A wave of regulation was identified as the top industry trend among several, including digitisation, the growth of wealth in the region, demographic change, rising competition, heightened volatility and slowing economic growth.
Regulation was cited by around 50% of the respondents as important or very important.
“Have we actually brought this on ourselves because of the actions or inactions of some?” asked Vineet Vohra, director and practice leader at the firm.
Vohra was speaking at Fund Forum Asia 2017 in Hong Kong this week. He presented the results of his firm’s survey of around 60 wealth management and private banking professionals in the region.
Regulations introduced over the recent years are expected to have a significant impact on Asia’s wealth management industry. “The world of asset management hasn’t been spared either,” he added.
Examples are the Markets in Financial Instruments Directive set by European regulators; the Foreign Account Tax Compliance Act from the US; restrictions on the cross-border sale of unregistered products; stiffer controls to prevent financial crimes and guidelines on fair-dealing, he said.
However, another way of looking at tightening regulations is “raising standards”, added Andy Agathangelou, founding chair of Europe’s Transparency Task Force.
Tech gap
Digitisation was cited by almost 50% of respondents as an important or very important trend.
The term can mean many things, from social media strategies to the adoption of robo-advisories or the use of “big data”.
“[Digitisation] will help lower costs, it will boost performance and enhance your engagement and intimacy with existing clients. That is one way to go into the future, regardless if you are a wealth manager or asset manager,” Vohra said.
However, wealth managers believe they have not attained a high level of digital development, Vohra said, citing survey findings.
Across all trends, digitisation had the biggest gap between the perceived level of importance and business attainment, he added.
Vohra believes that if wealth managers were to focus on only one trend, it is digitisation. It is perhaps “the answer to a lot of issues”, he said.
Untapped wealth
Another important trend cited was the growth of the wealthy in Asia, with nearly 50% of the survey’s respondents saying it is an important or very important trend.
The global wealth pool is around $168trn, with $37trn of that coming from Asia, according to Vohra.
But only 5% of that $37trn has made its way into the wealth management industry. “Not only is the bite size very small, it is actually growing slower than the wealth pool is growing.”
Vohra expects that Asia’s wealth pool will grow 10% by 2020, while the compounded annual growth rate of the region’s top 20 private banks was only 5% from 2012 to 2015.
Vohra said that the untapped wealth is mostly invested in retail banks, gold, investment property, businesses and pension funds.
Adding to the industry’s woes is that only a small group of wealth managers has a share of Asia’s small wealth pool.
“Competition is rather ugly and size certainly matters,” he said, adding that competition is a driver of private bank consolidation in the region.
“But the real game is not with the $1.5trn [currently managed by the industry], but how you could get to the $35.5trn, which is not in the bag yet,” he said.
Nevertheless, industry professionals remain optimistic. According to him, around 40% of the survey respondents are forecasting business growth of more than 10% over the medium-term and around 30% looking at 5-10% growth.
