Is Asia the future for wealth management?
Photo: Erwin Soo. Source: Wikimedia
One of the most popular movies this summer has been “Crazy Rich Asians,” a charming romantic comedy set in the city-state of Singapore with echoes of “Guess Who’s Coming to Dinner.” Asia has certainly seen dramatic growth in its wealth management business, with over China having over 1.2 million individuals who have more than $1 million in investments. For comparison, the US has about 5.3 million individuals who are millionaires.
Singapore, the setting for the movie, is at the heart of this growing wealth management business. It’s been labeled the richest city in Asia and the 5th richest in the world. By one informal measure, it has the highest ratio of individuals with the prestigious CFA Charter – the gold standard for financial analyst accreditation – to population of any major city in the world. In Singapore, 1 out of every 1400 residents is a CFA, compared to the New York City area, where the ratio is 1 out of 2800.
In fact, Asian wealth is growing so fast that banks in Singapore and Hong Kong are poaching relationship managers from each other, offering base pay raises of 30% to 45%. Speakers of Mandarin Chinese are particularly in demand. Many Chinese entrepreneurs own property in Hong Kong and Singapore, where they may send their children to school. The wealth management arm at Overseas-China Banking Corp (OCBC in the skyline above) needs to hire 150 new relationship managers by 2020.
Source: Capgemini, Bloomberg
But wealth management in Asia isn’t just limited to the big banks. Big Tech firms are making serious inroads into money management. In 2016 the Chinese internet search firm Baidu created its own investment management fund, Baidu Capital. Last year, Alibaba’s money market fund became the world’s largest, and Ant Financial – their payment and banking arm – says they have over 620 million customers with more than $340 million in assets. And this year, Tencent Corporation received a license to sell mutual funds to WeChat’s 1 billion users. Clearly, Chinese Big Tech wants to have a stake in this game.
The appeal of purely digital robo-advisors may be limited, but most new clients want sophisticated mobile interfaces to go along with robust investment returns and personalized service. Big Tech – both in Asia and elsewhere – is likely to be wealth management’s “frenemy” – both a rival and a resource, a competitor and a collaborator.
Global Wealth as of 2017. Source: Capgemini
At the end of the movie, the boy and girl get together, after the girl and the boy’s mother play an emotional round of mahjong, a complex game of luck and skill. The mahjong game is a metaphor for life, where players combine and discard various tiles to create their best hand. If Asia keeps growing the way it has been, we all may need to learn mahjong soon.
Douglas R. Tengdin, CFA
Charter Trust Company
“The Best Trust Company in New England”