Wealth Management in Asia - Embracing the Digital Proposition for Investment Solutions

The pandemic has done irreparable harm to the global economy and life as we know it, but in the world of wealth management, there has been a regionwide acceleration of the adoption of digital solutions. The course of the pandemic remains unclear, but what we do know is that the path towards digitisation, evolving for some years already, has become even clearer for all parties concerned. Where precisely will digital solutions be in even greater demand in the months and years ahead? Well, there is no doubt at all in the minds of the respondents to our latest Mini-survey that technology support and solutions for the optimised delivery of financial advice and for portfolio construction are central to the upgrading and enrichment of their offerings, especially for the mass-affluent segment, as the drive towards the democratisation of wealth management in the fast-growing Asia region continues apace, with or without the spectre of the pandemic. Hubbis conducted this survey supported by sole sponsor Tradesocio, to gauge the mood of the market and to illuminate the digital road ahead.

Exclusive Sponsor: Tradesocio

There are numerous challenges faced by the wealth management community in Asia today. The competitive landscape is constantly shifting, with newer digital-enabled players challenging the private banks and the independent wealth managers, all of which are making significant efforts to digitise themselves.

The traditional fee structure for the wealth industry is being challenged, and the financial institutions (FIs) need to move more into the mass market, so gearing up for that is a key mission, whereas historically it was not worth focusing on clients with just small amounts to invest. But today, bringing in digitalisation shifts the cost of client acquisition and retention into a more realistic field of vision, allowing for greater financial inclusion and viable returns for these major FIs.

Asia, as Hubbis acknowledges from the numerous panel discussions, events, interviews and thought leadership forums we organise, can attest to these trends and developments, and can confirm that, in so many ways, Asia is today truly at the cutting edge of digital technologies, even if the financial sector has thus far been lagging in its uptake of these solutions.

Largely driven by the advancement of technology, the democratisation of investments has also been driven by tighter regulations in investor protection. Higher transparency in products and fees drove many banks to switch from pure product-focused recommendations to standardised advice based on diverse product packages.

Additionally, many banks had no choice but to widen the customer target group and the offering, staying on the hunt for new revenue streams from recurrent advisory fees instead of commissions.

The democratisation of wealth management

The mass-affluent segment is where the digital-driven players are coming in most visibly, where the democratisation of finance is taking place most actively. While the higher end of the private banking spectrum, the HNW and UHNW segments, are seeing rising sophistication in approaches, a greater shift from offshore to onshore, and a burgeoning demand for digital solutions, especially from the younger generation of clients making new wealth, or gradually inheriting the trillions of dollars of assets and businesses from the older generations in Asia.

Hubbis: If technology plays a bigger role in helping create portfolios for clients in the future, which segment will it help the most?

UHNW 1%

HNW 5%

Mass affluent 50%

Retail 44%

There is, therefore, increasing digitisation throughout all the different parts of the wealth business, from back office to front office, from onboarding to empowering the relationship managers, from a focus on compliance to enhancing the client experience. And there is an overriding consensus that more and more players will acquire more and more digital solutions to allow them to compete effectively and potentially stay ahead of the chasing pack.

The role of digital on the mass-affluent side, helping to provide digital advice to that type of client directly, is especially core to the proposition. The needs of the mass affluent are less complex than theirs of HNW and UHNW clients, the ticket sizes are smaller, and therefore digital advice, including robo-advisory, are particularly valuable there, also for the banks and other wealth managers of course, as suddenly, cost-effectiveness and scale are much more attainable.

With the technology currently available in the market, what is the minimum amount that you are willing to onboard for a customer?

USD 100,000 30%

USD 10,000 55%

USD 1,000 15%

USD 100 or below 0%

And as the banks and advisories cater to the higher wealth segments, there the needs rise significantly for greater sophistication in asset allocation and portfolio construction, and again, digital solutions can help greatly, especially as more banks and IAMs/EAMS attempt to migrate their business models away from the product-push type model, to a far more advisory-centric model.

Not if, but how

The question, therefore, is no longer whether digital is top of every wealth manager’s strategic agenda, but rather how far can digital tools be leveraged to strengthen their value proposition and deliver the optimal customer experience to their clients. Banks can improve their customer service by adopting innovative digital technologies. With new competition on the rise, an enhanced digital journey leading to greater customer engagement, seems to be the most powerful strategy to win the race.

