While the emergence of digital wealth custodians is driving disintermediation between traditional banks and external asset managers, there is still enough market share for certain players in the region, Swissquote’s Rafael Weber told finews.asia in a recent interview.
Historically, many banks in Asia acted nearly as a one-stop shop for clients, ranging from the consumer segment all the way to the ultra-rich. But over the years, there has been an increasing trend towards disintermediation.
Non-bank players are winning market share with various differentiated propositions. For example, external asset managers (EAM) are building the early foundations in Asia by championing independent advisory capabilities to clients who lack the wealth to build their own fully fledged family offices.
EAM Market
At Swiss online bank Swissquote, EAMs are one of the main segments it targets in the Asia.
Since launching its Singapore booking center in 2019, Swissquote's unit in the city-state has grown its staff from 4 to 14. It currently serves around 75 EAMs in Asia that are mainly based in Singapore and Hong Kong, serving end-clients globally that focus on the region. While this segment of clients is still small due to its short history in the region, the growth potential is sizeable.
«The market is still relatively nascent. In Switzerland, EAMs manage 20 to 30 percent of client assets while penetration in Asia is still estimated to be just 2 to 5 percent,» said Rafael Weber, Swissquote Singapore's head of clients, in a recent interview with finews.asia.
Disintermediation of Wealth
EAMs are not the only players benefitting from disintermediation. Digital players like Swissquote are also able to win market share not only by reducing costs and improving efficiency but also by leveraging other advantages in technology, such as timely accessibility.
«Clients can do everything online whenever they want and don’t have to wait for the relationship manager to wake up to receive instructions to trade stocks, bonds, funds and options or instruct a payment. This is especially key for next generation clients,» Weber said.
«We position ourselves as a digital wealth management custodian bank and we do not provide advice. Our key advantages are our reliable platform, safety, product range and competitive pricing while not compromising on safety combined with a top-notch white-glove service.»
Focus and Size
While disintermediation between traditional financial institutions and Asian clients will persist, Weber envisions that there will be enough market share for players with a certain profile.
«We believe that EAM desks at private banks will continue to flourish, despite the emergence of players like us,» he explained. «There will be success both from smaller private banks that have a dedicated focus on the segment and larger ones that are looking to expand or build their EAM businesses opportunistically.»
New Markets and Asset Classes
Moving forward, Swissquote will continue to seek fresh markets in Asia and expand its shelf of over 3 million capital market products.
On new markets, it is eyeing opportunities to partner with financial institutions in Thailand, Indonesia and Taiwan. And on products, it is exploring the potential in new areas like crypto, where it has some experience with 35 different digital assets already onboarded on its platform in Switzerland since introducing physical bitcoin trading in 2017.
Investor Appetite
Despite the optimism, trading activities in Asia have been relatively lower compared to the historical trend. This is driven in no small part by dented risk appetite in the region, partly caused by downturns in local markets like Hong Kong and mainland China.
«Given the recent environment, there are still quite a number of investors still on the sideline waiting for buying opportunities. Transactions have been steady but at lower levels,» Weber added. «Nonetheless, given the substantial growth of Swissquote Singapore’s business in terms of revenues and assets under custody, we are looking back to an extremely positive 2023.»
Swissquote was founded in 1996 and listed on the Swiss stock exchange in 2000. Today, it has approximately $60 billion in assets under custody from over 550,000 clients worldwide.
