Wealth managers in Asia ex-Japan need to enhance their digital business models while making their operations nimble and cost-effective to capture post-pandemic opportunities in the region.
Most fund managers in the region have placed the highest priority on marketing and sales efforts, ensuring robust liquidity risk management and investing in digital platforms, Cerulli Associates says in a new report.
Cost has also been in the spotlight, as uncertainty in growth has prodded managers to seek ways to manage operating costs more effectively. In the survey, managers ranked reducing their operating costs as their fourth most important priority to ease the impact of Covid-19. They are stepping up investments in technology to create more efficiencies while supporting their investment processes.
Whether it is through their own platforms or their distribution partners’, fund managers in China have been creatively engaging with and marketing to investors. In markets such as Singapore and Hong Kong, managers have reallocated budgets to digital marketing, hosting webinars, creating green-screen studios for more professional videography, and conducting social media campaigns and promotions.
In 2020 online platforms in markets such as China, India, South Korea and Taiwan benefited from the pandemic as retail investors turned to contactless channels to invest and prefer the convenience and low minimum investment amounts offered by such platforms. In Singapore and Hong Kong, competition to onboard funds or expand distribution through global and private banks is expected, even as managers vie for opportunities emerging from online platforms.
One trend that could have long-term ramifications for the fund industry is the acceleration in the uptake of exchange-traded funds (ETFs), led by markets such as Singapore, China, and India. Singapore saw the highest on-year growth, with an 84.6% rise in locally domiciled ETFs. India and China saw ETF asset growth of 47.6% and 44.0%, respectively.
Driving this trend is a preference for transparency, simplicity, and lower investing costs. “The fact that many ETF investors in the region are young bodes well for ETF managers. If engaged well, they could become long-term investors and may diversify their investments to include other asset classes,” says Cerulli analyst Kean Yung Siau.
Leena Dagade, an associate director at Cerulli, adds: “Increased competition, use of online platforms, and the gradual rise of passives are expected to fuel fee pressures and weigh adversely on managers’ margins over the medium to long term.
“While delivering consistent performance is important to retain investors, managers are also likely to focus on curtailing operating expenses and improving their product mix to include megatrend investment themes and higher revenue-generating products, such as alternatives, and targeting wealthy investors for revenue growth.”