Curious Shifts Behind the Scenes in Asian Wealth Management
Something curious is happening behind the scenes in the wealth management sector in Asia, finews.asia editor Andrew Isbester writes.
It started with VP Bank last summer and then, in January, BIL. Both decided to close their Hong Kong offices in relatively short order.
You can speculate about the internal to and froing and what prompted the final decision.
Big Ask
But the truth is that it has always been challenging for small and medium-sized overseas wealth managers to run a sustainable operation in any of the major finance hubs in the Asia Pacific region.
Every single cost is inordinately high by any reasonable measure and the returns are low.
Laundry List
But of all the long laundry list of expenses, a pairing comprising oversized buckets of compensation for specialists and middle management with an equity brokerage business at best, and not formalized portfolio-based wealth management, can prove fatal.
Then there is regulation. Most waltzed in knowing little more than the hands-off principles-based Swiss regulatory regime or similar, but they now return, sobered, with a profound understanding of the circular joys of supervisory micromanagement.
The Residuals
It also means you can’t just up and leave – and a residual business somewhere has to keep years of client voice logs stashed away in some storeroom, or on some computer, that will be kept intact as long as they have to be.
That includes humdrum, once inordinately urgent and expensive fare like reviewed call logs of equity trades marked as «solicited» and «unsolicited» audited by an approved third party at supervisory gunpoint and possibly then re-audited by the regulator if they didn't like what they found or as part of their constant thematic inspection trawls.
Breakeven Point
In the early 2010s, when times were good, and the mainland’s future growth trajectory seemed endless, $20 billion in assets under management was considered the breakeven point.
That number has likely risen since then. The region’s equity markets haven’t done well in the last half-decade, and most wealth managers are not large enough to compete on fixed income or even put a good showing in for alternative investments and private equity.
Below the Radar
Moreover, the mainland’s future no longer looks like the sure thing it once was, which has a trickle-down impact on the Greater China region, where most of them operate.
Although the sector’s large institutions continue to maintain their strong commitment to the region, smaller players and even medium-sized ones are likely to continue to abandon the cause.
Under the Radar
The pitter-patter of exits has mostly gone unnoticed, but Trump 2.0, and the continued uncertainty that is likely to prompt, could make the whole thing a good deal more visceral in the future.
