Despite rise of robo-advisory, Singaporeans overwhelmingly prefer face-to-face advisory, he said.
Wealth management and private banking have repeatedly been identified by both banks and analysts alike as one of the key business lines and expect it to be a core driver of revenue in the future. Asia is especially a region of great opportunity for wealth management businesses. There is as much $34t of onshore personal financial asset in the region as of end-2019, according to a report by McKinsey & Co.
Although COVID-19 slashed investor wealth in Asian equity markets by as much as 15%, or around $2.5t to $3.5t, positive developments keep opportunities open. China, which makes up approximately 35% to 40% high net worths’ personal financial assets (PFA) in Asia, saw its economy and stock market swiftly rebound once it got COVID-19 cases under control. This initial recovery bodes well for the region’s wealth management industry, says McKinsey.
When it comes to offerings, personalization is being touted as the crucial attraction point to lure clients, and banks have worked to provide both a convenient digital platform and cozy, specialized spaces that will suit their clients' needs.
But a trend in Australia sees local wealth managers lose their market share as investors become picky with fees and distribute their wealth across different wealth managers. A study by data analytics firm GlobalData found that more than three in four or 76% of wealth managers in the country have lowered their fees or plan to lower fees to compete with the lower fees offered by robo-advisors.
Australia’s high net worth (HNW) investors are also reportedly using an average of four different providers, GlobalData’s 2020 Global Wealth Managers Survey found.
Asian Banking & Finance spoke to Gary Harvey, CEO of St. James’s Place Wealth Management Singapore, to find out whether the same trends can be seen in Asia and to learn more about the latest updates in the region’s wealth management space.
What’s happening in Asia’s wealth management space? How has the pandemic affected the sector?
What COVID-19 has shown starkly is that people need to think very carefully about financial protection and estate planning, as a potential crisis is never far away. As volatility continues to affect almost all asset classes, wealth managers will see an increase in investors turning to them for advice and guidance in managing their money.
Wealth management is a people-oriented business. The health and safety of individuals should come first so physical distancing and restrictions on travel and meetings have also clearly introduced new challenges for wealth management professionals.
What are some trends you’ve observed in recent years regarding wealth advisory services? For example, have you observed a rise or fall in?
What we’re seeing is that there has been increasing interest in financial advice, as Singaporeans look for qualified, tailored expertise in a volatile landscape and seek to avoid making decisions based on emotion.
Whilst there are growing multiple sources of advice available to investors, there has been in particular an increased appetite for trusted advice from financial advisers. Our recent research in
Singapore highlights that four in five (81%) Singaporeans now heavily prioritise seeking financial advice before making any major financial decisions, and 70% would consider engaging a financial adviser to manager investments on their behalf.
A survey found that 75% of wealth managers in Australia had lowered their fees due to competition from robo-advisory platforms. Have you observed a similar trend happening in Singapore or elsewhere in Asia?
Whilst technology has made great strides in the wealth management landscape, there is still a strong preference for face-to-face, human advice. Our own research in Singapore has found that an overwhelmingly 94% of Singaporeans say that face-to-face financial advice is very important to them and that only 12% say that robo-advisory services are their preferred mode of advice.
Investing one’s hard-earned savings and trusting a platform or person to manage wealth can be a very emotional decision, even more so in today’s volatile markets. Not only do today’s investors require specialist and tailored expertise, but they would also want mutual trust, respect and reassurance to see them through their investment journey. This is the key distinguishing factor for why trusted relationships with human advisers are so important in making major investment decisions.
Technology should be welcomed as a tool to enhance and supplement the relationship-based advisory model. With greater interconnectivity and the rise of new digital services, we’re seeing clearly how technology can assist financial advisers with financial planning, adapt to changing client needs and meet regulatory standards, amid the current background of physical isolation.
Gary Harvey, CEO, St. James's Place Wealth Management Singapore
Another point in the same survey noted that HNW individuals are now spreading their wealth across several wealth management firms. Have you observed the same trend in Asia, or has this always been the case with Singaporean/Asian HNWs?
Diversification has always been an important element of any well-balanced portfolio and many wealth managers will advocate such a strategy in order to mitigate financial risks across various asset types.
Particularly with a rise of geopolitical tensions, such as what we’re now seeing with US-China trade relations or Brexit, some investors have been quick to assess their situation and have appropriately adjusted their portfolio both geographically but also structurally.
However, spreading out similar investments across different firms will still lead to mixed portfolio performances, especially if they are all tied to major markets. It is therefore important for investors to work with a wealth manager that understands their financial goals, specific circumstances and long-term needs so that they can offer the right leverage and diversification throughout their investment journey.
What are the advantages of “traditional” wealth advisory? How does your firm stand out in this regard?
New services promising investors low-cost, diversified and passive investing alternatives have proliferated over the years. Whilst they are a popular way for investors to gain access to markets, they have received some criticism for being too one-dimensional in following an optimised “one-size-fits-all” strategy.
The human element of wealth management is often overlooked, and it is important to remember that financial advisers are more than just stock-pickers.
With differing goals and aspirations, clients ultimately desire personalised advice that is grounded in various aspects of their financial needs - from investment to retirement to insurance to tax and estate planning. This must also be designed specifically for their lifestyle goals and stage of life.
These are some of the areas in which traditional wealth advisory grounded in face-to-face human advice really shines. A financial adviser can diagnose personal financial problems and better understand individual circumstances.
How has your customer demographic changed in recent years?
The rise of Asia’s affluent is substantial and it is estimated that by 2030, two out of three members of the middle class globally will be Asian. This is a demographic that will have higher disposable incomes and greater consumption power as it grows and will also have evolving needs for wealth management advice. With its immense potential, wealth managers will be looking closely at how to better serve this growing segment in Asia.
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