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The apparatchiks emerging as the "Fourth Generation" of Chinese leaders -- the First being Mao's; the Second, Deng Xiaoping's; the Third, that of Jiang Zemin -- have never heard of contact lenses, let alone laser eye surgery. Every man among them sports a determinedly unstylish pair of bifocals.

Clothes-wise, the situation is even more dire: identical white shirts and single-breasted dark suits are the uniform. Vanity and panache, evidently, are not qualities cultivated by the Middle Kingdom's peer-pressured mandarinate.

But these men, who range in age between 58 and 68, were talent-spotted some 20 years ago precisely because they resembled IBM Company Men circa 1952. Deng, then Party Secretary, ordered his officials to scour the land for college-educated administrators who were good Party members with sterling bureaucratic records and the dullest of technical backgrounds.

To pass the revolutionary torch from generation to generation in a most unrevolutionary way, these cadres were intended to inherit the Politburo Standing Committee, China's supreme authority. Early this summer, the short list was finalized and slots on the Politburo allotted according to each man's qualifications (and the quality of his connections). Within the next decade, the Fifth Generation -- comprised of new men mostly educated in U.S. and European universities -- will come of age. And so the process will continue.

Deng's recruiters dug up some rum characters. Hu Jintao, who is almost certainly ascending to the post of Party General Secretary (eventually to be followed by appointments as State President and Central Military Commission Chairman, thus completing the Holy Trinity of Chinese politics), was discovered diligently toiling as a hydro engineer for the provincial construction commission in the Middle of Nowhere (actually, Gansu, a barren northwestern region).

Cherry-picked for greatness, Hu vaulted to the chairmanship of the Communist Youth League (he was 42) before volunteering for thankless duty as Party secretary in Guizhou, another backwater. Eventually, he was promoted to become gauleiter of Tibet. Aiming to suppress the independence movement, Hu declared martial law in Lhasa in March, 1989, thereby setting a precedent for another such declaration two months later in Beijing, during the Tiananmen Square demonstrations.

Three years later, he made it to the Politburo as its youngest member and Jiang's heir apparent. As ever, Hu avoided offending anyone or stepping out of line. Hu's colleagues are likely to include Wu Bangguo (a vacuum-tube specialist from Shanghai), Luo Gan (a metallurgist who spent some time training in East Germany) and Zeng Qinghong (an automatic-control systems engineer). China's next government, it seems, will consist of boffins.

The Vision Thing will be in deliberately short supply. The Fourth Generation resembles nothing less than H.G. Wells' fantasy in The Shape of Things to Come of technocratic, autocratic elites guiding the government for "the benefit of all mankind." Caution, half-measures and safety first will be the watchwords of this Politburo, whose task is to plot China's slow, steady course toward modernization without running aground on the reefs of Westernization or torn asunder by storms whipped up by global capitalism. To the Chinese way of thinking, such a titanic task calls for a cultivated dullness; there can be no room for imaginative prima donnas. A Cabinet of Brezhnevs is far preferable to one of Gorbachevs.

Radical economic and political reforms will be abjured at least until the Fifth Generation can take over. Hu, for instance, "is more colourless than I would like to say, but then you don't want someone too flashy with one billion people," counsels Ercel Baker, founder of Ottawa's Baker Group International, a firm focusing on expanding business ties with China.

For partly this reason, these up-and-comers are congenitally averse to the public politicking and purging that accompany most transfers of power, in which violent conniptions are produced by the clash of individual egos grasping for the glittering prizes. Within a consensus-obsessed Politburo, "disagreements" never leave the room and ruthless internal dogfighting comes disguised as "frank discussions within Party circles."

Considering the Identikit backgrounds of the Fourth Generation, there are more such "disagreements" than one might expect, but they are generally divergences of degree rather than of principle. One of these individuals, for instance, may be marginally more favourable toward privatizing some of the unprofitable State-Owned Enterprises (SOE) than another, but the wisdom of retaining the government's hand on the economic tiller remains unquestioned dogma.

