SCB Julius Baer Wealth Report Thailand 2019
The rising tide of wealth in Thailand is worth taking note, which is why the inaugural edition of the Wealth Report Thailand explores the attitudes of over 350 Thai High Net Worth Individuals (HNWI) towards wealth. The publication also showcases the Julius Baer Lifestyle Index, and compares the prices of luxury items between Bangkok and key Asian cities.
Asia Pacific is known to generate a significant share of global HNWI wealth. Yet, it is not often mentioned that more than half of new wealth growth in the region has been driven by emerging markets, such as Thailand. Thailand has a sizeable high net worth wealth pool that is rapidly growing. In 2018, Thailand was rated by Forbes magazine as the top-ranked country with the most billionaires in Southeast Asia. Notably, the Thai private sector plays a leading role in the economy. It is a major source of wealth creation and occupies a prominent place in entrepreneurship and investment for the development of economic growth and employment.
The Thai wealth market
- Asia’s pool of investable assets held by HNWIs is on track to reach USD 14.5 trn by 2020, representing growth of 160% in the current decade.
- It is estimated that Thai HNWI wealth will grow at a five-year CAGR of 9.9% from 2015-2020E to USD 401.2 bn. The drivers behind this growth are steadily growing household wealth, economic development and a buoyant property and stock market.
- Thailand’s economy is predominantly driven by its private sector. Family-run businesses play an important role in the Thai economy and are amongst the nation’s biggest employers.
- As these family businesses mature (22% of business owners in our survey are >60 years of age), they will need to understand and implement effective succession planning for the next generation.
- There has been a historical preference for the majority of Thai consumers to keep their wealth in simple financial products such as deposits and insurance. In recent years, this is slowly changing as investors have shifted away from deposits into mutual funds.
- Investors were encouraged by the government’s easing of regulations which made it easier for them to diversify their portfolios.
- The majority (58%) of mutual fund assets held onshore are in fixed income or yield products while around a fifth (21%) are in equity funds.
- Foreign investment funds (FIFs) have been particularly successful and account for around a quarter of Thailand’s THB 4.9 trn mutual fund industry.
- Wealth managers have taken different approaches to tapping the wealth potential in Thailand, choosing to operationalise their business onshore, offshore or through a partnership. Each presents its own benefits.
- Thai HNWIs are more invested in liquid assets (stocks, bonds and funds) than global, Hong Kong and Singapore HNWIs. They have the largest exposure to cash (21.5%), followed by Fixed Income (20.4%), stocks (19.5%) and funds (15.3%). In aggregate, Thai HNWIs have a 55% allocation to liquid assets vs 47% for global HNWIs and 42% for Hong Kong and Singapore HNWIs. However, the majority of their liquid assets are in onshore investment products.
- Thai HNWIs are under-invested compared to their global counterparts in real estate and alternatives. Global HNWIs hold 17% of their portfolios in real estate, well above the holdings of Thai HNWIs (7%). A similar pattern exists for alternatives, with Thai HNWIs owning 6% in the asset class, against 9% for global HNWIs.
- Thai clients are more geared towards wealth creation than wealth preservation (56% vs 41%). This is augmented for the up to 40 age group (71% vs 27%).
- The top advisor for clients when making investment decisions is family and friends (43%). 13% of clients indicated that their top source for advice when making a decision was online research, demonstrating high digital demonstrating high digital savviness. This is in alignment with studies showing high digital usage in the nation.
- Thai clients have high return expectations, with only 27% of clients indicating they are satisfied with their current returns matching their expectation, whereas 13% indicated, “not-at-all satisfied”. The underperformance of Thai equities to global markets over the past few years could have contributed to this perception.
Thai HNWI profiles
Through our analysis, we identified three distinct investor profiles: The Millennial Entrepreneur (19%), the Mature Investor (59%) and the Techie Retiree (22%).
Millennial Entrepreneur (up to 40 years old)
- She is well educated with 87% holding a Bachelor’s degree or higher.
- 51% of Millennial Entrepreneurs are business owners.
- 71% of Millennial Entrepreneurs prioritise wealth creation over wealth preservation.
- The Millennial Entrepreneur prefers a provider with good performance, and who understands her personal requirements.
- She relies primarily on family and friends when it comes to making investment decisions.
- She holds a diversified portfolio of investments, but is currently underinvested for wealth creation. She is digitally savvy and has a good relationship with her relationship manager.
- Digital financial services are relatively more important to her.
- She is a highly-engaged client who would like monthly reviews of her portfolio.
Mature Investor (41 to 60 years old)
- The Mature Investor is the most highly educated, with 96% holding at least a Bachelor’s degree.
- The Mature Investor has a balanced attitude towards wealth creation (55%) and wealth preservation (39%), recognising the need to stay protected.
- He heavily prioritises the growth of his investments (70%) over the growth of his business / career.
- He takes a holistic approach to selecting a financial provider: he wants a provider with a good track record of returns, good reputation, and who can provide tailored solutions.
- He has a greater understanding of how to access offshore investments and has exposure to a more diverse range of offshore assets.
- He is an investor who values advice not just from family and friends, but also his relationship manager.
- Stability and security are greatly prized when choosing an offshore investment provider and he sees offshore investments as a means to diversify his portfolio.
- Portfolio review once every quarter is ideal.
- The Mature Investor has a higher capital allocation rate than the other age groups (79.8%).
Techie Retiree (61 years old and above)
- 17% of Techie Retirees hold Doctorates, the highest proportion amongst our profiles. In total 89% hold Bachelor’s degrees or higher.
- The Techie Retiree prefers wealth preservation (58%) over wealth creation (39%).
- Like the Mature Investor, the Techie Retiree prioritises the growth of his investments (68%) over the growth of his business / career (32%).
- He takes a holistic approach to selecting a financial provider and wants a provider with a good track record of returns, good reputation, and can provide tailored solutions.
- The Techie Retiree is the group least familiar with offshore investments, with 73% stating they are unfamiliar.
- Amongst the different profiles, the Techie Retiree expresses the greatest desire to have his money professionally managed (26%).
- Like the Mature Investor, the Techie Retiree values advice from family and friends and his relationship manager.
- When considering offshore investments, the Techie Retiree prefers to a greater extent investments that align with his risk profile than the other age groups.
- The Techie Retiree wishes to have portfolio reviews once a month or whenever he wants.
Thailand’s luxury market
- Thai spending in luxury goods is expected to reach a retail value of USD 2.2 bn in 2019.
- In the 2018 findings of the Julius Baer Lifestyle Index, Bangkok maintained its status as a relatively inexpensive city for shoppers, keeping at 7th place from 2016 to 2018 in USD terms.
- Between 2017 and 2018, on a weighted-average basis, prices in Bangkok were flat y/y in local currency terms (+1.0%). However, the Baht’s appreciation translated into prices in USD being higher by 4.9%.
- The price of a degustation dinner rose by 44.4% in Baht terms due to the inclusion of Bangkok in the Michelin Guide.
- Prices of cigars, men’s suits and luxury residences also rose by 28.6%, 8.3%, and 4.9% respectively. In contrast, prices of botox, a luxury hotel stay, ladies shoes, and legal consultation fees fell by 29.8%, 28.0%, 17.7%, and 17.0% respectively.
- The Julius Baer Lifestyle Index shows that Bangkok remains the 7th most expensive city out of 11 cities in Asia.
- Luxury goods are pricier in Thailand due to excise taxes, whereas luxury services are generally well-priced due to lower operating costs.
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This article forms a part of the ’Arising Asia’ series in which we explore the growing economies and expanding middle classes of emerging Asia.