Supported by Greater China’s resilient economies, Asia’s intermediaries will continue their rapid growth in assets. As they do so, they look likely to change in nature and require more from custodian banks.
Asia’s intermediaries set for fresh wave of growth
In spite of the uncertainty still beleaguering much of the world, Asia’s intermediaries appear firmly set to continue the growth that they have enjoyed over the past 15 years. As they do so, they are likely to become more complex organisations needing more comprehensive products and greater transparency.
Greater China’s remarkable multi-decade economic transformation has fostered the rapid proliferation of the region’s newly wealthy families. After having been the first to be hit by the initial shock of Covid-19, the Asian economies are now among the first recovering. This strong economic growth momentum will further fuel and support the continued creation of private wealth.
“Regardless of what’s happening on the global scene, Asia has its distinct dynamic and will return to its previous levels of growth,” explains David Reymond, Head Intermediaries APAC & EMEA. “We shouldn’t forget that China, just on its own, has close to 1.5 billion of consumers. If we factor in all the Asian countries we are looking at something like 2.5 billion, which is more than a third of the world’s population.”
The equation for banks and intermediaries alike is very easy. The more wealth is created, the more demand there is for wealth management services.
Serving the entrepreneurial generations
Since 2005, the number of intermediary firms based in Asia’s main wealth management centres of Hong Kong and Singapore has grown from zero to about 100-120 firms managing USD 60-70 billion, according Reymond’s estimates. About two thirds of them are what Julius Baer defines as ‘enterprise’ firms, which means that they are well-staffed independent portfolio managers, with a degree of institutionalisation. The other third are multi-family offices (MFOs) who are typically built around one or more anchor families in order to holistically cover their financial affairs. MFOs have clearly been the predominant driver of industry growth in the past three years, and are likely to further gain in importance in the coming years.
As befits a young region, with entrepreneurial families still in their first or second generations, Asia’s intermediaries are less focused on wealth preservation than those in Switzerland and Europe. On the back of their clients still being in their wealth creation cycle, their services commonly extend beyond investment management to include concierge services, management of real estate and corporate services.
Multi-jurisdictional and multi-family
Reymond anticipates not only further growth in assets under management, but also a shift in the nature of Intermediaries. He believes that more enterprise firms will expand to span both Hong Kong and Singapore, with the aim of getting closer to where clients reside. They will also evaluate the possibility of setting up in Asia’s other regional business cities.
Turning to family offices, expect more single family offices to become multi-family offices. “We have already seen the scenario of single family offices taking on assets for other families, and I think we will see more of it in the future,” notes Reymond. “That’s characteristic of their entrepreneurial nature. Small groups of families come together and start an operation, or an existing family invites others to join their corporation. That’s something which I’m very convinced that we will see more of.”
Sophisticated products, more transparency
While custodian banks typically provide Asia’s Intermediaries with a fairly standard investment product set, looking forward that seems likely to change. Intermediaries will want more sophisticated and individualized solutions and greater transparency, according to Reymond. That means a comprehensive and flexible product range including, for example, private markets and lending solutions, as well as digital platforms that deliver more convenient, transparent and timely service, and hence a better client experience.
Julius Baer is seeking to meet these requirements across three dimensions – people, products and technology. In terms of people, the bank hires experienced staff and systematically develops existing talents in order to ensure they are equipped with profound expertise to interact beyond traditional banking services with Intermediaries’ principals or the families behind them. When it comes to products, services and solutions, the firm is taking a holistic view on client’s wealth with wealth financing, for instance wealth planning and insurance are integral elements of its offering.
Finally, in terms of technology, the new Digital Intermediary Platform (DIP) is currently being rolled out, combining a front-end workspace with a direct connection for trade execution and straight-through processing.
This new digital platform puts Julius Baer in a strong position to help Asia’s Intermediaries in the next phase of their growth. “I think now with DIP being offered to our Intermediaries, we are in a position to lift discussions to a totally different level in Asia, as the range of possible applications which we can deploy to support intermediaries will become more comprehensive,” concludes Reymond.
- “The equation for intermediaries is very easy. The more wealth is created, the more demand there is for wealth management services.”
- In the next phase of their evolution, intermediaries will become more multi-jurisdictional and multi-family.
- Julius Baer’s new digital platform puts it in a strong position to help intermediaries with the next phase of their growth.