Until now, owing to the Politburo's mania for presenting a united front to outsiders, dissecting its institutional thinking and predicting likely policy was guesswork. We are fortunate in having a Chinese-language book, Disidai ("The Fourth Generation") -- translated by two China experts, Andrew Nathan and Bruce Gilley -- apparently written by a highly-placed Party insider. The book is based on classified Organization Department (OD) documents. The OD is the Communist Party's secret office that collates dossiers assessing candidates for promotion, based on their previous experience, written memoranda and internal comments and speeches. We can derive from this, and other sources, a picture of the new Politburo's collective mind and its views on a range of subjects.

The Chinese leadership is -- in a sentence -- painfully aware the country is in big trouble, making them still more wary of approving such radical reforms as mass democratization and introducing Western-defined standards of rights that might blow the place apart. The basic human figures are frightening: there are 150 million semi-literate (if that) migrant workers, 100 million or so unemployed and 200 million (out of 400 million in total) agricultural labourers thought to be "surplus to requirements."

Ercel Baker believes there are two Chinas nowadays: the one Westerners see, which comprises 400 million quasi-bourgeois, educated, relatively prosperous Chinese mainly residing in the coastal areas; and the other one, of 800 million peasants, whom Beijing sees as one big Boxer Rebellion just waiting to happen if things go wrong, much as happened back in 1900. Owing to massive over-capacity combined with over-supply of goods destined for export, there is retail price deflation and corporation profits are stubbornly low. So it is that last year, in spite of China's oft-cited spectacular GDP growth (7.3% in 2001), the country's 174,000 SOE suffered a 0.8% decline in profits. That's quite a remarkable feat, but not one the incoming Politburo would wish to keep repeating.

And then there's the stratospheric level of non-performing bank loans, the huge unfunded social welfare obligations and, of course, the pervasive corruption, not only within the SOE but also in the Party. In 2000 and 2001, it is believed that one-third of all government revenues disappeared. Of the Communist Party's 64 million members, fully 780,000 have been punished in the past five years for corruption, and even that significant figure is a fraction of the real number of bent officials. One estimate states that only between 6% and 10% of corrupt members are detected and charged.

Given the magnitude of the problems, to the incoming Politburo, the mantra that "China must undertake serious reforms immediately" is infantile. According to Christopher Marsh, writing in an online foreign policy journal, www.inthenationalinterest.com (an offshoot of The National Interest), the Chinese have been studying the effects of economic and political reform in the former Soviet Union in order to avoid similar mistakes. In their view, while Hungary and the Czech Republic are counted as success stories, "the fate of Yugoslavia provides a much more pertinent and troubling analogy."

The consensus view in China, borne out by Disidai, is that the Politburo will pursue what Nikolas Gvosdev (in a recent issue of World Policy Journal) has nicely termed "managed pluralism"; another name for the process might be "controlled liberalization" -- in the interests of strengthening, not eradicating, the Communist Party. In other words, people will be given the right to choose, but the government, in the interests of "national unification, ethnic cohesiveness and social stability" (in the words of Zeng Qinghong, the probable Secretary of the Party Secretariat), will carefully limit their choices. In decades to come, then, China is planned to move away from ideological despotism toward a post-ideological authoritarianism of the sort once found in Taiwan and South Korea. The danger, from the Politburo's vantage point, is that liberalization snowballs, leading to a Polish-style "democratic revolution" but perhaps shattering territorial unity into shards of rival fiefdoms (viz. Yugoslavia). For this reason, unleashing Western-style democracy, adds Baker, "would be the worst thing for China."

According to Disidai, in order to cement the hold of the Communist Party over a united China, the new Politburo will focus on binding the people to the government while keeping foreign relations (with the United States) on an even keel. It is believed the economic turmoil and the rampant corruption are causing threatening levels of alienation.

That is the general principle with which all agree, but within the Politburo a small split exists. On one side is the comparatively liberal Li Ruihuan, slated to take over as the National People's Congress chairman, who favours semi-competitive provincial elections (i.e. non-Party members might run for office) and a limited degree of private media ownership to check abuses of power among low- and middle-level officials; on the other is Hu Jintao, who argues that Party members ought to be recruited, monitored and evaluated more stringently to weed out slackers.

