Alpha FMC releases 2020 outlook for asset & wealth management industry

Alpha FMC – a leading consultancy for the global asset and wealth management industry – has released a new forecast for the year ahead, including an analysis of the Asian market.  

International asset and wealth management consultancy Alpha FMC has released a new outlook for the year ahead, with a number of its experts worldwide providing insights across three market themes; Consolidation, Regulation and Innovation. Among the contributors is Michael Chaille, who at the beginning of 2018 was appointed as Executive Director to lead the firm’s expansion into Asia. Challe looks into the local market against a backdrop of geopolitical instability.

“The 2020 global political outlook has a number of key events on the horizon,” opens Alpha FMC’s global CEO Euan Fraser, citing the ongoing US-China trade negotiations as one. “In addition to these macro topics, our industry is also facing significant changes: the need to digitise, the need to respond to fee and margin pressure, and the changing needs and expectations of customers. Little wonder then that 2020 is set to be an important year for the industry.”

At the global level, Alpha FMC expects this combination of industry and external factors to manifest in a number of ways, including through greater M&A activity as firms look to generate economies of scale, and by way of further operating model consolidation as “firms pick enterprise-wide systems and simplify global outsourcing relationships.” In addition, Alpha FMC is forecasting a sharper focus on profit & loss for specific strategies, with consolidation to follow for non-viable streams.

The report also reminds that the ‘onslaught’ of fresh global regulation won’t cease anytime soon – with Alpha as a result predicting a closer focus on operational risks and resiliency within firms – while as to innovation, the consultancy expects there will be an even greater investment in digital and agile; “with processes being reinvented end to end, rather than just at the client end.” Fintech will also continue to disrupt, with increased collaboration between incumbents and startups on the cards.

From an APAC perspective, the report highlights both the resilience of wealth managers in a region rocked by the persistent China-US trade tiff and the Hong Kong protests, and the potential of the local market in respect to wealth generation. While tough conditions prevail for the wealth management sector, a forecast CAGR of 6.45% growth from 2016-23 in the total wealth assets of Asia’s high net-worth individuals comfortably outpaces comparable rates in the Americas (5.17%) and EMEA (4.75%).

This outperformance, says Alpha FMC’s Singapore-based executive director Michael Chaille, is “underpinned by long-term trends (high-growth economies, rising wages, favourable demographics) which assure that the region will continue to be a powerhouse of wealth management.” But it will be far from a free-for-all, with the tough market conditions presenting ongoing challenges for local firms, in particular with the choices to be made.

To complement the analysis, Alpha FMC conducted a series of interviews with C-level executives of global private banks in Asia to gain further insights into their top priorities for the next twelve months. The common response; navigating the uncertainty would require the conviction to “focus on what you do best and do it even better”. This, Alpha notes, applies to the both the client-facing dimension, as well as to internal organisation.

The former concerns enhancing products and services as key, while the aim of the latter is to reduce operational friction and improve efficiency. The basis for this strategy says Chaille is that the market conditions demand further differentiation and added value. “Yet, the reality is that any private bank’s investment capacity is finite. This means clear choices must be made to favour some areas and drop others,” Chaille writes. “Management logic is that narrower, focussed project portfolios will translate into sharper impact.”

With ‘housekeeping’, or mostly ‘reactive’ changes in areas such as regulatory initiatives and technology stack upgrades carrying less urgency by comparison than in recent years, Chaille concludes a greater maturity of the business environment. “In this context, 2020 will see continued growth of wealth management in Asia, leading us to believe that the correct approach is to pick the right battles, and go bold, with the conviction needed to win.”