Moving Out

Both decided to close their Hong Kong offices in relatively short order. 

You can speculate about the internal to and froing and what prompted the final decision.

Big Ask

But the truth is that it has always been a big ask for small and medium-sized overseas wealth managers to run a sustainable operation in any of the major finance hubs in the Asia Pacific region.

Every single cost is inordinately high by any reasonable measure, and the returns are low.

Laundry List

But of all the long laundry list of expenses, a pairing comprising oversized buckets of compensation for specialists and middle management with an equity brokerage business at best, and not formalized portfolio-based wealth management, can prove fatal.

Then there is regulation. Most waltzed in knowing little more than the hands-off principles-based Swiss regulatory regime or similar, but they now return, sobered, with a profound understanding of the circular joys of supervisory micromanagement.

The Residuals

It also means you can’t just up and leave - and a residual business somewhere has to keep years of client voice logs stashed away in some storeroom, or on some computer, that will be kept intact as long as they have to be.

That includes humdrum, once inordinately urgent and expensive fare like reviewed call logs of equity trades marked as «solicited» and «unsolicited» audited by an approved third party at supervisory gunpoint and possibly then re-audited by the regulator if they didn't like what they found or as part of their constant thematic inspection trawls.

Breakeven Point

In the early 2010s, when times were good, and the mainland’s future growth trajectory seemed endless, US$20 billion in Assets under Management (AuM) was considered the breakeven point.

That number has likely risen since then. The region’s equity markets haven’t done well in the last half-decade, and most wealth managers are not large enough to compete on fixed income or even put a good showing in for alternative investments and private equity.

Below the Radar

Moreover, the mainland’s future no longer looks like the sure thing it once was, and that has a trickle-down impact on the Greater China region, where most of them operate.

Although the sector’s large institutions continue to maintain their strong commitment to the region, there is a strong likelihood that the smaller players and even medium-sized ones will continue to throw in the towel.

Under the Radar

The pitter-patter of exits has mostly gone unnoticed, but Trump 2.0, and the continued uncertainty that is likely to prompt, could make the whole thing a good deal more visceral in the future.