Regarding the economy, the Politburo is less divided. We can be quite confident the Second and Third Generations' solution of export-led growth fuelled by foreign investment will be slowly phased out by the Fourth. In the words of Wen Jiabao, the likely Premier of the State Council, the Politburo will concentrate on the "expansion of domestic demand" by "raising the people's standard of living." Though Western imports will necessarily rise as a consequence, better-off people are less likely, it is believed, to seek succour in democracy and to entertain thoughts about ousting the Party. Local businessmen seem taken with the idea, resulting in the paradoxical scenes of capitalists earnestly filling out their Communist Party membership forms.

As Western companies come to rely on sales to the gigantic Chinese market, and China in turn becomes less reliant on Western countries buying its exports, Beijing will be allowed to dismiss outsiders' demands that impinge on China's sovereignty. In particular, the new Politburo's views on Tibet, Xinjiang (a partly Uighur Muslim province in the far north-west) and Taiwan are not calculated to reassure independence movements. In Disidai, Hu Jintao, formerly of Tibet, is quoted outlining his plan to deal with separatists in Xinjiang:

"We have to send our best people to the front lines, the village and township Party committees have to play a core leadership role, the village Party branches have to become fortresses in the battle, the police precinct offices, People's Armed Police and basic-level militia must develop their roles as core cadres along with the advanced peasants."

A free hand in Tibet and Xinjiang, and something of an overbearing influence over Taiwan, have long been Chinese aims that the Fourth Generation believes it can achieve once China has modernized sufficiently. An economically strong China, in other words, can afford to ignore Western mores. That is the Very Long-Range Plan, which Hu Jintao and his colleagues are dedicated to helping execute in their methodical, plodding way. According to Disidai, the new Politburo is convinced the United States uses these issues as moral bargaining counters to put Beijing on the diplomatic defensive, but in the future, Washington will hesitate before risking its trade connections. The Politburo has no intention of picking a fight with the United States, and so long as Washington stays out of what Beijing regards as its business and co-operates with it on "matters of mutual interest" (i.e. anti-terrorism and non-proliferation), the two Great Powers should rub along in a civil enough fashion.

Welcome to the Fourth Generation. - by Alexander Rose National Post 9 Sept 2002

Forbes' list of China millionaires swells in 2001

BEIJING (Reuters) - The ranks of Communist China's super-rich swelled this year and two brothers running pig-swill king Hope Group stand at the top of the pile, Forbes Global magazine said on Friday.
In the very year the Communist Party finally proposed opening its doors to entrepreneurs, Forbes has enlarged its annual list of China's richest to 100 from 50 and raised the bar for entry to $60 million from $42 million in 2000.
The top 12 are estimated to be worth more than $300 million each and 60 are believed to have amassed more than $100 million.
All this in a country of 1.3 billion people where around 10 percent survive on less than a dollar a day and annual per capita income stands at just $1,100, Forbes says.
Fortunes have swelled since late paramount leader Deng Xiaoping launched market reforms two decades ago but never before in China's modern history has Deng's well-worn phrase "to get rich is glorious" had quite so much resonance.
In July, President Jiang Zemin suggested giving entrepreneurs the right to become party members, acknowledging the growing role at least 1.5 million private firms are playing in the economy and absorbing workers laid off by state-owned enterprises.
Fewer than 10 percent of this year's list are party members, but nearly three quarters of them had their education interrupted by a decade-long Cultural Revolution beginning in 1966 which persecuted and at times killed intellectuals and capitalists.
Six are delegates to the National People's Congress, China's parliament, and 16 are part of the Chinese People's Political Consultative Conference, the government's largely toothless advisory body, according to Forbes.
RAGS-TO-RICHES
Topping the list are the Liu brothers who run East Hope and New Hope, part of the Hope Group, one of China's first private companies to engage in foreign trade independently and which feeds the millions of animals devoured by ordinary Chinese.
Liu Yongxing, 53, came in second place last year while his brother Liu Yonghao did not appear on the 2000 list at all.
Built from an initial outlay of just 2,000 yuan (US$240) in 1982, the Hope Group is now one of China's largest private conglomerates and a major shareholder in the only private bank, Minsheng Bank.
Another example of modern China's new found wealth is Seastar's 44-year-old Rong Hai, who has made $300 million from a diversified concoction of information technology, fruit juice and real estate.
Rong did not make the list last year. This year, he ranks 12th.
Many on the list are young, averaging just 45, and seven are women, Forbes said.
Many of last year's successes linked to the now burst Internet bubble have slipped off the list.
Telecom firm Huawei's Ren Zhengfei failed to make the grade despite ranking third last year with a fortune of $500 million.
Chinese Web portals Netease.com Inc's William Ding and Sohu.com's Charles Zhang were also conspicuously missing. In 2000, Ding, aged 29, ranked 20th and Zhang was 37th, at the age of 37.
Embattled Netease.com's share price has fallen to under $1 from a closing high of $14.75 since its listing on the Nasdaq stock exchange in July 2000. - YAHOO! 26 Oct 2001

