Singapore leads the digital wealth management sector, but it can’t thrive in a complete vacuum if no one else starts to pick up more of the slack. 

Digital wealth platforms in Southeast Asia are facing a key inflection point. Although the sector, commonly dubbed Wealthtech, appears ready to shake up the market, there is a large gap between the region's developed financial hubs and emerging economies.

No More Legacies

That, at least, is one of the main takeaways of a report (Substack) on the state of the industry by Urs Bolt, a Weathtech expert, and co-author Liam Reeve, a PhD candidate at the University of Hong Kong.

Published on December 11, it cites a McKinsey survey that predicts that as much as $700 billion in wealth from the mass affluent and high-net-worth segments in the Asia Pacific could move from legacy private banks and wealth managers into Wealthtech firms.

Serious Threat

«It appears the private banks in Asia, particularly boutique private banks, are not taking the threat from Wealthtech too seriously, or they have yet to comprehensively consider future strategies,» Reeve suggests.

Beyond that, trust is growing in the Wealthtech sector, and 80 percent of those polled appreciated the sector’s costs, transparency - and the availability of personalized strategies.

No Tailoring Here

This is a larger issue that finews.asia itself recently commented on, maintaining that legacy firms have difficulty providing adequately tailored portfolios to clients in the wider region.

So why is Wealthtech better at it? Part of the package that they bring is an ability to leverage AI and employ robo-advisors. They also have a wider selection of alternative investments such as private equity and private debt.

Singapore Dominance

One of the leaders in the region is Singapore’s Stashaway, a platform that is also emblematic of the city-state’s continued dominance of the regional market.

The city-state has managed to capture regional leadership in the Wealthtech market despite the incongruity, at least on the surface, that much of the assets flowing into the city’s financial hub comes from the ultra-high net worth and the high-net-worth, as well as family offices.

Achilles Heel

But that may also prove to be an Achilles heel for the city-state in the long-term, as Urs Bolt indicated in an interview with finews.asia. 

«To be the regional financial center you need more than the ultra-wealthy and family offices,» he said.

Lagging Behind

The issue is that the rest of the region lags far behind, except in isolated instances such as Indonesia, which recently enhanced regulation for digital financial services and digital assets.

It also fields a competitive Wealthtech entrant, Ajaib, who provides curated mutual fund recommendations to almost 3 million investors.

Further Harmonization

«The two-pronged approach in Southeast Asia is making it hard to provide proper investment advice for the affluent. On top of that, many individuals simply don’t have the liquidity and the cash flow,” Bolt indicated.

However, Singapore’s further development is going to depend on the further harmonization of regulation in the various countries. Even though many are making progress, what the region needs is a common financial market that allows for cross-border investment advice and product distribution.

No Cluster

«There are regulatory issues in each country with licensing. The challenge for emerging economies is that there is no cluster and you don’t have the talent,» Bolt maintains.

«Each member state has its own set of rules governing financial advice, which can create challenges for firms seeking to operate regionally. Navigating these diverse regulations requires careful consideration and compliance efforts from financial advisors and Wealthtech companies,» Bolt indicates.

Bright Future Nonetheless

Still, despite everything, the authors maintain that the future of Wealthtech in Southeast Asia is a bright one.

«In the years to come, Wealthtech in Southeast Asia will be characterized by innovation, regulatory support, and increasing consumer engagement with digital financial services. There are many reasons to be optimistic…But patience is advisable,» the report concludes.