Cultivating Wealth Management in Asia

It is currently the rainy season here in Shanghai and as I left my hotel bound for the office this morning, it got me thinking of home. No, I was not thinking of the weather in the UK but the comparison of the Western economies to those in the East.

As the Western economies continue to struggle to pull themselves out of the storm of post-crisis blues and the cyclone – the European sovereign debt situation – howling through the European Union, the weather in South East Asia looks rather rosy.

Sure, we have seen a weakening of GDP in India and China, but even then we are talking of growth upwards of 6%.What would a European economy give for a 6% GDP growth rate right now!
We’ve all heard a lot of talk around the ‘shift of wealth from the West to the East’. It sounds like the Western investors have shifted their investment focus there, or that Asian investors are moving their assets away from the West.

Granted, there are certainly elements of change in investor focus, but it isn’t the major contributing factor; not when we consider the evidence i.e. the distribution of high net worth individuals (HNWIs) in the world. Asia has already over taken Europe in both volume and value with many predicting that Asia will surpass the United States in the next couple of years. It only takes the briefest of looks at the Capgemini / Merrill Lynch: The Asia-Pacific Wealth Report, 2011. According to the report,

• The Asia-Pacific HNWI population grew at 9.7% to reach 3.3 million in 2010, exceeding that of Europe, and is now nearing that of North America.

• HNWI wealth in Asia-Pacific had already overtaken that of Europe in 2009 and extended that gap in 2010, when the region’s HNWI wealth grew at 12.1% to reach US$10.8 trillion.

• Asia-Pacific is home to many of the world’s fastest-growing HNWI populations. In 2010, 8 of the 20 fastest-growing HNWI populations were in Asia-Pacific markets, including Hong Kong, Indonesia and Singapore.

In Asia, a problem exists. Because majority of the wealth created in region is first generation and linked to entrepreneurship or family enterprise, these wealthy individuals often lack familiarity with wealth management services and are unwilling to relinquish control of their assets. To these families and individuals a word of caution, do not forget the Chinese proverb – ‘fu bu guo san dai’ – which literally translates to ‘wealth does not pass three generations’. Or put another way; the first generation works extremely hard, so that the second generation reaps the benefits. By the time the third generation arrives, the wealth is squandered.

For banks, family offices and asset management firms servicing the needs of these families and individuals the challenges are manifold. How do you:

• acquire new customers, grow AUMs and retain existing customers

• maximize flexibility in responding to a changing business environment, expand product sets and cope with market volatility whilst coping with an increasingly sophisticated customer base

• make timely and effective business support decisions whilst being able to highlight and anticipate actions, and execute and deliver up to date information at the shortest time possible

• ensure compliance that encapsulates every aspect of customer management from risk, fraud, exposure to regulatory breach and inconsistent advice

As the rain continues to fall in Shanghai and the wealth in Asia continues to cultivate I would like to explore these challenges in greater details over the coming weeks and months through a series of blog posting as I travel around Asia.

Please feel free to post your thoughts on the challenges faced by financial services firms servicing the wealth management needs of Asia’s high net worth individuals.

Next stop for me is Singapore, so more from there next month.