PROFESSION

Golf, charm and private banking
In this follow-up to last week's piece on career prospects in private banking, Jason Low talks to a veteran who shares with Young Investors' Forum what it takes to be successful and how to survive along the way

Having qualified as a professional accountant in London, David Loh has ditched crunching numbers for a job as a wealth adviser to high net worth individuals - an occupation more commonly termed as a private banker.
Backed by more than 20 years of experience in the business, the man is now a senior private banker and managing director of Citi Private Bank, managing a select group of 'mega wealth' clients - those with a net worth of US$250 million or more - from the Philippines, Singapore and Malaysia.

Mr Loh believes that cultivating the trust of his clients is one of the most important factors in a highly successful client-banker relationship.

'Your clients are very bright people and they are always assessing you throughout your interaction with them,' he said. 'Thus it only makes sense to be very aware of your role and respect the relationship and time that they grant you.

'Only when you respect the relationship will you be able to gain their respect and trust in return. This will in turn enable you, the banker, to foster closer ties with your client and members of his family which is pivotal in managing a successful relationship.'

Backed by more than 20 years of experience in the business, the man is now a senior private banker and managing director of Citi Private Bank, managing a select group of 'mega wealth' clients - those with a net worth of US$250 million or more - from the Philippines, Singapore and Malaysia.

Mr Loh believes that cultivating the trust of his clients is one of the most important factors in a highly successful client-banker relationship.

'Your clients are very bright people and they are always assessing you throughout your interaction with them,' he said. 'Thus it only makes sense to be very aware of your role and respect the relationship and time that they grant you.

'Only when you respect the relationship will you be able to gain their respect and trust in return. This will in turn enable you, the banker, to foster closer ties with your client and members of his family which is pivotal in managing a successful relationship.'

But trust can only be built over the long term by consistently following up in delivering services, asking for feedback and asking good questions.

'Ultimately, the choice lies with your client in deciding whether to allow you to manage his wealth, so a good amount of trust is always essential in developing a strong partnership when it comes to wealth management,' he said.

After-sales service is also critical, he added. New recruits should bear in mind that relationships are developed for the long term - quite unlike deal closures in investment banking, which tend to be on a project basis.

'Hence, being attentive to your clients' needs and taking the initiative to provide solutions for your clients will undoubtedly help to cultivate trust for the long haul.'

While mastering the technical aspects of private banking - such as the ABCs of trust services, investment products, credit and lending - is not difficult, the challenge is in mastering the softer skills required of the job such as effective communication and making others warm up to one readily.

'It is important in this business to be able to warm up to others, especially your customers, so as to facilitate effective communication,' he said. 'Even when you are in a restaurant, the proficiency of your soft skill-set comes into play. You are expected to be able to handle yourself well by behaving politely when you are ordering food and display a competent knowledge of dining etiquette.

'Of course, some of this can be trained for and practised but a portion of it is also determined by a person's character and upbringing. This is the skill set that is the most difficult to train for, especially within a short period of time.'

For undergraduates wishing to prepare themselves for a career in private banking, Mr Loh suggested picking up golf, a game often associated with the high net worth.

'Many people often like to play golf both for the love of the game as well as the character building aspect of the game,' he explained. 'Your behaviour on the golf course speaks volumes of your ability to control yourself and evidently shows your level of emotional maturity. Thus a head start on the golf course will always be very helpful for one aspiring to be a private banker.'

