Asia’s private banking and wealth management industry is back in growth mode, and it’s largely due to the rise in Asian wealth rather than cash flowing from other parts of the world.

Asia’s private banking and wealth management industry is back in growth mode, and it’s largely due to the rise in Asian wealth rather than cash flowing from other parts of the world.

The point was made succinctly by one of Swiss banking’s most public figures, Dr Urs Roth of the Swiss Banking Association, who spoke at a media lunch in Singapore last week.

Dr. Roth’s observation was that his association, which represents around 400 Swiss banks, had “not seen, so far, a large degree or a significant outflow of assets from Europe to this part of the world.”

“For the time being, we see the Asian financial centres very much as financial centres which attract the regional wealth.”

The upshot is that the Asian private banking industry is a self-sustaining one, and its growth is driven by the need to service the double digit growth in high net worth markets such as India, China and also South Korea. Look out for Vietnam and Thailand as the next centres for growth.

So the venerable old names from Europe which have hung out their shingles in Asia in the last five years or so have done so because they want to cash in on the Asian phenomenon, and not so much because their European customers are looking for another safe haven or service centre.

It’s been a market rush – the European and American banks know the private banking model and have been desperate to roll it out and get critical mass in the region before the locals dominate.

Just look at RBS Coutts Asia, one of private banking oldest names. Nick Pollard, the newly appointed chief executive for Asia, told this publication earlier this week that the bank intends to hire 200 private bankers in the next five years as he pursues a mandate to double the Asian assets under management. Today, Asia accounts for 25 per cent of the group’s assets under management.

Even regional colossus HSBC is anticipating a growth story. Asia currently accounts for 30 per cent of the private bank’s assets under management, but the expectation is that this will rise to 50 per cent over the next five years.

Looking around Asia this October, there are signs of growth and optimism everywhere. The DBS Group, for example, is planning to set up a domestic private banking presence in China, as the private bank follows the growth of DBS in the commercial and retail sectors.

Credit Suisse is in hiring mode, looking to add to the 20 new hires it has added so far this year in Singapore. The bank, which current has just over 60 billion Swiss francs in assets under management, is targeting as much as 45 billion Swiss francs in new client money between now and the end of 2012.

There is even growth, we are told, in Japan, which has long been one of the most frustrating markets for private banking. Societe Generale says it is aiming to add as many as 300 new Japanese clients each year and aims to return to the 30 per cent annual growth it was enjoying before the global financial crisis.

Amid all this bullishness, there must however be some caution. Are we coming out of the recent crisis too quickly? Will some of the lessons discussed over the last year be forgotten?

If the industry repeats some of its mistakes, and goes back to earning fees from pushing too-complex products which could turn toxic then nothing will have been gained, and client disillusion can only escalate.

The way forward is for the banks to genuinely focus client performance as their critical key performance indicator. That is the only truly sustainable model for Asia’s private banking industry. And if that does not become the new paradigm, post GFC, then much of Asia’s growing wealth will, sadly, continue to be squandered.