credit Suisse globally has around 50,100 employees and a presence in over 50 countries in three main lines of business – private banking, investment banking and asset management. The private banking business, a major contributor to the bank’s overall revenue, employs 4,200 relationship managers, including 360 in the Asia-Pacific, for its international wealth management business spread across 370 locations and 48 countries. In the Asia-Pacific, Private Banking manages US$96.9 billion of assets for its clients as of March 2011 and attracted US$4.7 billion of net new assets during the first three months of the year.
A competitive advantage in a growing market
Credit Suisse saw Australia as a priority destination for investment for three main reasons.
First, Australia’s resources growth was set to expand and continue. Second, the local superannuation marketplace was an ever increasing pool of capital that would need managing. Third, the investment landscape in Australia was dominated by property and shares, with limited opportunities for more diversified investment assets.
“We figured that these three areas – the resources growth, the superannuation market, and the existing asset allocation of Australian clients, called for a new private banking service model in Australia,” says Galligan.
“According to the Credit Suisse Global Wealth Report 2010, the wealth per adult in Australia since 2000 has gone from US$100,000 to US$320,000, the third highest average wealth per adult in the world. This presents a strong opportunity for Credit Suisse to help people grow and protect their wealth. This is what we saw.
“Also, the Asia-Pacific was seen as a region where European companies needed to expand to capture the change in demographics the world is experiencing in the shift towards China and India.”
The private banking arm of Credit Suisse has added new capacity and capability to the Australian financial sector, created new jobs and raised Australia’s profile as a wealth management market.
Having a direct presence in Australia gives Credit Suisse a competitive advantage over other groups that seek to service Australian clients from Singapore or Hong Kong.
“We made a decision in 2006 that the onshore private banking model was best for Australia,” says Galligan. “The structured advisory process and the relationship management model we favour, getting closer to families and clients, means you have to be here. You can’t just fly in every quarter. If you are truly going to align your interests to those of your clients you have to be available when they want to see you.”
“Credit Suisse has taken its entire global private banking platform and rolled it out locally, offering one of the broadest range of products and services on its local booking platform in the industry,” says Galligan.
Australia, a strong link in the global chain
Australia is distinguished by the resilience of its economy, the sophistication of its financial markets, and the innovative nature of its A$1.7 trillion funds management sector – all underpinned by the country’s mandatory retirement income policy. A number of foreign banks have established private banking services in Australia, recognising the strength of the domestic market and the potential within the region.
“A strong regulatory framework and robust corporate governance practices give investors a lot of confidence in Australia,” says Galligan. “Underpinning this is a strong legal system and a well-understood and transparent set of regulations. This is the backbone of the current success of Australia as a place to invest. You can read any newspaper to see what goes wrong in other countries.
“We are also lucky in terms of our time zone. Geographically, we are removed from some of the big financial centres of the world, but we get the late New York market, the early London and European markets, and the full day in Tokyo and Singapore. Australia is well positioned for global trading, and it is a strong link in the chain, whether it’s for bond markets, equity markets or foreign exchanges.”
How Austrade helped Credit Suisse
Austrade has worked with Credit Suisse in Switzerland over many years and Galligan says relationships like this form part of the advice he would offer companies about investing in Australia.
“Others ask us what we have learnt,” he says. “As an international company you need to do a lot of work developing networks – that’s where Austrade has played an important role for Credit Suisse and they can do that for others thinking of investing here.”
1. Capgemini/Merrill Lynch Wealth Management, Asia-Pacific Wealth Report 2010.