Digital platforms offer potential to tap into next-generation wealth in Asia

While banks are key channels to expand the wealth management pie, digital platforms are growing in importance, according to Cerulli's latest product trends research. 

The prospects of Asia's wealth management industry remain strong in the medium to long term and there are ample opportunities to tap into high-net-worth (HNW) and ultra-HNW wealth across key markets.

The growing number of wealthy individuals in the region, rising number of family offices, gradually improving appetite for discretionary portfolio management (DPM) services and private market strategies, and adoption of technology in delivering investment advice all contribute to a positive outlook for the region's wealth management segment. 

Banks are the key channels used by asset managers to tap the wealth management opportunities in the region.

According to Cerulli's research, managers in the bank-dominated fund distribution centers of Hong Kong and Singapore see local, foreign, and private banks as the top channels to expand the wealth management pie, whereas they rate online platforms moderately. 

Despite their strong existing client base, banks are ramping up their digital initiatives to meet the long-term needs of next-generation investors, who are more tech-savvy and will continue to accumulate significant wealth over the coming decades. 

Banks are also increasingly focusing on expanding the DPM business, of which Asian investors are expected to increase their use as they rely on their wealth managers for professional advice, more so against volatile market conditions.

More than 40% of banks surveyed expect their DPM assets under management (AUM) to grow in the range of 1% to 10% in the next two years, while nearly 20% expect them to grow by more than 10%. In addition, banks are onboarding private market strategies for their HNW and ultra-HNW clients. 

Meanwhile, online platforms and digital wealth advisors are growing in prominence and have in recent years expanded their product offerings to include alternatives.

Although digital wealth advisors are not a popular channel for promoting alternative funds among Asia ex-Japan fund managers, as the digital transformation of the region's wealth management industry gains momentum, these platforms will eventually grow in importance.

Apart from direct fund onboarding potential, managers have the opportunity to partner with digital wealth advisors to offer portfolio solutions, including funds and exchange-traded funds (ETFs). 

Leena Dagade, associate director with Cerulli said: "The wealth management sectors in key Asian markets are set to bloom over the medium to long term, as wealth pools keep growing and rich clients increasingly seek investment expertise.

"Although banks are regarded as the main distribution channels for fund managers that want to target the HNW segment, digital platforms cannot be downplayed, as their importance in attracting underserved and digitally savvy individuals is expected to only increase in the future."

These findings were from The Cerulli Edge—Asian Monthly Product Trends, July 2023 Issue.