BrazilAPAC’s rich looking to switch wealth management providers
Wealthy ranks in Asia Pacific (APAC) are looking to relocate large shares of their portfolio in the coming years, and wealth managers with digitalised, service-minded and purpose-driven offerings are touted to win out.
That is the main conclusion of a new EY report, based on a survey of 2,500 investors worldwide with a net worth anywhere between $250,000 and $30 million. The aim: to gauge how a pandemic-stricken year has affected private investment strategies.
The pandemic’s impact has – not very surprising – been major. “Client behaviours are changing rapidly, as they seek to financially de-clutter their lives and refocus on their most important priorities. Our research confirms that the pandemic has had far-reaching effects on wealth clients’ beliefs and world views,” noted EY APAC wealth and asset management consulting leader Mark Wightman.
“Clients are becoming more risk averse, are increasingly focused on achieving personal goals aligned to their purpose, and want to enhance their financial protection, diversification and security.” For most, a change of strategy needs a change of service provider.
Across Europe, Asia Pacific, the Middle East and the Americas, many investors plan to relocate at least some share of their wealth to a different asset manager over the next three years. Countries like Argentina, Mexico, Norway and Chile will see small shift of funds, among a handful of investors. APAC’s
Between 20% and 30% of the wealthy in major economies such as US, UK France and Sweden plan to relocate between 30% and 60% of their portfolio in the same period. And in APAC – across India, China, Japan and Singapore for instance – between 30% and 60% of a rapidly expanding wealthy class plan to shift 30% or more of their wealth to a different manager.
All of a sudden, wealth managers in APAC and around the world are preparing for a mass exodus of funds – reeling from the pandemic and its repercussions. Challenges aside, the researchers point out how this sizeable reset could be a tremendous opportunity for some managers to capture market share – provided they quickly align with new investor priorities.
Digital priority
So what are these priorities? Front and centre is technology. For years now, tech-driven insights and speedy digital transactions have been edging out the traditional investment and trading model. Covid-19 has cemented this change: the number of rich investors choosing FinTech-backed service providers – robo-advisor or neobank, for instance – is set to jump by nearly 75% in the lead up to 2024.
At the heart of this shift is a desire for better service. Data-backed FinTechs can deliver better performance across a wider range of products at a lower cost – all of which are top priorities for the wealthy in the near future. Digitalisation is one means to this end, while collaboration will also play a key role.
“Clients expect a greater range of tailored services than many firms can provide alone. Nearly half also want to consolidate all their financial activities in one place. Firms that can use partnering to integrate client services could unlock huge gains in wallet share,” explained Wightman.
Customer service and purpose
Products and services aside, the quality of engagement with investors will also matter in winning business. A strong digital offering is important, although many clients complain that an overly tech-driven experience eliminates the personal touch with asset managers. A face-to-face can be important when dealing with high-magnitude investments.
Finding the balance between digital and personal will be key for wealth managers, not only to win a client but to amass a strong reputation and secure that much-needed recommendation in a highly competitive market. Engagement and service will be key differentiators in the near future.
Another core consideration is purpose. Environmental, social and governance (ESG) performance in a portfolio is no longer nice to have, it’s a necessity. Sustainable portfolios perform better under climate-friendly consumer markets and regulations, while many rich investors view sustainability as more than just a box to tick. Asset managers must adapt to this fundamental perception shift.
“Most clients now have sustainability goals, but providers’ understanding is failing to keep up. A broader understanding of purpose will help firms to implement clients’ beliefs, meet their growing expectations and build lasting relationships,” concluded Wightman.