Software designed to help financial institutions manage, offer and access secure and profitable financial services are high on the agenda for banks and IAMs seeking to enhance the client experience and improve the quality of the advice and execution they deliver, right the way from the retail client to the HNW investor. The right digital investment management solutions can significantly help reduce costs and increase revenue potential, as well as boost client engagement and retention.

Asia’s huge potential

As digital solutions providers seek to help democratise wealth management, Asia offers a market of immense potential for digital delivery of these investment solutions.

It is fair to say that, as recently as only a few years ago, there was hardly anything provided to the retail or other financial institution customers of any value or integrity before the world of FinTechs began to offer new solutions. But, there has already been a significant improvement in just a few years to people’s access to products and investments, and the whole digital wealth manager investment experience is gradually catching up with other parts of the world, and the customer experience is starting to emulate that enjoyed in other business sectors.

Seamless is the target

Execution must be seamless for clients, as a very first step. With the right easy-to-use platform that enables investors and traders to place trades and monitor accounts, there is suddenly a more institutional type offering available to the average investor, even a new investor. Moreover, these investors are through this encouraged to venture into a broader range of capital market offerings out there, from stocks to ETFs and funds, and even structured products, without becoming bogged down in excess complexity and difficulties.

If appropriately supported by simple-to-access, easy-to-understand fundamental analysis, research and fund or product information, it is far easier to enable informed, smart investment decisions, without weighing them down with professional levels of data and technicalities.

Tailored advice for the people

Robo-advisory solutions also provide customers with a tailored set of ideas and portfolio allocation models that can address the needs and expectations of those clients, without necessarily the need for an RM to be directly involved, the cost of which cannot really be covered by the retail and mass affluent segments.

Would you allow AI to auto-create a unique portfolio proposition for each unique customer?

Yes 70%

No 30%

Investment opportunities based on risk profiles and investment goals are now much more readily within reach of the average smaller investor. The HNW and UHNW clients will still obtain the same type of AI-enhanced service, but delivered by humans not machines, while the other 98% of customers out there, the retail and mass-affluent investors, now have a far enhanced investment offering available.

Experts are also seeing more one-stop service providers that offer multiple services from one platform, services such as money exchange, investments, and portfolio management, while the increased use of AI and machine learning (ML) are helping with costs and risk management. And the competitors are jostling for position as they strive to achieve digital for scale, cost-efficiencies, and USX optimisation.

And if the robo-investing experience can also be aligned to the automation of middle and back-office applications and processes, full reporting, an ERP suite, and customer relationship management tools, then the customer can enjoy a seamless and highly professional service and enjoy the experience at the same time. For the providers, this can be offered to clients at scale and with a rapid concept to market protocol.

Do you feel confident that using technology, machine learning, AI etc. is effective when creating investment solutions for clients?

Yes 80%

No 20%

Institutional type expertise – now in reach

There are then enhancements of these solutions available, such as ongoing portfolio valuation and re-allocation services that offer clients, particularly the wealthier customers, a transparent and highly effective way to control their risks and exposures on a real-time basis, with decisions supported by real-time access to NAV, factsheets, equity analysis and advanced statistics. There are also solutions out there that offer average types of customers information to allow them to copy trades or portfolios of far more experienced professional investors. And this can also be done across multiple asset classes, and both public/liquid and private/illiquid assets.

In the coming years – what will be most important for you and your clients?

The ability to manage portfolios in real time 26%

Transparency in fees and payments structures 22%

Access to a wide range of asset classes and investments 30%

Connectivity to global markets and strategies 11%

Flexible solutions that deliver to requirement 11%

Seeing the trends ahead

As of current and anticipated trends in Asia, there is plenty of dynamism right now. Paperless transactions mean there is an increasing trend in secured and automated onboarding of new clients.

The advancement of technology contributed to the proliferation of wealth management services and the rise of non-financial players that offer low-cost, automated investments mimicking traditional portfolio management in the form of proprietary algorithms managing customer portfolios.

