The size of the ASPAC high net worth (HNW) market has grown by nearly 8 percent annually in recent years and is projected to reach 21 million by 2024. The global pandemic, meanwhile, has increased succession planning, with increased demand for personalized service and professional advisory support.
Signals of change
Customer
Many younger people in markets like China, Hong Kong (SAR), China and Singapore are getting wealthier, with assets held within their home country and globally. ASPAC has the second-largest concentration of HNWIs in the world after North America.
Digital adoption is ubiquitous across all age groups. Millennials in particular prefer personalization and self-service but are also less investment savvy and need guidance and education. Retail investors want the same investment strategies as HNW customers.
There is growing demand for advice for a wide range of products across global markets, including alternative assets, sustainable, ethical investments, cryptocurrencies and Shariah compliant investments. As wealth management becomes increasingly commoditized, Asians favor high-touch, human/digital relationships with their wealth managers.
Competitive
Markets like Hong Kong (SAR), China and Singapore have become offshore centers to service wealth, especially to customers in mainland China and India. This is generating strong competition from wealth managers, insurers, and other players, who are building a presence across the region, expanding into Thailand and Japan.
Big tech firms are also moving into financial services in ASPAC and will likely continue to outperform incumbents in access to expertise, innovative platforms and low-cost, value-added services and products. The huge global talent shortage means wealth managers need to hire thousands of relationship managers, as well as data scientists.
Regulatory
Wealth managers should navigate multiple, non-harmonized securities regimes across the region, adding to the complexity of serving the ultra-wealthy with international advice. In Hong Kong (SAR), China and Singapore, regulations are largely tailored to the retail market, making it harder for professional investors to verify suitability, ‘best execution’ and fair pricing.
Meanwhile, strict data security laws in countries like China and Indonesia prohibit the transfer of data cross-border, restricting wealth managers from sharing data on clients’ global investments. Expect further changes to legal and regulatory frameworks, generating opportunities for some, while eliminating players that fail to meet new standards.
Data and technology
The race is on to deliver personalized, 24/7, automated, multi-channel service, with technology expanding low-cost, customer-centric services to a wider customer base, including the less wealthy. Big tech and fintech are also entering the sector, redefining customer expectations and generating significant investment returns.
Hong Kong (SAR), China was the first to issue virtual bank licenses, followed by Singapore and Malaysia. Most ASPAC banks, larger wealth managers and brokers now offer online investment platforms, which are likely to consolidate.
With more and more Asian investors considering cryptocurrencies, Hong Kong (SAR), China has become a hub for virtual assets, with the region’s first licensed crypto exchange, and Singapore aiming to follow suit. Regtech is also developing, with encouragement from regulators in Australia, Singapore and Hong Kong (SAR), China.
Future business models
How can the region’s wealth managers gain the capabilities to compete in a fast-moving, technology-influenced marketplace?
The financial well-being provider
These providers are expanding their product scope to meet sophisticated investment demands historically addressed by more-upscale players. Wealth managers, pension and insurance companies, and even virtual/digital banks are all branching into lifestyle products, focused on winning trust and promoting financial acumen and inclusion.
To thrive amid intense regional competition, many businesses are consolidating or entering into new alliances or joint ventures, to enhance digital capabilities and cost efficiency. Potential partners include fintechs and other third-party providers, while many mid-tier financial institutions are exiting the sector.
Domestic wealth manager
In a crowded, highly regulated market, smaller domestic wealth managers, including banks, are finding it hard to compete and focusing on specific client segments. Meanwhile, larger groups are leveraging strong local brands to expand.
Mid-tier players are building on their strong retail foundations, acquiring peers and partnering or forming joint ventures, notably in mainland China. China’s huge domestic banks, with their advanced digital offerings, are well-positioned to succeed, concentrating efforts domestically and in Hong Kong (SAR), China).
As ASPAC domestic wealth managers move upmarket, they may challenge the global investment expert segment.
Global investment expert
Institutions in this exclusive segment focus on best-in-class investment advice and capital-markets expertise. The main players are sophisticated global private banks, multi-family offices and global asset managers directly serving the wealthiest global clients. Regions within ASPAC with high political stability, a solid financial sector, favorable tax regimes and a highly skilled workforce have appeared attractive for family offices and trusts for wealth transfer. However, high barriers to entry have led some to consolidate and/or partner with fintechs.
Hong Kong (SAR), China and Singapore are the two major markets for global investment experts, with emerging opportunities in mainland China and India. Global investment experts are also experiencing competition from businesses historically catering to the less-wealthy — notably domestic wealth managers’ private banking arms, who offer innovative and cost-effective new digital products and services.
Further Insights
