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Digital platforms offer potential to tap into next-generation wealth in Asia: Cerulli Associates

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The prospects of Asia’s wealth management industry remain strong in the medium to long term and there are ample opportunities to tap into high-net-worth (HNW) and ultra-HNW wealth across key markets, says Cerulli Associates, Singapore.

The growing number of wealthy individuals in the region, rising number of family offices, gradually improving appetite for discretionary portfolio management (DPM) services and private market strategies, and adoption of technology in delivering investment advice all contribute to a positive outlook for the region’s wealth management segment, the firm says.

Banks are the key channels used by asset managers to tap the wealth management opportunities in the region. According to Cerulli’s research, managers in the bank-dominated fund distribution centres of Hong Kong and Singapore see local, foreign, and private banks as the top channels to expand the wealth management pie, whereas they rate online platforms moderately.

Despite their strong existing client base, banks are ramping up their digital initiatives to meet the long-term needs of next-generation investors, who are more tech-savvy and will continue to accumulate significant wealth over the coming decades.

Banks are also increasingly focusing on expanding the DPM business, of which Asian investors are expected to increase their use as they rely on their wealth managers for professional advice, more so against volatile market conditions. More than 40 per cent of banks surveyed expect their DPM assets under management (AUM) to grow in the range of 1 per cent to 10 per cent in the next two years, while nearly 20 per cent expect them to grow by more than 10 per cent. In addition, banks are onboarding private market strategies for their HNW and ultra-HNW clients.

Meanwhile, online platforms and digital wealth advisers are growing in prominence and have in recent years expanded their product offerings to include alternatives, the firm says. Although digital wealth advisers are not a popular channel for promoting alternative funds among Asia ex-Japan fund managers, as the digital transformation of the region’s wealth management industry gains momentum, these platforms will eventually grow in importance. Apart from direct fund onboarding potential, managers have the opportunity to partner with digital wealth advisers to offer portfolio solutions, including funds and ETFs.

“The wealth management sectors in key Asian markets are set to bloom over the medium to long term, as wealth pools keep growing and rich clients increasingly seek investment expertise,” says Leena Dagade, associate director with Cerulli. “Although banks are regarded as the main distribution channels for fund managers that want to target the HNW segment, digital platforms cannot be downplayed, as their importance in attracting underserved and digitally savvy individuals is expected to only increase in the future.”

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