"Polarization Increases the Wealthy"... Banks Focus on Ultra-High Net Worth Individuals

Launch of Specialized Service for Clients with Assets Over 30 Billion and 10 Billion
From Travel Preparation to Family Gatherings... Taking on the Role of a 'Jipsa' Assistant

[Asia Economy Reporter Minwoo Lee] Banks are actively targeting the ultra-high-net-worth individual (UHNW) market. They are expanding their service areas beyond simple asset management to support all major and minor matters, including travel preparations and family gatherings. This is seen as an opportunity to increase non-interest income as the number of wealthy individuals grows due to polarization.

◆Focusing on Ultra-High-Net-Worth Individuals... From Hobbies to Family Affairs= According to the financial industry on the 11th, Hana Bank recently launched the ‘Hana Family Office & Trust’ service targeting ultra-high-net-worth individuals with assets exceeding 30 billion KRW. This strategy narrows the focus from the existing VIP service ‘Club One,’ which was provided to those with deposit assets of 3 billion KRW or more, to concentrate on clients with even larger asset sizes.

In particular, they have formed a ‘Life Care Dedicated Team’ to manage non-financial needs, providing support beyond asset management to overall lifestyle assistance. This includes finding and booking restaurants for family gatherings, arranging accommodations for travel, and coordinating various schedules. They also recommend and manage various curricula for children’s education. Essentially, they act as a ‘butler’ who responds whenever the client calls, supporting all kinds of household matters. Additionally, a ‘Wealth Management Advisory Group’ specializing in legal, tax (accounting), and real estate matters is operated for each client. Through this, they plan to offer comprehensive wealth management services including asset growth, inheritance, business maintenance, and succession.

Shinhan Financial Group has also been actively providing the ‘Shinhan PWM Family Office’ asset management service for ultra-high-net-worth individuals and families with financial assets exceeding 10 billion KRW since early this year. Dedicated centers have been opened in both Gangbuk and Gangnam, Seoul, and the top private bankers (PBs) among the 150 nationwide have been assigned. The plan is to provide ultra-close 1:1 asset management tailored to the life cycle of families and corporations, going beyond personal financial advice.

◆Strategy to Expand Non-Interest Income Amid Growing Wealthy Population= The increase in services targeting the wealthy and the opening of dedicated centers contrasts with the trend of bank branches closing. The five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?closed 236 branches last year. This year, 136 branches have already been consolidated. As asset polarization deepened due to COVID-19 and the number of wealthy individuals increased, banks view the high-net-worth asset management market as a future growth area, aiming to increase non-interest income through fees beyond traditional interest-based business.

The expansion of the wealthy market is also confirmed by various indicators. According to the Household Financial Welfare Survey released by Statistics Korea in December last year, the average net assets of the top 20% compared to the bottom 20% increased from 99.7 times in 2017 to 166.6 times in 2020. According to the ‘Korea Wealth Report’ released by KB Financial Group at the end of last year, the number of individuals holding financial assets of 1 billion KRW or more was 393,000 as of the end of 2020, an increase of 10.9% from the previous year. This is an increase of over 100,000 compared to 271,000 in 2016. It is the second-highest year-on-year growth rate following 14.4% in 2017. Not only the number of wealthy individuals but also the financial assets they hold have significantly increased. As of the end of 2020, the total financial assets of those with 1 billion KRW or more reached 2,618 trillion KRW, showing a record high growth rate of 21.6% compared to the previous year.

An industry insider said, "While the economy stalled due to COVID-19, the number and asset size of wealthy individuals have increased further," adding, "This is a good opportunity for banks, which have been criticized for relying on interest-based business, to increase their non-interest income."