EY - Global investment platform converge

EY Asia-Pacific Wealth & Asset Management Q&A Series

Global investment platform converge

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How should Asia’s wealth and asset managers respond to a global phenomenon? In June 2014, EY’s global Wealth & Asset Management Platforms specialist, Jeroen Buwalda, held forums across Asia to discuss the future of investment platforms in the region. In this frank Q&A, he discusses how next-generation investment platforms are influencing buying behaviors in traditional Asian markets, and the opportunities and risks this presents for Asia’s wealth and asset managers.

Q: You have called investment platforms a “global phenomenon.” Why do you say that, and what does the international investment platforms landscape currently look like?

Buwalda: The global demand for investment platforms has never been stronger. All over the world, the pools of financial and non-financial investment assets are growing rapidly — particularly in Asia. Investment platforms have played a critical role in this growth, helping wealth and asset managers’ clients to build, manage, protect and transfer their wealth effectively and efficiently.

Platforms have simplified asset management; they have made it easier for individuals to invest in a range of asset classes and have helped them to optimize taxation. ↓ [... more]

Q:  What are the starting positions for that convergence — and what do you expect to see at its end point?

Buwalda:: Worldwide, we’ve seen the evolution of three clusters of investment platforms, each with a different proposition influenced by traditional regional distribution networks. The first cluster is in the UK, Australia, New Zealand and South Africa.

In these geographies, the vast majority of customers get their investment advice from insurance brokers that have evolved into financial planners. Therefore, investment platforms in these countries have developed to support financial planners in meeting the needs of their clients. ↓ [... more]

Q: What drivers are influencing these next-generation platforms?

Buwalda: Aside from technological developments, wealth platform evolution is being driven by three factors: information, regulation and choice. Despite privacy regulation, social networks like LinkedIn and Facebook are increasing consumers’ capacity and willingness to share personal and private information.

Sometimes, people are unaware of how much they are sharing — and we expect a backlash of regulation to address this issue. Regardless, the generation of platforms will be able to leverage increasing amounts of personal information to shape preferences and adjust for life cycle events. ↓ [... more]

Q: What trends are you seeing in the next generation of wealth platforms?

Buwalda: We’ve identified seven trends we expect to emerge in Asia in the next 12-18 months.

  1. The increasing adoption of goals-based planning will provide a more inclusive and engaging client experience, and better advice. ↓ [... more]
  2. Because goals-based planning encourages a lifestyle, rather than a financial discussion, we also expect an increasing focus on financial well-being. ↓ [... more]
  3. In the face of increasing regulation to protect consumer interests, investment platforms will become indispensable compliance tools. ↓ [... more]
  4. We also expect investment decision-making to move out of the office and into the everyday lives of investors through mobile devices, cards and wearable technology. ↓ [... more]
  5. Investors will become socially connected, supporting a trend toward disintermediation in both lending and investing. ↓ [... more]
  6. Technology will also continue to lower barriers to entry, leading to potential disruption from new entrants. ↓ [... more]
  7. Aging populations and the need for sustainable retirement incomes also present a significant opportunity for investment platforms. ↓ [... more]

2“Yu’e Bao Fund Accumulates Over $92 Billion in Assets in One Year,”Azila, 2 July 2014.

Q: You just returned from a tour of Asia. In your opinion, how are next- generation investment platforms influencing buying behaviors in traditional Asian markets, and what does this mean for the wealth and asset managers in Asia today?

Buwalda:  Traditionally in Asia, most wealth management has been dealt with by the big banks, with more than 80% of funds sold face-to-face, in formal meetings through these large institutions. At the same time, buying behavior has been purely performance-focused, with people chasing high returns. ↓ [... more]

Q: From your time spent in Asia, what should wealth and asset managers be wary of where the investment platform landscape is concerned?

Buwalda: I think there are three things.

  1. Firstly, they need to prepare for a strong consumer pull toward next-generation wealth management. In our connected world, consumers in Asia will be aware of and start demanding some of these wealth management innovations. They won’t wait for traditional institutions if alternative providers step up first.
  2. Secondly, they should be wary of underestimating the level of competition that will come from nontraditional financial services providers.
  3. And third, I think they could potentially be caught unaware by the speed with which such nontraditional providers might enter the market — especially since we know it will take time for policy settings to catch up.

Q: What advice can you offer to organizations interested in exploring the potential benefits of implementing a next generation investment platform?

Buwalda: In his book, The Road Ahead, Bill Gates said: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.”4 This advice has never been more applicable than in Asia’s investment platform market. However, we strongly recommend that when organizations take action — whatever that looks like — they focus on “evolution” not “revolution.” ↓ [... more]

Q: In your opinion, what will the investment platforms landscape in Asia look like in 2020?

Buwalda: By 2020, digital will no longer be distinct from the general customer experience. Technology will be invisible — merged with the fabric of our lives — as customers seamlessly move across multiple on — and offline channels to pursue their wealth management goals.

We’ll also have had a strong regulatory response to the emerging trends. We anticipate policy setting that will enable omnichannel propositions while also protecting consumers from misinformation and poor quality advice.

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