Asia-Pacific wealth managers need to employ client-centric strategies to capture share of US$200b global revenue opportunity
- Fifty percent of wealth clients likely to consider consolidating assets
- Wealth managers expect to invest 42% of strategic budgets on regulatory compliance
- Singapore clients seek greater fee transparency; wealth managers globally appear out of step with clients on transparency, advice channels and the advisor’s role
SINGAPORE, 30 MAY 2016 – Wealth managers in the Asia-Pacific (APAC) region will need to employ client-centric strategies, navigate diverse practices and balance disparate regulatory and tax policies in order to capture a share of the US$200b global revenue opportunity, according to EY’s 2016 global wealth management report. The report, titled The experience factor: the new growth engine in wealth management says firms need to seize opportunities through various passporting schemes and compete to deliver a superior client experience while managing regulatory requirements across the region.
At 15%, APAC had the highest percentage of clients with relationships at more than five wealth management firms. This jumps to 29% among the ultra-high-net-worth segment (far greater than the global average of 17%). More than half of these respondents indicated a preference to consolidate assets pointing to greater pressures on managers to offer better returns, pricing and breadth of products and services.
More than 2,000 wealth management clients (37% from APAC) representing a broad spectrum of segments, including wealth level, age, region and gender were surveyed by Oxford Economics for this report. EY also conducted interviews with more than 60 wealth management executives globally (20% from APAC) to better understand how wealth managers are thinking about and investing in key growth initiatives.
Regulatory compliance dominates strategic investment budgets across APAC
While wealth managers in other regions have their strategic investment budget focused on revenue growth, those in APAC are still bogged down in regulatory compliance, with managers expecting to invest 42% of their strategic budgets on regulatory compliance. The region’s constantly changing regulatory frameworks pose a challenge to wealth managers at the same time as they are hoping to seize opportunities offered by the vast buildup of wealth and deliver superior client experience.
Across the region, wealth managers are also facing tremendous pressure from new competitors that are driving fees down. Sixty-two percent of firms reported declining margins — compared with just 18% in North America — citing competitive fee pressure and regulatory compliance costs as the key causes.
Alex Birkin, EY Global Wealth & Asset Management Advisory Leader, says:
“This research should make the industry sit up and take notice. The rules of the game have changed. In order to attain growth, managers must now learn to compete with man, machine and hybrid-based firms to retain and attract new assets.”
Bridging the client experience gap and manager-client disconnect
Client experience in wealth management is unique and complex, as it spans an individual’s life journey of managing and preparing for the unknown, the report notes. As a result, wealth managers have lacked a common definition of client experience or a standard against which firms can measure themselves. In APAC, wealth managers face the additional challenges of distinct country differences necessitating the development of products and services that take into account these idiosyncrasies.
Mark Wightman, Partner, Wealth & Asset Management, Ernst & Young Advisory Pte. Ltd., says:
“Wealth assets in APAC continue to accumulate at three times the rate as the rest of the world. Managers will need to bridge the gap in client expectations across very different markets to capture and consolidate these assets. The race is on!”
The research also identified a number of worrying disconnects between wealth managers and their clients. Particularly, while wealth managers globally believe that an understanding of financial goals (75%), quality and frequency of interactions (52%) and investment performance (50%) to be the top drivers of client experience; clients seek investment performance (61%), understanding of financial goals (32%) and transparency in fees and portfolio management (27%). This is especially true for Singapore clients, who share similar sentiments (investment performance 67%; understanding of financial goals 35%; and transparency in fees and portfolio management 34%).
Wightman also noted the pursuit for fee transparency among Singapore clients. Currently, clients are being charged based on transactions (42%), with a smaller proportion on a fixed fee (13%). However, in their preferred fee structure, we see movement to a fixed or annual structure.
As well, 57% of APAC managers expect personal interactions with clients to remain their primary channel, compared with just 32% of clients whose preferences are instead shifting to digital. In fact, by 2018, digital channels will become increasingly popular across the region – wealthy clients in mainland China and Singapore indicated a preference for mobile apps, while Japan, Australia and Hong Kong prefer online advice interaction.
“Singapore clients are becoming more savvy about fees. They want to know what they are paying for and seek clarity in fees. As such, it is not surprisingly that they are turning to digital channels and automated advice, where demands of meeting financial goals can be met with a better customer experience and clear explanation of the fees being paid,” explains Wightman.
More than one-third (37%) of APAC wealth clients have no issues at all communicating digitally with their firms. Those with concerns cited security of personal information (40%), transactions not being processed in real time (29%), inaccurate data display (28%) and limited connectivity (25%) as key factors.
Wealth management firms will need to address these issues to meet their clients’ future preferences for digital interaction. Currently, none of the APAC firms rated their social media footprint as effective; 70% rated it as ineffective or very ineffective.
Wightman adds: “More than 60% of APAC clients consider transparency in fees and performance critical to trusting their wealth manager, more than 30% would like to rate their advisor and 50% would like to share their experience with peers. Our findings provide a clear road map for those managers that want to differentiate on experience and capture market share.”
Read the complete report at https://www.ey.com/GL/en/Industries/Financial-Services/Asset-Management/ey-global-wealth-management-survey-2016.
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About the report
More than 2,000 wealth management clients representing a broad spectrum of segments, including wealth level, age group, regions and gender, participated in the survey. Survey population targets were set for each segment to optimize accuracy and representation. The survey was also translated to local languages and administered online by Oxford Economics in the latter part of 2015. EY also conducted interviews with more than 60 wealth management executives globally to understand how wealth managers are thinking about and investing in key industry topics.