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Growth of Wealth Management Business in Asia

Friday, April 1st, 2011
wealth management puzzle

Asia in recent years has grown to be a strategically important region for wealth management businesses in terms of the rising number of investors there as well as the availability of investment products where funds can be channeled.

Wealth management in Asia has also evolved into the global arena by providing an Asian channel for foreign investors as well as making foreign investment products available to Asian investors.

A survey from Barclays Capital indicated a softening in wealth management business revenues during the last two years due to changes in Asia’s business environment brought about by the global financial crisis and changes in several governments’ economic policies. Still, a remarkable upward trend was experienced during these periods and is expected to continue through 2011 and into the coming years.

Current Wealth Management Business Trends in Asia

Research companies, such as NRI Ltd, have described Asia as the most dynamically growing region for the wealth management industry in terms of both assets and funding opportunities. This is attributed to the growing number and accumulated assets of High Net Worth Individuals, or HNWI, seeking post-retirement income security by investing in pension funds and similar investment opportunities.

This was confirmed by a similar study by Celent which put annual growth rates for Asian HNWI at 15 to 20% for the next two years. The study was based on trends from the top wealth management markets in Asia, particularly China, Hong Kong, Japan, India and Singapore, with China and India registering the highest growth rates, at 8% to 10%.

According to the Asia-Pacific Wealth Report released by Capgemini and Merrill Lynch Global Wealth Management, the wealth of HNWIs in the Asia-Pacific region increased by up to 30.9% in 2009, amounting to 9.7 trillion US dollars. These figures surpassed levels before the financial crisis and exceeded HNWI wealth in Europe for the same period.

Japan remains the largest wealth management market, with 54.6% of the Asia-Pacific HNWI population coming from this nation. China is second in terms of HNWI population, but Hong Kong registered the fastest HNWI population growth rate at 104.4%. According to the International Wealth Management Industry Database Research from Highworth Research Ltd indications are that China now has the fifth highest number of US dollar millionaires, but the current figure of 310,000 is expected to double in 2011. Asia-Pacific HNWIs invested primarily in opportunities within the region but the number of investments conducted in the rest of the world increased to 36%.

Market Outlook for the Wealth Management Industry

There are still several challenges facing the Asia-Pacific region in the coming years, but 40% of leaders in the regions wealth management industry are optimistic for continued growth in revenues. Barclays Capital reported that 90% of wealth managers expect more than 5% revenue growth per year. This is double the number of wealth managers who expected growth during the previous year.

Most wealth managers see China as the most attractive market, with forecasted annual revenues there of up to 15% for the next two years. This high rate is due to the big potential for expanding businesses in the country. India is also viewed as another attractive market and is also expected to register positive revenue growth rates, followed by Southeast Asia.

In order to succeed, wealth management businesses in the Asia-Pacific region need to adapt changing market realities there as well as conforming to the evolving regulatory conditions in various countries. On top of that, wealth managers must also learn how to adopt technology as part of their financial services as a way to improve on costs, effectively manage risks, increase their efficiency and offer better services to their clients.

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