Structured Products Asia Awards 2016
Despite finding itself seeking to grow in an increasingly moribund market, Contineo - the multi-issuer platform that launched in January 2015 with the backing of most of Asia-Pacific's key structured products houses - can lay claim to be offering users a glimpse of the future of private wealth management.
The platform has built up a strong issuer base, expanding beyond its original shareholder-dealers - Barclays, BNP Paribas, Goldman Sachs, HSBC, JP Morgan and Societe Generale - and is already working with around 40% of Asia's private banks. Two further dealers are expected to onboard this year, with another two to follow early in 2017. The platform's buoyancy is such that the original shareholders are understood to be marking their principal investments at a significant gain.
From a low base, volumes are growing: the platform has reported annualised volume growth of 30% in equity-linked notes, 30-35% in fixed coupon notes and 25% in accumulator/decumulator trades this year. Mark Munoz, managing director at Contineo in Hong Kong, says the tipping point will come when private bank clients begin fully migrating away from their historical manual pricing and processing systems and adopt the platform's more automated system.
"The first challenge is that a platform must get users accustomed to something new, and when you have embedded your job in Excel and email that process is really hard to transition," says Munoz. "If it's apples for apples then there is no incentive to switch, and so we had to understand what would drive our users to not just use the application occasionally but embrace it as a go-to tool."
The platform uses a multi-issuer request-for-quote system, and a full trade-booking suite with term sheet delivery and compliance reports. The platform's data scientists have designed more than 25 reports to support management information needs and a dashboard to provide greater ease of use. The platform's interactive business intelligence tool, Contineo I/O, gives banks information on what clients are buying and selling, and also on its performance in request-for-quote orders with clients.
Having learned what enhancements private banks and dealing desks wanted to see, and with solid input from the platform's backers, this year saw the team begin to address what they were missing in their current process. Munoz says Contineo built new features into its network, including user interface changes to make the workflow simpler, and functional changes to the sending and receiving of information over networks.
Positive feedback loop
The next stage was showcasing the benefits of the platform's data offering to clients - such as best execution, compliance and regulatory reports - and showing dealers where flows were happening, to create more opportunity for users to push products to their clients. As the firm learns from clients, it incorporates their feedback into the network and releases a new version of the application every month.
While one senior executive at a private bank observes that only a minority of his peers are transacting on Contineo at the moment, he expects that to change. "[At the] beginning of next year, all our flow will go onto the platform," he says. "[Now] it's actually just a small amount of the trades, but we really need to streamline our processes. The idea is clearly to have everything on the platform going forward."
The current Excel- and email-based practices used in Asia may be clunky, but they work well, he adds, and any new system needs getting used to: "I definitely think it's going to happen, but some banks will move quicker than others. Even on our side it's taking some time, so there is not huge flow happening there. But by the beginning of next year when we move everything to the platform, that's when you will see pick-up. The same is true for other banks."
Despite being based in Hong Kong, the platform sees about 85% of its business from Singapore, where the Asia-Pacific private wealth management industry is concentrated. The platform's planned opening in Europe is still on the cards, says Munoz - subject to finding the right partners. Meanwhile, a physical expansion to Singapore, where the firm already has a datacentre, is planned for next year. This will comprise a client engagement team and a support team of around three people to begin with, he adds.