Historically, wealth management services have had a higher focus on the high-net-worth individual (HNWI) segment. Since the affluent segment share is increasing in Asia-Pacific, countries like India, Indonesia, Malaysia, Thailand, and Vietnam could experience substantial AuM growth in the coming years.
Competition between Banks
The fact is that most of the top traditional foreign banks are expanding their presence in the region. At the same time, traditional Asian banks are working on strengthening their wealth management businesses and holdings in these markets. Both groups are experiencing growing competition from two types of technologically advanced players.
One is the emerging WealthTech firms that are developing advanced B2B and B2C digital solutions, while the other is a challenge for banks—virtual banks and payments firms (especially arms of tech giants)—that have started acquiring financial services licences to capitalise on their wide customer base.
Financial Advisory and Digital Setup
In Asia-Pacific, wealth management companies are faced with significant opportunities to grow. According to McKinsey, the estimated “onshore” PFA will be approximately USD 81 trillion by 2027—about USD 1 trillion in revenue pools across the wealth continuum. The region is emerging as the leading destination for wealth management and private banking globally. The relaxed and pro-investment regulatory environments in markets such as Singapore and Hong Kong have been attracting a large amount of capital from around the world.
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Still, customers’ requirements are changing: they seek needs-based financial advisory and multichannel engagement across a digital-hybrid setup. Personalised solutions are a natural part of development. With this and the growth of technology in the industry, the future of the wealth management industry is challenging.
HENRY´s in the Spotlight
Most people now see there’s a gap in the wealth management market, which is to serve the most underserved segment of the market: people who earn a decent sum of money—so-called HENRYs (high-earning-not-rich yet). The mass affluent market has the capacity to save money but does not meet all the criteria to qualify for traditional wealth management services. Traditional wealth managers often have their eyes locked on servicing HNWIs and ultra-high net worth individuals (UHNWIs). This was a massive missed opportunity that WealthTech firms have readily filled.
WealthTech firms have notedly enabled lower-cost, easier, and simpler access to wealth management services and products that were traditionally available only to HNWI individuals at a higher cost. “With high rates of adoption of digital financial services, this new generation of investors has more access to information and demands more sophisticated products and more control over their wealth journey,” notices Theron Lam, Head of Product Development Southeast Asia at Schroders.
WealthTech firms have particularly found a haven in Lion City, taking advantage of its location, regulatory environment, and reputation to attract investors across the region. “Asia, in general, is the second largest wealth hub in the world after Europe, [and] Singapore has long been a regional hub of wealth,” said Leon Ong from KPMG Singapore to Asian Banking & Finance.
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