We are already seeing big tech companies, such as Google, Apple and Facebook, looking to break into the financial services industry. While many expected robo-platforms endanger high-end wealth management taking over its market share, the platforms ultimately cater to investors with lower assets. This brought a new kind of customer segment to the wealth management digital marketplace. Privileges that used to be reserved exclusively for HNWIs are becoming available for regular investors and retail banking customers.

Financial institutions have played catch-up to challenger banks and FinTech companies for a few years now. Digital investment platforms have centred mostly on the needs of retail investors, while HNW and UHNW clients continued to rely on a personal, relationship-based service. However, wealth managers are now realising that this model is flawed, in that HNW clients also expect a digital experience and services as part of their overall manager relationship. The challenge is to provide a low-cost, digital experience that matches the level of their personal service.

When curating investment solutions for your clients – what is most likely to be added to the mix in the next year?

Actively managed funds 20%

ETFs 50%

Fractional shares 20%

Thematic baskets 10%

Adjusting to the needs

As the demographics of wealth shift, so will the needs and expectations of wealth clients. According to Credit Suisse, at the end of 2019, total global personal financial wealth stood at USD360 trillion, and by some estimates that is more than four times the wealth of only 20 years ago. Many expect that HNW and UHNW will remain the fastest-growing segments in North America and that the affluent band will be the fastest-growing segment in Asia, Western Europe, and the Middle East. The Middle East and Latin America are also expected to see their share of cross-border wealth grow slightly faster than the global average over the next five years.

With the large and growing affluent and HNW segments in mind, retail banks and asset managers need to use technology and hybrid models to aggressively undercut traditional wealth management providers, and offer simple, but appealing, investment solutions across their existing client base. These offerings will be especially attractive to clients in markets with few established wealth management providers. Asset managers will leverage their superior investment capabilities to win new clients through direct channels.

The regulatory changes taking place in Asia and globally are, in fact, extremely helpful to bring in new technologies and more digitalisation, and so are the demographics and the evolution of wealth in the region. In short, amidst these many key trends and developments, Asia will offer an immense opportunity for the democratisation and digitisation of wealth management.

Tradesocio – A Brief Introduction

Tradesocio is a Singapore-based FinTech, with operational headquarters in the Middle East, that aims to make financial services more accessible to all levels of investors. The firm’s customisable products are designed to create a more convenient, flexible and faster user experience while guaranteeing the security and transparency of transactions.

With offices in Dubai, Singapore, Cyprus and India, Tradesocio aims to make financial services more accessible to all levels of investors by focusing on solutions that are responsive to individual needs. The customisable products create a more convenient, flexible, and faster user experience while guaranteeing the security and transparency of transactions.

Tradesocio provides Digital Technology that helps Financial Investment institutions manage, offer and access secure and profitable financial services. The solutions allow financial institutions to attract a wider clientele, ranging from retail to high-net-worth institutional investors, and offer them access to a variety of financial services, bringing equal opportunities to the world. The firm offers tailored digital investment management solutions to the wider investment management community that reduce costs and increase revenue potential.

Tradesocio also provides the complete end-to-end financial management solution, from development, hosting and maintenance, to security and post-sales technical support. The company understands that agility, versatility, and user-friendliness of a digital solution are crucial in managing the intricacies of investment activity across multiple markets and financial assets. Also, that transparency in fee calculation, as well as real-time portfolio analysis, are also important in maximising profits.

Tradesocio states that its award-winning solutions are inherently seamless. Integration processes, such as client onboarding and regulatory compliance, are fully automated to provide a highly efficient management experience. The firm aims to provide the best system for financial institutions to maintain a competitive advantage through advanced real-time data and accurate portfolio valuations, while delivering superior service to clients.

The key products for Investment Management (IM) are:

Robo Advisor

Tradesocio’s Robo Advisor is embedded with a unique AI-based algorithm and a fact-finding investment logic. It provides users with accurate and reliable investment advice that is actionable within a matter of seconds.

Separately Managed Accounts (SMAs)

SMA is a frictionless investment management platform that allows auto-management of multiple base currency accounts in real time. Provided with a holistic view of their portfolio, investors are also given the liberty to optimise and manage their investment capital allocation seamlessly.

The company offers a variety of discrete advantages for customers, including:

Agile and scalable architecture

(A system that continuously evolves over time and expands to cater to clients’ needs as their business grows.)

