Asia wealth management faces talent crisis

TOKYO (Reuters) - From Tokyo to Shanghai to Mumbai, the loudest complaint from financial executives is that the shortage of talent is getting worse as competition for Asia's wealthy increases.

A lack of well-trained fund managers and private bankers throughout Asia poses a risk for the wealth management business as the industry expands too quickly for newcomers to gain experience.

"We have a number of concerns about the experience of people coming to us looking for licenses," said Martin Wheatley, chief executive of Hong Kong's Securities and Futures Commission, during the Reuters Wealth Management Summit. "That's across the board in financial services."

Asia's wealthy -- considered to be people with more than $1 million in investable assets beyond their house -- rose 7.3 percent to 2.4 million people last year, faster than the more developed markets of the United States and Europe.

Financial firms are gearing up to take care of this new class of rich customers, but the talent shortage is costing big money as firms struggle with high turnover rates as employees with minimal experience jump to competitors for bigger paychecks.

"We lose people to the industry quite a lot," Wheatley said. "We need to pay them more."

Private bankers are particularly hard to find as they need to make personal connections with the world's richest people, and some country officials are trying to fill the void.

"At the high end, people like to have relationships with people like themselves," said Dave Seymour, global head of investment management and funds practice for KPMG, noting that Singapore has set up banker training schools.

"The government's recognized one of the problems facing the industry is a shortage of trained bankers. That's led to, in Singapore and other markets, extreme wage inflation," he said.

The shortage is not limited to Asia, as companies in the United States and Europe face similar challenges, but many foreign companies are particularly hamstrung when trying to find bilingual staffers.

"The biggest issue in Japan for a foreign institution is to find people," said Francois Barbe, the Japan chief executive of Societe Generale's (SOGN.PA) private banking arm.

SocGen is trying to hire nine more private bankers by the end of next year, up from its current 26.

"You need people who have some contacts," Barbe said.

Increasingly, the company is rubbing up against local competition that is also keen to expand into the higher echelons of private wealth -- managing money for clients with more than $1 million in investable assets.

"It's not easy to develop or raise fund managers," said Koshiro Taniguchi, head of private banking for Daiwa Securities Group Inc. (8601.T), Japan's second-biggest brokerage.

For Daiwa and its rivals, grooming fund managers with a nose for making money is crucial as Japan's wealth management business shifts from relying on broker commissions to earning fees based on the returns of a client's portfolio.

"It's a performance fee. For customers, if they don't make money, they don't have to pay the fee," Taniguchi said.

And it's not just fund managers. Taniguchi said that Daiwa recently lost one of its three tax specialists to a rival firm.

"He was headhunted," the 29-year Daiwa veteran said.