McKinsey’s report into digital and AI-enabled wealth management in Asia highlights that affluent and mass-affluent client segments in Asia's economies are nearing a pivotal moment, says Eliza Chang, Avaloq’s regional director and head of the North Asia market in a Q&A interview.
Households with investable assets ranging from USD 100,000 to USD 1 million are expected to see their collective wealth soar from USD 2.7 trillion in 2021 to an estimated USD 4.7 trillion by 2026, driven by rising incomes across Asia. Crucially, the report finds that these growing client segments are underserved by the region’s banks and wealth managers.
As Asia’s financial sector matures, the region’s financial institutions face increasing pressure from their clients to provide the latest products and services. Technology plays a key role in helping firms keep up with this demand and remain competitive in terms of personalized service, depth of offering and fair value.
Despite this, recent research by wealth management technology firm Avaloq found that many wealth managers in Asia are dissatisfied with their current technology systems. Over half of respondents (56%) stated that their current technology systems are outdated, and 49% revealed they struggle to find the information they need in their current systems.
However, the research found widespread enthusiasm and demand for well-functioning technology systems among those surveyed. Automated portfolio monitoring (70%), simplified/automated client onboarding (70%) and enhanced data analytics (68%) were cited as the top three functions offering a major improvement for wealth management professionals in Asia. Considering that 43% of respondents across Asia cite time as a strong or very strong barrier to offering more personalized advisory services to clients, the use of automation or AI technology to boost front-office efficiency can result in improved service for wealth management clients.
In this Q&A, Eliza Chang, Avaloq’s regional director and head of the North Asia market, discusses the opportunities for wealth management firms in the region.
How has the wealth management sector in Asia grown in recent years and where is the biggest opportunity for wealth managers?
“We have witnessed many changes over the past ten years across Asia’s wealth management sector. Growth in Hong Kong and Taiwan, in particular, has been impressive, supported by increasing liberalization by regulators. For example, Taiwan’s decision to issue licenses for financial institutions to provide wealth management services for local residents has encouraged individuals to invest their wealth onshore, resulting in a more mature wealth management industry.”
“In recent years, Taiwan has been working to attract more money back onshore, with many financial institutions keen to establish private wealth management services for mass-affluent and high net worth individuals, providing them with a much wider product and service range in their home market. Although the island’s wealth management sector is not yet as mature as in Hong Kong and Singapore.”
“For wealth tech providers in Taiwan, we believe the initial focus should be on supporting wealth managers with their offshore business first, helping them to establish or upgrade their Singapore or Hong Kong platforms. This will allow providers to build up the credibility and relationships to then help institutions onshore in Taiwan.”
What are the main challenges for wealth management firms in Hong Kong?
“The financial market in Hong Kong is mature, well-regulated and diverse. The city is experiencing a ground swell of investment, which is driving demand for new digital tools to help front-office staff support a larger client base and to elevate the client experience.”
“The successful implementation of these systems and tools requires close alignment of the technology with firms’ business processes and offerings. Financial institutions have vastly different needs when it comes to technology depending on whether they are establishing or scaling their operations – and how digitally attuned their clients are. Wealth tech providers should be prepared to cater for these wide-ranging needs if they want to remain competitive.”
How are technology solutions such as software as a service enabling wealth management firms to transform their business models?
“A standardized software as a service (SaaS) setup can help financial institutions of all sizes, including smaller firms, build the operational capability to compete effectively well into the future. Specifically, SaaS deployment models enable firms to focus on their core business of managing money, while entrusting technology providers with maintaining, updating and scaling their systems. This strategic approach streamlines banks’ operations, trims their overhead costs and bolsters compliance across jurisdictions.”