Seamless integration

(A library of APIs, open banking and digital wallet gateways that allow frictionless integration with the customer’s legacy architecture, for a seamless user experience.)

Easy market launch

(Built according to client specifications, the solution can go to market in as quickly as 120 days with a minimum viable product launch in less than four weeks.)

Multilingual

(A wide range of languages can be applied to the tailored solution to engage a larger customer base.)

Total support

(A complete front-to-back-end solution that includes development, hosting and maintenance, security and post-sales technical support.)

99.99% uptime

(A proven stable and reliable system, delivering confidence in operational and customer availability.)

Mission Possible - Tradesocio’s CEO Wael Salem on the Democratisation of Finance with Scalable FinTech Architecture

Tradesocio CEO Wael Salem sees Asia as a market of immense potential for the digital delivery of investment solutions for the mass market, as well as for the higher tiers of private wealth. As incumbent banks and other financial institutions race towards the goal of democratising wealth management, Mr. Salem and his team are positioning Tradesocio at the cutting edge of this revolution. Hubbis spoke to Mr. Salem to glean his insights into Tradesocio’s ‘Mission Possible’.

Asia, Mr. Salem states, is at the cutting edge of digital technologies, even if the financial sector is lagging in its uptake of these solutions. He observes that the regulatory changes taking place in Asia and globally are extremely helpful to encourage new technologies, bring in more digitalisation, and so are the demographics and the evolution of wealth in the region.

“In short,” he says, “Asia will offer immense opportunity for firms such as Tradesocio in the years ahead, as putting all of these elements together results in an extremely impressive and accommodative climate that works ideally for us and our suite of products and solutions. The democratisation of finance and wealth management is at the core of our solutions and our proposition.”

Mr. Salem believes that the most critical features for financial institutions, as they drive towards these goals, are a scalable investment architecture and a seamless integration with legacy systems, as well as mobile-enabled capabilities.

“For investment managers,” he claims, “scalable architecture is particularly important in maintaining a competitive edge. With the growing demographic of both the mass affluent and high-net-worth individuals, particularly in Asia’s dynamic economies, financial institutions that lack a scalable architecture suffer the risk of lagging dangerously behind.”

He explains that there are two facets to scalability as FIs strive to democratise the world of investing. First, in terms of size and throughput capacity, scalability is needed to handle the increasing volume of trades, tick and tie the reconciliations, as well as generate accurate and timely reports. And second, he says, in terms of supporting the expansion of the business, scalable architecture is required to accommodate a growing client base, the addition of new funds, asset classes and strategies, or break into new markets.

As a boutique FinTech development company, Tradesocio’s raison d’etre is to optimise the time and money spent by FIs on digital transformation. “This all tends to take a huge amount of time, large budgets, and the outcomes are seldom what might have been expected,” Mr. Salem comments. “But we have built a full array of end-to-end digital investment solutions that focus on capital markets and WealthTech, banks and other FIs.”

If these banks and other FIs need only a simple interface that gears up onboarding and the investor experience, or if they want more, perhaps a complete end-to-end automated digital solution powered by AI, business process management, automation, machine learning and other protocols, Tradesocio, according to Mr. Salem, can deliver those requirements. “And we always look at all this from the customer’s perspective, analysing the lifetime value, the retention value, and how can we maximise and customise end-investor experiences.”

In a period of immense global uncertainty and amidst spells of high volatility across all asset classes worldwide, investors have had to diversify to ensure a steady stream of income and a balanced portfolio. As digitisation lowers barriers to entry to wealth management as a business, the competition will intensify, and offerings that once provided differentiation will face commoditisation.

In the past, offering a high level of customisation at scale, as Mr. Salem says can be attained today, would have been cost-prohibitive. But advances in technology are allowing wealth management providers to create highly tailored portfolios at a fraction of the current time and cost.

“Before founding Tradesocio,” Mr. Salem states, “I had seen as a customer how people’s access to products and investments, was both limited and unreliable, and the whole experience was lagging behind other services industries. Moreover, while Europe and the US had moved ahead earlier, I saw that Asia was well behind, so there was a major gap we could fill. And we are doing precisely that today.”

Mr. Salem concludes by reiterating that the firm offers the complete end-to-end financial management solution, from development, hosting and maintenance, to security and post-sales technical support, all aligned with competitive pricing.