How can banks strike the balance between digital offerings and traditional services to meet the evolving needs of investors in the Greater Bay Area?
By Pascal Wengi, Managing Director North Asia, Avaloq
The Guangdong-Hong Kong-Macao Greater Bay Area (GBA) has established itself as a hub for technological development, industrial innovation and business, resulting in a dynamic market with strong economic momentum.
With a population of over 86 million and gross domestic product surpassing twelve trillion yuan (1.8 trillion U.S. dollar) in 2021, the Pearl River Delta is an economic powerhouse with extraordinary opportunities for banks and wealth managers.
And as policymakers and regulators continue to foster wealth creation in the region, the pool of private investable money is set to more than double over the coming decade. In a recent Avaloq study of affluent to UHNW individuals from the GBA, 28 percent of respondents stated that they would consider dismissing an adviser who was unwilling to pursue modernization and keep up with technological innovation.
But while technology is important, investors in the GBA still insist on a traditional white-glove service. The study found that an incredible 93 percent of investors still want the personalized, premium experience that has long been the cornerstone of private banking.
Shaping the Future Through Investment
The unique investor profile of affluent to UHNW individuals in the GBA is an important consideration for banks and wealth managers. On average, they tend to be younger than their global peers and are more likely to adopt an aggressive risk appetite.
Unsurprisingly, given the vibrant business scene in the GBA, 43 percent of respondents said they invest to fund their own entrepreneurial ambitions. This risk-on approach is motivated by long-term financial goals, and it demonstrates a high degree of financial responsibility to prepare for future expenses related to healthcare, retirement and caring for elderly relatives.
Over two-thirds of GBA respondents identify as ESG investors, and 91 percent of the investors we surveyed described ESG investing as a must-have or a reason to switch advisers. This is fully in line with the longtermism of GBA investors.
Banks, however, need to be careful, as GBA investors are also wary about potential greenwashing, with 62 percent questioning whether ESG investing opportunities are truly sustainable.
New Wealth Landscape Powered by Innovation
With all eyes on the region’s wealth of opportunities, banks and wealth managers are facing intense competition to attract and retain GBA investors. To support their value proposition, advisers must focus more on how they present new and sophisticated investment solutions to investors, for example by visualizing portfolio performance in a clear and engaging manner.
Now more than ever, investors expect their advisers to model a wide range of scenarios, including the impact of interest rates, market volatility or climate change. Within the GBA, the majority of those surveyed stated that they would feel comfortable with their advisers deploying AI to support portfolio analysis and recommendations.
While it is impossible for artificial intelligence to perfectly predict the performance of a single investment or an entire portfolio, AI can play a vital role in enhancing the accuracy and personalization of such projections with faster turnaround times.
Rising Demand for Boundary-Less Investments
As financial integration and market fluidity continue to improve across the GBA, banks and wealth management firms will have an unprecedented opportunity to tap into the vast wealth creation taking place there.
The Wealth Management Connect initiative launched in September 2021 marks just the beginning of the region’s growing trend towards boundary-less investments. Banks and wealth management firms that can combine the automation and speed of technology with personalized service will be in a strong position to win over investors in the Greater Bay Area.
- Read Avaloq’s full GBA report here.