Playing golf as part of a job may sound like a luxury for many. However, there are many challenges that private bankers face as well, especially when their clients' portfo-lios are not performing up to expectations. When that happens, a good private banker should not be afraid to address and discuss the issue with his clients.

'Most of the time, portfolio underperformance might be due to the poor global economic environment which the private bankers have no control over,' said Mr Loh. 'Therefore, it is important to talk it out with your clients to enlighten them about the situation. For them to give you 'face time' is a privilege; you should appreciate and make the best use of it.

'It also helps to talk to your clients in terms that they understand when explaining the underperformance. For example, you might relate investing money in a new product to investing in a new business where economic conditions play a large part in determining the success of the venture, to enable them to understand the situation better.'

The bottom line is to engage clients and maintain regular communication. 'Dedication and commitment in serving your clients is one of the cornerstones of private banking, something which every private banker- to-be should possess even before considering a career in private banking,' he said.

When not working, Mr Loh enjoys working out in the gym, reading and trekking. 'I prefer the open to the cities and I like to travel to unique places, places where tourists seldom frequent,' he added. 'It is there that I find peace and quiet and it gives me time to reflect and put things into perspective. I always seek to live my life to the fullest by trying out things that are different from the ordinary.'

His final piece of advice for aspiring private bankers: 'This is a glamorous and prestigious job but you have to be prepared to work hard for the rewards that come along with it. It is a great career for someone who enjoys interacting with people as private banking is an extremely client-centric business. Live your life to the fullest because clients will appreciate you more if you have a very interesting lifestyle. Through you, they may also see an interesting world and life.' - 2008 June 16 SINGAPORE BUSINESS TIMES

A new breed of private banker

The corridors of Singapore�s Command House once resonated to the sound of British officers barking orders. Last month, though, the former military headquarters of a colonial power was reincarnated as a �management campus� for UBS. Here the Swiss bank�s newest recruits in the Asia-Pacific region embarked on a mission to become the continent�s private bankers of the future.

What the world�s biggest wealth manager has initiated in Singapore is being replicated to varying degrees elsewhere, as leading banks including Citigroup, HSBC and a clutch of Swiss companies react to a shortage of talented individuals to look after rich people�s money.

�The traditional image of the private banker has altered as the business has undergone a transformation,� says Christian Machate, head of human resources for private banking at Credit Suisse. �Lunching, dining or playing golf with clients may still matter. But they are no longer enough to meet our customers� needs.�

Spiralling wealth, especially in high growth regions such as Asia and eastern Europe, has created thousands of customers for the world�s wealth managers. UBS, which reports its second-quarter results today, attracted SFr113.3bn (�46bn, $89bn) in net new money to its international wealth management network last year � more than the balance sheets of many banks.

In Asia, excluding Japan, UBS expects the liquid assets of wealthy people to grow almost 10 per cent a year up to 2009 compared with almost 6 per cent globally over the same period.

Many leading banks want a piece of this action. But while customer numbers are growing, finding suitable staff is increasingly problematic. The Swiss, who dominate wealth management because of their reputation for reliability and discretion, are particularly exposed to shortages. And what the Swiss banks face today, those eyeing private banking will contend with tomorrow.

Gery Bruederlin, group head of human resources at UBS, says its private bankers have grown in number by about 20 per cent a year in Europe, excluding the mature Swiss market, and by about 30 per cent in Asia. Boris Collardi, chief operating officer of Julius B�r, a smaller rival that is expanding fast, puts growth in �double digits� across the board.

The sense of urgency is heightened by the fact that the ideal private banker of today is strikingly different from his predecessor. Where charm, the right accent or family background and a foreign language once guaranteed a job in an undemanding backwater of the banking business, requirements have changed.

Once, clients were happy to have safe but low-yielding fixed-interest bonds in their portfolios. But the better informed clients of today demand better performance. And that requires a new breed of private banker with improved financial skills.

The first response has been to step up recruitment. Advertising and, increasingly, staff referrals play a part. Headhunters now get involved at the highest level. But traditional apprenticeships remain central for the bulk of appointments in Switzerland, which is home to an estimated one-third of the world�s offshore wealth.

