The formation of Asia’s first industry body representing independent advisers in the wealth management space is a promising sign for high net worth individuals.
Date: Oct 2011
Tags: Independent, Conflict of interest, Value proposition, Regulation
The formation of Asia’s first industry body representing independent advisers in the wealth management space is a promising sign for high net worth individuals.
"Clients need to know that there is a choice other than just going to a big bank, an IFA or a broker,” said Anthonia Hui, chief executive officer of AL Wealth Partners, and the inaugural president of the Association of Independent Asset Managers (AIAM) in Singapore - which held its official launch party on Friday, 30th September 2011.
Despite the large number of independent / external asset managers (IAMs / EAMs) already operating in Switzerland, the concept is new to Asia.
But it is gaining traction – helped in part by turbulent and unsettling financial markets.
An emerging model
The IAM / EAM model developed in Singapore in the wake of the financial crisis – when various seasoned relationship managers and investment advisers decided to leave the large private banks and other organisations they had been working for.
"They felt the industry was at a point where the institution’s interests were over-shadowing those of the client,” said Hui. “The financial crisis revealed a lot of the shortfalls of the structure of the wealth management industry in Asia.”
The problem when using a typical wealth management provider, she said, is that they don’t tend to work in conjunction with all other parties to find the most appropriate solution for a client. This, therefore, might not take into account the full needs of clients in relation to the combination of banking facilities, trust issues, insurance requirements and wealth planning priorities.
"IAMs are able to join all these dots together,” explained Hui, adding that it takes a certain personality and level of experience to be committed – and able – to act in a client’s best interests.
Target clients for IAMs tend to be HNWIs, or accredited investors, she said, given that individuals need to have a certain net worth and set of wealth management needs to make the most of the services that IAMs offer.
Clear objectives
While it is premature to pinpoint specific targets for the AIAM, Hui said it has some key goals.
An important driver for creating a formal IAM body, for example, has been to remove a lot of misunderstanding about the business model itself.
"Many clients compare us to IFAs,” said Hui, “which are commonly used as agents by insurance brokers.”
At the same time, there is a lack of understanding among regulators and service providers about why IAMs exist and what they do.
It is also important to ensure a consistent service offering and best practice among members of the AIAM.
To tackle these and other challenges, this united body therefore aims to achieve the following:
Once it has successfully been able to educate the wider market about the IAM model, Hui said the next mark of success will come when a wider group of wealth managers begins to view independent firms as a viable option for their next career move.
"A lot of bankers are disgruntled about their career options as they don’t feel there is a choice for them outside large organisations,” she explained. “However, once they know IAMs exist, they have a choice to either join an existing firm, or set one up themselves. So we can provide the forum to support these developments.”
Such camaraderie among members can further encourage best practices and informal consultations – which Hui said is unique within an ever-competitive banking industry.
Indeed, as a further sign of the take-up of the IAM model, an increasing number of banks are starting to set up specialist internal units with the aim of providing IAMs with a platform to work in conjunction with the banks – rather than the banks trying to exclusively develop their own books of business.
"The banks have realised that there is no cost or liability when they have professional IAMs communicating with a client on their behalf,” said Hui. “They can then just get the AUM and transaction volume from the independent firms.”
Click on this link for more coverage of the AIAM launch party: http://www.hubbis.com/forum/aiam/
More details about the Association are available here: http://www.aiam.org.sg/
Further insight about the purpose and growing role of IAMs in Asia – focusing on key aspects of their business model such as distinguishing features, fee structures, the investment process, and general benefits for clients – can be seen at this link: http://www.hubbis.com/video.php?vid=1286874784
