Why it's not all bad news for Singapore's financial services sector

OK I have read an interesting post today by Voiddecker, my fellow Londoner from Singapore and I wish to respond to his post where he talked about why a front office Singaporean core in the financial services sector is important. Having worked in financial services in both Singapore and London, allow me to respond to some of his observations and why I think that it is not all bad news for Singapore's financial services sector.

Here's a story to give you some insight as to what happens after things went wrong in my industry in the UK. I know two former hedge fund managers (let's call them Bill and Ben, I can't use their real names) who had once ran one of Europe's most successful hedge funds - the fund managers then fell out with their board and this internal infighting led to the board blocking some of the fund managers' investment decisions. As an internal power struggle ensued, everyone took their eyes off the ball and the fund performance collapsed. Bill and Ben were both very headstrong characters with short tempers and big egos, so there was a lot of shouting matches in the boardroom. Yes there was a lot of, "do you know who I am? Do you know who I am?! Without me, you're nothing!"

By the time they realized how bad things got, it was too late - some really bad investment decisions had been made and they couldn't get rid of the toxic assets fast enough. Investors lost faith in the fund and word was out, "quick, cut your losses and sell before the fund price falls any further." That fund crumbled in 48 hours and it was both shocking and spectacular how quickly and suddenly the wheels came off that bus. Yikes, their investors lost a lot of money overnight. The numbers on the screen vanished, just like that and the fund was worthless.

So these two fund managers knew that they couldn't go back to managing another fund - no one would trust them, but they did have the expertise still and they knew that the last fund crashed primarily because of the infighting and power struggles within the company. They were rich but weren't prepared to end their careers on a sour note like that - so what they did was they set themselves up as consultants to help other new fund managers get their funds off the ground. They have a little black book full of names and contact details of various experts in the industry (like myself) who are on hand, so even if they couldn't solve any problems these new players may have, they knew someone who had the answers. They were a one-stop shop for any  problems pertaining to new hedge funds. Bill and Ben weren't going to just retire and die, hell no. They reinvented themselves and are now doing pretty well. People like Bill and Ben are always going to be fine no matter how many banks go the way of Lehman Brothers - people will always be looking for a better alternative to the biscuit tin under the bed.

Or would you rather trust the biscuit tin under your bed?

Will the banking industry ever totally be outsourced to a cheaper country like India? Never, it won't happen for a simple reason: banking is a complex service industry, it cannot be compared to say the manufacture of cheap clothing where you're looking for the cheapest place to produce the garments. There is a serious amount of brain power involved in those crucial investment decisions to ensure that your investments grow - and these brains will always be attracted to places where they can make money. Bill and Ben can be anywhere in the world and they will find the right opportunities in any market to make money. And this is where Singapore comes into the equation.

London used to be a good place for bankers to be based until the 2008 crash when things changed. Bankers were portrayed by the media as the greedy bad guys, with their generous bankers' bonuses whilst ordinary folks suffered the consequences of the recession when times got hard. Don't forget, some of our big banks had to be bailed out with tax payers' money. Because we live in a democracy, (for better or for worse) our politicians reacted to this public anger directed at bankers by passing laws to curb bankers' bonuses and implementing far tight regulations on everyone involved in financial services - so it wasn't just the big bosses in the banks who were targeted, even your humble independent financial advisers and brokers who dealt with a handful of accounts had their activities far more tightly regulated under these new rules to prevent another crash.

There will be smaller and fewer bonuses for bankers in the UK under these new laws.

Yes there is an element of shutting the stable doors years after the horse has bolted - but that's what our government has done. I was at a meeting with some fund managers (including Bill and Ben) last month and you know what Bill said? "The place to be now is Singapore - they love wealth and they love superstar fund managers. I know some people who have already relocated there, the government of Singapore love people who can generate wealth, they welcome foreigners to work there if they can make money, no stupid questions asked, not like in the UK. All those fucking laws about curbing bankers' bonuses - why not just fucking shut down all the banks and send this country back to the stone age so we can all dance around fucking Stonehenge like a bunch of hippies and starve the fuck to death. That's what this government will do, they will kill the goose that lays the golden egg, that's ridiculous."

Bill continued, "The Singapore government is pro-business, whilst the government here cares too much what stupid poor people in the streets think. I say, fuck the stupid people in the streets who are poor and just want to blame bankers for the recession. I say we should all move to Singapore and base ourselves there. The government there pays themselves so much to begin with - they're not going to be poking their noses into how much we earn as fund managers. They love wealth there, unlike Britain. We have have a Tory PM but he's held hostage by the fucking stupid electorate who want a socialist state. I can't wait to move to Singapore."

 Bill and Ben like the government in Singapore. 

Guess what? I actually agree with Bill. You need to create a business friendly environment where successful people are rewarded and if someone can make a lot of money, he should be allowed to do so. The problem with the UK is that we have had a situation whereby some bankers who were highly incompetent were paid too much money for screwing up big time. By all means, crucify those who have fucked up, people like Bernard Madoff can be hung, drawn and quartered for all I care. But why are you putting caps and restrictions on bonuses on everyone, even for those who do deserve them? Many successful people are just going to be driven to places like Singapore, where the government doesn't care how big your bonus is. Is the UK going to scare away their top bankers and superstar fund managers? Well the UK's loss may be Singapore's gain if Bill and Ben do relocate to Singapore in the future to go back to fund managing - right now they are working in consulting, but who knows? Maybe in 2014?