Many of the more than 1,000 private bankers who work for UBS in Switzerland, for example, left school at 16 or 18 and trained on the job, Mr Bruederlin says. Mr Collardi agrees: �Apprenticeships have been a traditional way of building staff, and will remain so.�

But the sheer rise in demand have led banks to start recruiting more graduates. That trend has been accelerated by the fact that, as in most developed countries, more school leavers in Switzerland are opting for higher education. Another factor is that traditional bank apprenticeships are largely unknown in the other markets into which the Swiss have expanded.

UBS has invested heavily in neighbouring European countries to create small networks of branches that are exclusive to richer customers. But local social patterns and recruitment numbers have not warranted tailor-made apprenticeships.

�In the UK, France, Spain or Italy, we hardly have any client advisers who have been trained the traditional Swiss way,� Mr Bruederlin says. �So we have hired from the universities.�

If hiring in Europe has required a broader strategy, the push into Asia has called for altogether more ingenuity. Countries such as Korea, let alone China, have no tradition of private banking. The absence of any idea about the levels of service that Swiss bankers and their clients take for granted makes training raw recruits more important than ever. The banks are starting from scratch.

UBS�s Singapore campus represents the most conspicuous response. But Credit Suisse�s business school, set up in 2004 for training throughout the bank, has also been active in wealth management. Young Asian recruits attend long courses either at the Zurich headquarters or at the school�s regional outposts in Hong Kong and Singapore.

But no matter how hard they train, the growth in demand means most banks need people on the ground today. This has produced some lateral thinking among employers still attached to traditional on-the-job training.

Asia abounds with stories of luxury goods stores, estate agencies and Ferrari dealerships being raided by private banks desperate to recruit good staff. The Swiss banks deny resorting to such measures but admit that they have widened their selection criteria.

�In Asia, the growth is faster and the competition for talent even fiercer than elsewhere,� Mr Bruederlin says. �The clients are different too. So you have to adapt; you have to take different routes.�

UBS now hires more people who are making �lateral� career moves, notably young lawyers or consultants, he says. No longer is private banking deemed socially or intellectually inferior � not to mention less well paid.

Credit Suisse is going down the same path. �We want to identify people with certain basic competences, who can be trained to learn specialist skills,� Mr Machate says.

Such competences include not only intelligence and a basic interest in private banking, but also good personal skills and what Mr Machate calls �an interest in services� � a sales mentality. A bulging address book � whether of penthouse owners or Ferrari drivers � is not so important. �It�s good if it�s there but is not a selection criterion for us,� he adds.

Julius B�er has also been looking beyond traditional sources, Mr Collardi says. Breakneck expansion into Asia has even prompted the bank to start recruiting at the famous hotel school in Lausanne. This graduate-level institution, which was set up in 1893 to train the Swiss hotel managers of the future, today attracts bright young people with wealthy backgrounds from around the world.

�We are determined to develop the service component of our brand,� Mr Collardi says. �These are talented people, often with the right international backgrounds and language skills.�

A COCKTAIL OF SKILLS TO SUIT CLIENTS� TASTES
UBS�s Asia-Pacific campus in Singapore divides trainees into two streams: new graduates and those already in employment.

The alternative � mixing graduates, apprenticed school leavers and �lateral hires� such as consultants or lawyers � would create a cocktail of talents that would be hard to absorb. With existing private bankers also undergoing periodic retraining, the mix could even be queasy.

Swiss banks claim that rapidly evolving recruitment practices have not damaged the fabric of their private banking operations. Most even argue the mix of talents has stimulated fresh ideas.

Not all the changes were assimilated without pain, however. Traditionalists accustomed to wining and dining clients may be suspicious of new financial jargon, such as for complex structured products. Older clients who shifted assets to Switzerland primarily to avoid onerous domestic taxes may still be more interested in stability than maximum returns.

The banks say their training programmes are geared as much to existing bankers as to their new recruits and, while some employees may be hostile to courses, most participate willingly. - 2007 August 13 FINANCIAL TIMES

A new wave in Asian private banking

Financial intermediaries (FIM) represent a middle ground between the private bank and the client, and in Asia they are a consequence of a milestone shift for both bankers and advisers. Just as many Asian individuals - often the first generation in their families to achieve significant wealth - are approaching a crucial period of transition to the next generation of their family, so too a crop of leading private bankers are reaching retirement age after a lifetime spent building trust with their clients. These bankers are setting up small businesses servicing the clients and families they have known for decades, while often linking back into the products and services of the big banks.

