Elliot Shadforth, EY
“The opportunity in the region grows, but there are challenges with costs. We have already seen some consolidation in the industry and we expect more of it,” he told FSA.
Opportunities in private banking and wealth management in Asia-Pacific continue to grow. Net investable assets of high net worth individuals are expected to hit $12.6trn by 2021 from $9.4trn in 2016, according to EY’s 2018 wealth management outlook report.
However, a number of banks in Asia have streamlined their operations during the past year by selling off wealth management units. The shakeout has been attributed to difficulties in attracting new clients, the need for scale and regulatory costs.
The latest activity on the M&A front is UBS’ plans to acquire Nordea’s Luxembourg-based private banking business, which includes offices in Singapore and Switzerland.
Other acquisitions and consolidations include Indosuez Wealth Management’s acquisition of the private banking division of Credit Industriel et Commercial (CIC), National Australia Bank’s sale of its private wealth business in Hong Kong and Singapore to OCBC and LGT Group acquiring ABN Amro’s private banking business in Asia.
Compliance costs
Regulatory costs will continue to be of the biggest challenges for private banks and wealth managers operating in the region, according to Shadforth.
“In Asia-Pacific, compared to North America and Europe, you have country-level regulations and you don’t have the overarching regulations, like the EU requirements in Europe.”
Costs rise in Asia because firms must comply with varying regulations across different markets. Finding a single solution to the regulatory requirements imposed by different jurisdictions is very difficult.
Firms are therefore looking for ways to trim down other operational costs, such as solutions to make client onboarding easier.
“That’s why technology now is important. If you stand still, the market will move past you. You need to look at your internal technology as well as how you are interacting with clients through different channels.”
Attracting more clients
A number of private banks and wealth managers in the region still give face-to-face advice to clients without offering other channels to provide advice, according to Shadforth.
However, citing survey findings that the firm conducted in 2016, Shadforth said that there is a growing number of high net worth individuals who are open to receiving advice online and through smartphones.
Financial advice preferences
According to the survey, there is a disconnect between the region’s wealth managers and their clients. Nearly 60% of APAC firms surveyed at the time expected personal interactions to remain their primary channel in the next two-to-three years. At the same time, 32% of clients say their preferences are shifting to digital.
Shadforth believes that players will be able to attract more clients by shifting to a “hybrid model”, where face-to-face talks are reduced, while online and mobile advice are increased.
“The winners will be the players who are able to shift their business models and capture the trend of giving online or mobile advice.”
Holistic solutions
Shadforth also suggests firms should offer more “holistic solutions”.
“Investors are definitely looking at investment returns, but they are beginning to look at goal-based planning, whether it is for education or retirement,” Shadforth said.
Private banks and wealth managers should start looking at how they could extend their product offering to better cater to their clients.
Like Shadforth, Ryan Sim, who was previously OCBC Bank’s head of investments within the bank’s wealth management division (now with Prudential), said that banks in the region were beginning to make a shift from product selling to needs-based selling.
