Last week’s blog post revealed what makes Asia Pacific such an exciting opportunity for wealth management institutions. This week, we’re zeroing in on six key factors that are shaping the region’s wealth management industry.
1. Offshore hubs
Regional hubs, such as Hong Kong and Singapore, are drawing foreign investment faster than traditional wealth centers, such as Switzerland. Between 2001 and 2009, the flow of foreign funds into Asian economies increased exponentially, from $324.8 billion to $1.3 trillion.
2. Growing wealth
Growing personal wealth, combined with political liberalization, is attracting more players to the region’s wealth management market. In 2011, Asia’s population of high-net-worth individuals reached 3.37 million, establishing the region as the world’s leading and fastest-growing wealth market.
3. Evolving investor behavior
In the past, many Asian high-net-worth individuals spread their investments across as many as seven or eight banks. The global financial crisis prompted a round of consolidation, and increased demand for differentiated products, innovative distribution channels and better relationship management.
4. Skills shortage
A shortage of qualified relationship managers and high attrition rates have resulted in fierce competition for skilled staff, and renewed interest in employee compensation, training, skill enhancement and leadership. In Hong Kong, for example, estimates place the annual attrition rate as high as 20 or 30 percent.
5. Regulatory compliance
New regulations concerning investment taxation, transparency, investor protection and capital requirements are creating complex reporting requirements and increasing the cost of compliance—with significant implications for the operating models of the region’s wealth management institutions.
6. Operational and technological challenges
Operations and technology play critical roles in an institution’s profitability, not to mention the effectiveness and satisfaction of its relationship managers. In fact, dissatisfaction with the quality of technology or technological support is among the top three reasons why relationship managers seek employment elsewhere.
With these factors in mind, wealth management institutions can begin to build their strategies for the region. Join me next week for seven key features of an effective Asia Pacific operating model.