The totality of wealth management

Wealth creation in Asia is likely to continue on its fast-paced trajectory well into the future, writes Antony Hung of Merrill Lynch global wealth and investment management, which means banks need to be prepared for the growth.
Antony Hung
Antony Hung

The rate of wealth creation in Asia during the past decade has been unprecedented. The number of high-net-worth individuals -- those with assets of more than $1 million excluding their primary residence -- in Asia has almost doubled.

The combined wealth of Asia's rich has likely risen at an even faster rate during the same period. And this wealth creation theme is likely to continue on its current trajectory well into the future. Rising domestic consumption, growing interregional trade and urbanisation will continue to work together to drive the Asian story, as well as corporate profits and individuals' wealth creation.

Asia's wealth management industry has also seen significant growth and development during the past 10 years and as we move into the next decade, it is clear that it will continue to develop, attract new entrants, gather pace and broaden its scope.

In the case of China, the number of high-net-worth individuals has risen as much as 10-fold during the past decade, albeit from a low base. This growth rate is unlikely to slow any time soon and more likely, will accelerate. While some of the other markets in the region may not be able to match the pace or sheer scale of China's wealth creation during the medium or longer term, the region as a whole holds much promise and is a strategic focus for every wealth management firm with global aspirations.

This comes as the industry in Asia stands at a junction, in terms of both its role to clients and in terms of the development of its business model.

As a result of the recent financial crisis, Asia's high-net-worth individuals have had to reassess their investing strategies, their relationships with their providers and their approach to wealth accumulation. Never before has the industry in Asia faced such a sea change in client needs and the opportunities and challenges that this encompasses.

While the events of 2008 and 2009 accelerated this process, a more holistic and advisory-based approach to portfolio investment and wealth management is the natural extension of the wealth management provider's role to its clients. This contrasts sharply with the early days of wealth management in Asia when wealth management meant simply filling orders, selling in-house products and generally executing clients' wishes.

There remains much diversity within the Asian wealth management industry and clearly some markets are more advanced in their development than others. There are three stages of growth within the industry:

1)    Wealth creation

2)    Wealth management

3)    Succession planning

Many of the region's markets are still in the developmental phases of wealth creation and wealth management. But Asia as a whole is maturing rapidly. A recent study estimates that 80% of Asian wealth will flow to the next generation in the next 15 years and as such, many high-net-worth individuals will be moving to the next phase of succession planning. And that's where wealth management firms can add the greatest value in considering portfolio diversification, correlation with the individual's business interests, and transparency, among other services. It is this totality of wealth management that espouses the long-term partnership and trusted advisor role that successful financial advisors must seek to build with their clients.

That said, in some cases, the characteristics of the succession planning phase may run counter to the mindset of Asian high-net-worth individuals as the experience of a typical Asian high-net-worth individual differs from that of his or her Western counterparts. More often than not, Asian high-net-worth individuals built their wealth from humble beginnings through entrepreneurship. He or she has long displayed attributes that characterise entrepreneurs when it comes to wealth management. In short, the typical Asian high-net-worth individual has a more proactive investment strategy, a greater international outlook to investing and a larger willingness to move across asset classes and products in the search for returns.

After reaping the benefits of the Asia wealth creation theme over the past decade, our challenge as an industry is to ensure that we continue to develop and grow in order to best serve our maturing clientele over the coming decade and beyond.

Antony Hung is head of global wealth management for Asia-Pacific at Merrill Lynch global wealth and investment management. 

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