Adapting business models to add value for HNWIs
The financial services industry is going through a transformation as it starts to emerge from the global economic crisis which has left so many investors feeling disillusioned and let down. In order to re-gain the trust of investors and prevent another crisis of such magnitude occurring again, regulators around the world are looking to tighten industry rules to ensure better outcomes for investors.
Asia is no exception. With its mass-affluent population growing quickly and Singapore gearing up for regulatory changes under FAIR, investors will be looking for a wider selection of products fairly priced, offered in tandem with higher quality service and full transparency on costs.
While making and implementing regulatory changes is never easy, the challenges present great opportunities for both financial advisers and wealth management firms. In the grip of the credit crunch, investors swept their assets into cash and low-risk funds to prevent further losses, waiting out the volatility until such time as they felt confident to start investing in more adventurous asset classes again.
With markets becoming less turbulent over the past six months, occasionally even shrugging off the bad news, it feels like we are drawing closer to a turning point. Investors are tentatively emerging and showing a shift towards a riskier portfolio, fleeing cash and re-entering the equity sectors. In a recent study carried out by Old Mutual Wealth among Asian financial advisers, as many as 40% said that over the preceding three months their clients had been willing to take on more investment risk.
But while investors are looking to embrace more risk by seeking assets that may enable higher returns, to invest now and to remain invested, they need to re-gain their confidence in the industry.
Market volatility has an impact on investor behaviour but is, in many ways, easier to digest – we have grown to understand it is a fact of life. However, having the peace of mind that their investment product will do what it says on the tin is where investors are really looking for reassurance. They want to know that appropriate and sufficiently robust safeguards are put in place that would protect them from potential mis-selling scandals in the future. And it is very positive to see that regulators across Asia, the Monetary Authority in Singapore (MAS) is a great example, are looking to address the concerns of their consumers.
We welcome the move by the MAS to bring in a definitive set of guidelines that will allow transparency, greater competition and improved products and services for consumers. I’m also excited by the opportunities FAIR represents for us and our customers. The customer is at the heart of our business and our aim is to enable positive futures for them by offering outstanding customer-focussed propositions. But we know that regulatory changes also represent a great challenge to the industry – a quarter of all advisers we recently surveyed in Asia cited changing regulatory requirements as their greatest challenge over the coming year. Having just come through one of the most dramatic regulatory changes in the history of UK financial services (retail distribution review – RDR), we fully understand these concerns and are fully committed to supporting our distribution partners while they embed the new regulatory requirements into their businesses.
An example of this is the launch of a new wealth management service - Wealth Interactive - which was introduced in Singapore in 2012 and has been designed with the changing regulation in mind. At no cost to clients or advisers, the service facilitates transparency around adviser fees and product charges and will allow us to react quickly to any other regulatory changes that may come along. Additionally, it offers access to a new and highly flexible investment product and provides access to investment information and portfolio planning tools.
The service enables the all-important three-way interaction between the customer, their adviser and us as the product provider. The customer can track their investments online and interact with their adviser at the touch of a button while the breadth of functionality and administration efficiency delivered by the system allows the advisers to spend more time servicing their clients, nurturing those relationships as well as developing new ones.
That last point will prove absolutely essential for advisers as customers demand more from the industry. With increasing transparency in the cost of advice and products, advisers will have to adapt their business models and be able to demonstrate the added value their services bring to the party. By outsourcing the bulk of the admin, advisers can focus on the quality elements of advice and service.
With a fast rise in consumer affluence across Asia and the ease of sophisticated information available at their fingertips, investors are looking for far more than just a transactional relationship with their adviser. They will engage advisers to help them grow their wealth by providing expertise and access to solutions that can enable positive futures.
I see the future of the wealth management industry in Asia as really positive and full of opportunity. The regulatory changes in Singapore will be unsettling for a while - and other regulators will follow suit, no doubt. But we live in a new age – the age of the consumer, where products and offerings must be designed to meet their objectives, so these changes are inevitable. Applied fairly and consistently, the changes will see the industry re-emerge stronger, fairer and fit to service customers for a long time to come.
Paul Feeney is the CEO at Old Mutual Wealth