Asia’s High Net
Worth Individuals are increasing their wealth, but their wealth is
growing at a slower pace and their sentiment is less bullish than two
years ago.
According to the most recent round of the Asian Wealth Index (AWI),
conducted by East & Partners Asia, HNWIs saw their personal investable
wealth, outside of the family home, reach US$5.39 million, up from
US$4.22 million in 2013.
Although this signifies a dramatic leap of nearly 28 percent since the
first round, the rate of increase has slowed significantly each time
the HNWIs have been interviewed.
At the same time, the measure of sentiment has become less bullish.
The AWI explores levels of optimism, and in the most recent round the
average result was indifferent, with the figure edging closer towards
the pessimistic side of the scale.
Their sentiment reflects the regional and global economic outlook. The
spectre of the “Grexit” – a Greek departure from the Euro zone – added
to concern over the Chinese share market and a corruption scandal in
Malaysia playing havoc with the exchange rate, are all having a
negative impact on optimism.
In this context, these HNWIs may be losing a small amount of
confidence in their own ability to manage their wealth.
Increasingly, they are looking to professionals to manage their funds
and the major beneficiary of this trend is the private banking
industry.
Around half of the HNWI sample are currently managing their own
wealth, but this figure has been falling steadily in the last two
years, down from 70 percent.
Over the same period, the proportion of HNWIs engaged with a private
banker more than doubled to 24.1 percent, and is predicted to increase
in the next six months. |
One of the big
themes for wealth managers in Asia currently is risk management and
compliance. Most conversations with private bankers in the region
touch on this subject.
It is an expensive and time consuming process, but it does position
the industry well for difficult times and make it more resilient.
In previous periods of volatility, such as the 1998 Asian Financial
Crisis and the Global Financial Crisis of 2008, the wealth management
industry attracted an amount of criticism for its performance.
No-one likes to lose money, but when a HNWI is paying for advice and
service which result in falling balances then confidence is seriously
undermined.
Perhaps the wealth management and private banking industry has taken
some learnings out of those recent experiences, and is focusing as
much on wealth preservation as on accumulation.
HNWIs will only engage private bankers if they feel they are doing a
better job than they can do themselves.
Wealth is hard earned but easily squandered and East’s HNWI sample
also say they are largely “self-made” people who have created their
own wealth, without much help from family inheritances.
Private bankers therefore need to earn the right to manage this
wealth, and perhaps – after several false starts – the industry is
starting to understand this, and achieve some significant traction.
The big test will come if and when there is another downtown, and how
the private bankers perform in protecting their customers from the
volatility. |