The only problem of course, is what is going to happen when all these FTs show up in Singapore. Would the Singaporeans benefit from Bill and Ben setting up an asset management firm in Singapore? Would they even hire any Singaporeans in their firm (I doubt it)? Can Singaporeans depend on the trickle down effect if Bill and Ben do not hire a single Singaporean in their new firm? Should Singapore be rolling out the red carpet for foreign talents like Bill and Ben? How would the MAS feel about people like Bill & Ben operating in Singapore?

Is Singapore's banking sector over reliant on FTs?

Now what happens next depends a lot on the government. If the government puts too much restrictions on what these superstar bankers can do or earn, then they're just going to leave Singapore. However, right now, the government is doing precious little in terms of trying to engage them with developing the next generation of bankers in Singapore. A simple idea would be to get these bankers to take part in programmes to accept local interns as part of their license to operate in Singapore, or to get them to participate in local CDP programmes.

I remember this company I used to deal with in Tanjong Pagar which was entirely expatriate - even the receptionist was a white expatriate. I was thinking, surely it would be cheaper to hire someone locally than to get a British expatriate but there you go, I must have been the only Asian person to have ever set foot in that office. There are plenty of other expatriate companies in the financial services sector in Singapore which are like that, where the only people who are Asian are the clerical staff and the cleaners. Would these people ever hire a local for a senior position? I doubt it somehow, given how rare it was to see an Asian face in some of these companies.

There are Asian-free companies here, staffed only by white expatriates.

Ironically, I don't think the PAP were thinking about attracting superstar bankers to Singapore when they decided to write their own paychecks, but that is at least one positive side effect! Singapore is definitely better off with these superstar bankers in Singapore than elsewhere - having such talent in Singapore will certainly help the prestige and reputation of Singapore as a global financial centre. Now that such foreign talents are indeed in Singapore, you need to figure out a way to get a lot more out of them by forcing them to engage further with the locals and this has got to come from the MAS, by coercing them into taking part in various training and education programmes that will benefit the locals so that the locals can benefit in a tangible and more direct way from Bill & Ben's presence in Singapore.

So Singaporeans, people like Bill and Ben are headed your way not because you've created such a lovely country, hell no. Rather, it is because of what is happening in the UK: when you have the government threatening to jail reckless bankers, Bill and Ben are getting very worried that they may end up in jail the next time one of their funds goes catastrophically wrong. They know that if they operated out of a place like Singapore, the government there will be a lot more forgiving to reckless bankers because the moment they jail a reckless banker working in Singapore, there will be a mass exodus of foreign bankers from the banking industry in Singapore and the PAP will never let that happen.

The PAP wants people like Bill and Ben to settle in Singapore.

Sorry for being blunt, but if people like Bill & Ben chose to move to Singapore because it is a lovely place to live in, nice people, nice culture, safe place to bring up kids, etc - then yeah, that's something to be proud of. But if they're moving to Singapore because they want to escape the UK's tighter regulations on the activities of reckless bankers, knowing they can get away with far more in Singapore, then no, that's nothing to be proud of. Oh the irony, you have such strict laws on everything from littering to graffiti and no freedom of speech, yet people like Bill & Ben sees it as some kind of promised land where they can do what they want without unwanted government intervention. Go figure.

Et voila, there you go - Singapore is seen by those at the top of the food chain in the banking industry as a very attractive destination to live and work for a rather bizarre reason (ie. the PAP pays themselves ludicrous amounts of money, so they're not going to bitch about big bankers' bonuses) that may not make sense to most ordinary Singaporeans, but seen through the eyes of people like Bill and Ben, it makes Singapore their perfect country. Will ordinary Singaporeans are a part of this banking boom or will this be no more than a bunch of expatriates in self-imposed tax exile running their global businesses from an office in Singapore? Right now, it is the latter. People like Bill & Ben will NEVER EVER take on Singaporean nationality for a simple reason: they have children and they don't want their sons to have to do NS. Even if their children do end up growing up in Singapore, they will do so holding British passports - why would they bother getting Singaporean passports?

Will Singapore's banking sector be successful without FTs?

I was going to write a paragraph about why Singaporeans are not getting the top jobs in the banking industry despite people like Bill and Ben heading your way, but then I thought, I'd rather wait till my trip to Singapore next month before passing judgment. I wasn't impressed with the locals I had encountered in the industry 2 years ago (go on bitch me out on that) apart from two locals who were superstars in what they did, but let's see what awaits me in Singapore in July-August 2013 (apart from the haze, of course). The only difference is that I was working in Singapore in 2011 and this trip is a holiday for me, but we shall see.

So, what are your thoughts? How do you feel about people like Bill and Ben heading to Singapore? If they did open an office in Singapore, would you like to apply for a job with them? Will Singapore benefit in the long run relying on attracting superstars like them to work in Singapore, instead of investing in local talent? Let me know what you think, please leave a comment below. Thank you! Kum siah!