Paragon Capital Management CEO Paul Lee spoke to finews.asia about the advantages of external asset managers for clients and relationship managers, highlighting alignment between the two via fee-based advice.
One of the oft-cited advantages for clients being served by external asset managers (EAM) is the alignment of interests, especially when there is a fee-based relationship. This can contrast with relationship managers working at private banks that may need to fulfill various key performance indicators tied to sales or specific products.
«In Asia, clients tend to be put off whenever the discussion of fees comes up. Often times, they question the need to pay for advice. My view is two-fold,» said Paul Lee, co-founder, CEO and chief investment officer at Paragon Capital Management, in a conversation with finews.asia.
«Firstly, there will always be fees. They are either transparently disclosed or hidden. Secondly, fees align interests with those of my clients. Whoever pays my fee is my boss. Do you want someone working for you or a salesperson pitching a product to you on behalf of their employer?»
Employee Benefits
The benefits of working at an EAM extend beyond clients to employees as well, Lee notes. This includes not only the advantage of serving clients under an open architecture platform that can leverage the strengths of multiple private banks.
«[F]or those that have the ability to foster strong relationships with clients to entrust a share of their wallet, they can perform better than they can at banks in terms of compensation,» he observed.
Overhead Costs
Nonetheless, there are also challenges for EAMs, particularly when it comes to managing expenses.
«I think there is significant potential for the EAM market in Asia to develop and grow. However, the space is fragmented with a number of smaller firms. Due to the high overhead costs, we are also seeing a wave of potential consolidations and dropouts,» Lee noted.
EAM Desks
Although EAMs may compete with private banks in certain aspects, such as hiring, they also act as a business partner. While Lee commended private banks on various aspects, such as the comprehensiveness of product platforms, there is also room for improvement.
«One area that banks can improve on when working with EAMs is by accelerating the client onboarding process. Currently, it takes anywhere between three to six months, which can be quite taxing on the client experience,» he said.
AUM Growth
Paragon Capital Management was established in 2017 initially with a team of three and approximately S$180 million ($134 million) in assets under management (AUM). Today, it has a staff of 20 with an AUM of over S$1.2 billion from more than 100 clients. The majority of AUM is from Singapore-domiciled clients and the firm is now seeking expansion into the Greater China market via its new Hong Kong office.
«Our team comprised mainly of veterans from the banking, wealth management, asset management and finance sectors with deep experience to navigate the complex market dynamics,» Lee added. «These private banking experiences have also been instrumental in shaping our industry knowledge and the importance of client-focused strategies.»
