Having established itself as a leading investment data and solutions provider in the UK, FE is set to replicate a similar model in Asia that caters to the needs of fund selectors, reports International Adviser’s Leena Dagade.
With all the building blocks in place, FE is eyeing an independent fund research foray into Asia to meet the needs of its wide range of independent financial advisers and life insurance clientele base, said Michael Li, an FE director and head of the Asia business.
Li began his career with Gerrards Investment as a fund analyst before moving to Putnam Investments. At Putnam, he was an investment specialist for European institutional business with specific responsibility for currencies and European, Asia Pacific and emerging markets equity products.
Now sat at the other side of the table, Li is leveraging his extensive investment industry experience in evolving financial solutions that meet the specific needs of clients.
“I have done fund research. I understand what client needs. When we are selling tools and software, I know what they are looking for,” he explains.
Eyeing fund research
In the UK, FE produces a list of top 100 funds covering all asset classes and sectors, selected using its own comprehensive suite of ratings, awards, and in-depth qualitative research.
Li says the product has received a good response from the IFA community, particularly since the implication of the UK’s Retail Distribution Review which has led to outsourcing of fund due diligence and portfolio planning to third parties.
The head of business explains, with a continuously evolving regulatory regime demanding transparency, a similar kind of fund research proposition may also be popular in Asia.
“The world is moving towards transparency. There is FAIR (Financial Advisory Industry Review) in Singapore and mandatory commission disclosures in Hong Kong. Obviously we do fund data analysis, what is missing is research side. That is something we can explore and get here in Asia in the coming twelve months.”
“There is no really dominant player here (in Asia) in terms of quality fund research for the IFA community.”
In Asia, clients are familiar with FE Crown ratings and use it as a tool to assist with client investments.
“We are trying to build on that, we already have all the data on hand but we need to make it readable and understandable to our clients. I think, research component will be an obvious next step, what is missing.”
Competitive edge
Li believes FE has the necessary competitive edge in terms of its large network of IFA and life insurance clientele to beat its peers.
“In terms of research, Morningstar has some but it is not pronounced, and Lipper really doesn’t have. They might have select research studies but it is not made available to the IFA community or life insurance platforms. So, we want to leverage on our big IFA space and reach all intermediaries and then the retail public.”
In Asia, the firm boasts a total 100 clients ranging from Aviva, Zurich International, Standard Life, IBP, Phillip Securities, in Singapore to Axa, Agieus, and Sun Life of Canada in Hong Kong.
The firm derives 60% of its revenue from life insurance companies and 40% from IFAs who typically buy analytics and data feeds like web and charting tools.
Product offerings
FE recently launched a new feature, Toolkit – a slightly customized solution comprising key information such as fund lists, performance, risks, fact sheets – that investors wish to have at their fingertips and in order to build simple model portfolios.
Toolkit received a ‘very strong’ feedback from clients in the UK, resulting in the firm planning it for the Asian market.
“Toolkit is more like a menu and you can pick and choose. There is some kind of customization. It has all key functions to satisfy IFAs and banks that have a big sales force. So, rather than troubling a research team constantly for every request, 85% of the queries from the sales force can be addressed by Toolkit.”
Li cited concerns over the cost and the turnaround required to build ‘bespoke solutions’.
“Here, our clients are always looking for cutting edge solutions, almost immediately. It typically takes at least six months to build simple solutions and for more sophisticated solutions, it can take more than a year to implement.”
According to Li, Toolkit is one of the fastest ways to meet the basic information needs of clients in a cost effective way.
“Rather than the bespoke solutions which can take six months to a year, Toolkit can be built in about one month and is continuously refined” he explains.
“So, as we produce new functionalities, we will automatically provide it on Toolkit. Toolkit is the new offering we take to the market to fill that middle gap in terms of whether we go for bespoke or nothing.”
FE has also initiated work to roll out another interesting tool called “alpha fund manager rating” that reviews managers who have consistently performed well over long term.
“We are just making sure we have full coverage of their entire biography. That is a work in progress.
Li says FE also explored possibility of rolling out its Adviser Fund Index but faced hurdles in terms of recommendation, disclosures, and lack of participants.
The Adviser Fund Index is made up of the recommended portfolios of a panel of leading UK financial advisers, collected and aggregated twice a year. FE publishes daily performance of each index as well constituent lists and further analysis.
“It is very interesting and works very well in the UK. It is something we did explore for Asia, but we encountered problem in Hong Kong. There are probably not enough firms to participate so as to get true representation of what the market thinks. Secondly, people movement is an issue. Also, people are too cagey and do not want to disclose their recommendations.”
Asia strategy
In terms of expanding its operations in other Asian regions, Li said the firm would take a call depending upon the need and market demand.
“We are currently not in the China market. Obviously, it is a key market to look at but there are lots of challenges as well. We need to get licensing, make sure products are bilingual, localize it to maximize product range. Taiwan is a big mutual fund market. Others, like Thailand and Indonesia are growing, strong countries, where we would like to ask, whether we could initiate fund coverage. “
Over the last seven years, FE set up three offices in Singapore, Hong Kong, and Australia. The UK-headquartered data provider, with 400 staff worldwide, currently has nine employees in Hong Kong and Singapore together. It recently appointed Hon Wah Choi as director business development and marketing Asia.
FE wants to tap into more clients in the asset management and banking space. The firm also plans to be the first to “build a tangible, sustainable, credible client base before moving on to next chapter”.
“Building a client base has been a key part of the strategy for the first five years. Now, I think we are ready to move on to next step, but it means initiating coverage of different markets to facilitate banks and asset managers. We will not shy away from it. We don’t want to neglect client-servicing levels. At the end of the day, you have to be profitable to engage in such ventures.”
Growing organically
FE prefers to grow in an organic way with a focus on building up the client base, but at the same time, says LI, it will not shy away from acquisitions, provided there are synergies.
“Our strategy has been more organic. We have very high client retention. That is more of FE brand identity.”
“To get bigger market space, we need to consider all the options. Do we need to go to new markets? Do we need to acquire new firms for synergies? We have done it in the UK. If there is a right opportunity, we will do it here.”
In the UK, FE acquired Evalue, a company specializing in financial planning tools and stochastic modeling, in 2010 followed by another firm – InvestorEase, a resource for UK equities in 2012.
“Our strategy is to get more institutional clients and if that means initiating coverage in China, Taiwan, Thailand, Indonesia, we will do it. And, if it means we have to acquire companies, we will consider it if they provide right synergies, we will not shy away from it. “
“But, we are not aggressive. If you start more mergers and acquisitions, it dilutes the brand we built. To achieve relative success in Asia, we will maintain a strong bond with our clients.”
