The exceptional and continued rise of the Asia-Pacific block of economies over the last few decades can certainly be described as a major historic event. Recently, I realised that my own personal experience mirrored some of the forces which made it happen. Without knowing it, I was emblematic of what changed and why. Drawing parallels with wealth management in UK/ Europe with Asia Pacific provides a useful insight into some of the opportunities and challenges wealth management businesses are facing right now.
Let’s start with the present: Asia-Pacific is, after North America, the fastest growing wealth management market on the planet. It has the second highest concentration of potential customers who live in a region that’s quintessentially ‘digitally native.’ Almost in the blink of a historical eye, the entire region was able to skip a whole era of technological development and go from having extremely basic infrastructure to one that’s practically entirely digital – at least in the organisations we interact with.
I grew up in the region during the 1970s and 80s (yes, I’m that old!) and, even in major metropolitan areas, the chance of getting a phone line (which had wires!) was often vanishingly small. My family didn’t get one until 1989, just in time for me to fly the nest, go to college, and then start my first job.
But that glacial entrance into the world of wired communication actually turned out to be an advantage. Within a decade after my family got their precious phone line, I got my first mobile phone. Which thrilled me, of course, but also represented a turning point: the slow pace of wired connections opened an opportunity for the rapid adoption of wireless ones. Suddenly, the digital world enabled us all to jump-start the mobile era and get a head start over the ‘wired West.’ Actually, I often joke with my wife that if I’d had a mobile phone even earlier, I might have been married to someone else. (I won’t share her response.)
Mobile-first culture
And that’s why many commentators talk about how the Asia-Pacific region developed a mobile-first culture faster than Europe did, though the latter has now caught up. Why did that happen? Because Asia-Pacific had less legacy technology to replace and a higher proportion of the population went straight to mobile technology. So, there was no need to transition from the old to the new: it was just ALL new. That was helped by the fact that the average age of the region is younger and so more eager to adopt new ways of living their lives, and crucially, new ways to spend and invest their money. It also meant that the regulatory environment can be less onerous and more flexible.
Citigroup estimated recently that the region adopts new technologies eight to twelve years ahead of the West, leading them to call it ‘much like a time machine to the future’. Their report shows that across the region’s banking and financial sector the fact that its fixed infrastructure lagged behind the West had encouraged players to go digital faster and with more innovation. And that’s something that large numbers of newly affluent young people respond to.
Citigroup’s research also shows that ‘Asia leads the rest of the world in adopting mobile payments both online and offline’.[1] And according to FinTech specialists, FIS, in 2021, digital/mobile wallets accounted for nearly 70% of the e-commerce transaction value in Asia, more than double that of North America or Europe.[2] Likewise, for purchases at physical points-of-sale, nearly half, or 44%, of transactions in Asia were done via digital/mobile wallets, a share 4-5x larger than in the West.[3] I find those data points interesting because, though they may not give a full picture of what’s happening, they nevertheless point to the fact that Asia-Pacific is moving faster in certain key areas.
Digital engagement
Of course, different markets and populations of customers have different needs. But it’s clear that customers in Europe are moving very quickly toward digital engagement with all kinds of financial products and services. So, there are some great lessons we can learn from what Asia-Pacific players in the wealth management business have done.
For example, incumbent firms in Asia have started to offer hybrid advice from the start of their relationship with customers. They’re doing that to overcome the fact that there’s a limited number of financial advisers so they’re creating what are called hybrid-robo advisors. They are AI powered platforms that manage portfolios based on investor’s goals, risk tolerance, and investment preferences with the added benefit of access to an actual (real-life) human advisor when they want one. It’s a compelling proposition. DBS of Singapore launched their DigiPortfolio which offers four robotically constructed saving portfolio options (created by Hong Kong fin-tech Quantifeed).
Firms are also using virtual platforms which enable customers to interact with advisors virtually – just as many people do with their physicians – Standard Chartered Bank has launched DigiAdvisory which enables customers to get appointments with Relationship Managers, Investment Advisors, and Insurance Specialists, quickly, securely, and digitally.
FX trading flourishes because the region has a big presence of expatriates who need to transfer currencies across borders. So, in 2018 The Ant Group (Part of Alibaba) introduced the world’s first blockchain based cross-border remittance network. That’s a prime example of cutting-edge innovation. And that innovation is being mainly driven by start-ups and challenger banks, which isn’t surprising.
Asia-Pacific has been pioneering the use of mobile apps. It’s the place where so-called Super-Apps thrive and have come to dominate the way people live, and how they spend their money. WeChat and Grab are just two examples. The point is that users are acclimatised to the digital environment to such an extent that they trust their entire financial lives to wireless connections. That’s why wealth management players are scaling up their offerings.
For example, Google is partnering with Grab to offer a range of financial services from insurance to investment advice and support. And HSBC Pinnacle in China has launched a Personal Wealth Planning Academy to offer new personal wealth planners the professional and comprehensive training they needed to deliver wealth and protection planning. They plan to increase their team of personal wealth planners to 3,000 by 2026.
What can we learn from Asia-Pacific?
Simply, it’s not just the future that’s digital and mobile, it’s the present. The rising generations – Gen Z and Gen Alpha (those born since 2010) already take mobile financial apps for granted and will gravitate to brands that can fulfil their needs. It’s that simple. That’s why interactive, comprehensive, and easily accessible and analysable data is key to everything the wealth management sector needs to do. Now.
It’s important to develop and launch hybrid, virtual solutions that engage customers of all ages, but especially those rising generations. They too will make money, despite what the gloomier predictions might suggest. In every generation there will be wealthy customers.
So, I believe these are the key takeaways from this brief look at what’s happening in Asia-Pacific:
- There’s a need to confront legacy tech so it doesn’t slow you down; a platform approach will help increase agility and reduce complexity
- Partnering with tech companies (One of the reasons why incumbents in APAC achieved this speed was partnership with tech)
- Be prepared for the fact that technology is becoming a key competitive advantage (For instance, relationship Blackbooks will need to be replaced or enhanced with tech very soon!).
- Focus on hybrid, virtual solutions because they are the future and over the long term it’s very likely that the lower end of customer segments will be serviced almost entirely through Robo advisors
- As an incumbent take note of the fact that in APAC the incumbents have shown high level of dynamism
- Feature-rich mobile apps to enable your customers to do everything they want and need to do on the go – and ensure they can connect seamlessly with real people inside your organisation
- Need for tech investments will be a driver of consolidation in wealth management
Needless to say, at Salesforce we’re already partnering with key wealth management players as they embark on this journey. We’re helping implement some, or all of those actions. It’s a prospect that excites me. I may be old enough to remember the struggle my family had to get a phone line, but I’m also old enough to know that the market moves fast and getting left behind is not a good idea!
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