The idea has a lot to recommend it both from an adviser and a client point of view. Both sides get to maintain continuity in relationship - one of the most vital commodities in private banking. The banker can step down from the rigour of a global firm, while remaining closely involved in client affairs. And the client is dealing with someone they know and trust, while still having access through them to global-standard services.

Clients can receive holistic and independent advice, from asset allocation to estate planning, from someone who knows their risk profile; they can have access to a whole spectrum of services through a single, vetting party; they enjoy transparency in their investments, with arguably better management of costs; and can engage specialists from tax to trustees, hedge funds to private equity managers, through their FIM.

In Europe, the appeal of this model has been apparent for quite some time, particularly in Switzerland, where it has been entrenched for at least 30 years. There, it is estimated that FIMs account for 15 to 20 per cent of the assets under management and revenues for the entire national private banking industry. In Asia, the penetration is far lower, which is hardly surprising as the whole idea of private banking is rather newer here: perhaps 2-3 per cent of private banking assets in the region are handled by FIMs.

Nevertheless, it's a segment that is growing fast, with vast potential. The European banks with FIM business which have flourished in their home market - again led by the Swiss - are leading the charge, setting up Asian hubs in Singapore to take advantage of the well-regulated environment, excellent infrastructure and government support. And global banks like Standard Chartered believe that FIMs represent an important strategic growth segment which will serve to increase banks' assets under management exponentially. Better still, they will do so in the least capital-intensive manner possible, since they remove any need to hire new relationship managers in order to bring in the assets.

The merits of the approach - increase in assets under management, the loyal 'stickiness' of client business, increased geographical reach - suggest that FIM business will rapidly take off in Asia as it has in Europe. New entrants, from Europe and elsewhere, are looking for alternative booking centres in Asia, particularly Singapore. Standard Chartered estimates that the FIM industry in Asia could account for 10 to 15 per cent of the market over the next decade, as the private banking market here matures. Indeed, many private banks are already positioning themselves for the influx, bringing in teams of FIM professionals with experience in the area - in Standard Chartered's case, eight professionals to set up an FIM-focused business in Singapore and Hong Kong.

Developing FIM business requires a nuanced understanding of the pros and cons of this new and growing area. From a bank's perspective, one strong positive is asset retention. If a relationship manager leaves to become an FIM - as more and more are likely to do - then the client and their money do not automatically leave with them. Set against that is the fact that the bank's relationship with the client is naturally diluted by the fact that an intermediary has been placed between them. Ultimately private bank services, and custodian services too, are exchangeable assets.

That means it is all the more important for banks to offer best-in-class advice, products and services, so that even in an environment of choice a client will still opt to stay with the same bank. Managing FIM relationships is an extension of managing client relationships; as well as ability and network, it is largely about trust.

FIM clients tend to be very wealthy, and so fit within the ultra high net worth segment of private banking - which for most banks means total assets in excess of US$30 million, and sometimes much more. Many international private banks have made great effort to bolster their capabilities for this segment of the market in recent years, in several cases setting up dedicated family office units to handle those wealthy clients who have sought to put their wealth within a sophisticated corporate structure.

FIMs are a natural group for this segment of the market to trust, since they can act as an external but closely-linked manager who screens banks, products and services, ensuring high quality and negotiating the best pricing and execution. This is the area where the line starts to blur between individual and institutional wealth, and it takes a carefully differentiated offering from private banks to cater for it.

Underpinning the likely growth of FIM in Asia is an unarguable dynamic: There are more and more wealthy people in Asia. They are graduating from high net worth to ultra high net worth, they are in the most vibrant economic region in the world and they are becoming far more sophisticated in their investment and planning needs. Bankers who see this, and identify FIMs as an opportunity rather than a threat, will thrive in this changing environment.

The writer is head of relationship management, Southeast Asia, The Standard Chartered Private Bank -- 2011 February 23 BUSINESS TIMES