David Bellingham of Professional Investment Advisory Services discusses some of the key trends and influences in terms of how advice is being sought and delivered in Asian wealth management today.

Date: Jun 2012

Tags: IFA, Financial adviser, Fees, Regulation

• Growth of the mass affluent segment in Asia is creating a demand for solutions and advice
• The challenge is to make the appropriate tactical adaptations to portfolios in line with what clients are seeking while also being consistent with their long-term strategies
• Some steps being taken towards investors being willing to pay for advice – leading to a greater need for advisers to articulate the quality of the service they deliver
• Regulators around the world are increasingly in dialogue and learning from each other to adapt the best points of regulation ion other markets to their own situations

According to David Bellingham in an interview, the mass affluent segment in Asia is the fastest-growing across the region, in turn creating a demand for solutions and advice in terms of what to do with the wealth they previously didn’t have.

At the same time, this brings with it a responsibility, he added, to deliver the right quality of advice.

Dealing with shifting investor preferences

A common theme, said Bellingham, is that demand from investors tends to be cyclically correlated – so when the market is up they want to buy equities, and when it is down they want to buy defensively.

As a result, the challenge is to make the appropriate tactical adaptations to their portfolio in line with what they are seeking while also being consistent with their long-term strategies, he explained.

This involves moving them beyond any “flavour of the month” towards their longer term goals.

Paying for advice

Bellingham said there are some steps being taken towards investors being willing to pay for advice, especially in line with the introduction of regulatory initiatives like the Client Knowledge Assessment – where the regulator is trying to ensure the investor knows what they are buying and why.

The next step is the FAIR regulations being discussed in Singapore, which based on conversations within the industry, suggests a move towards the end of commissions, said Bellingham.

This all leads to a greater need for advisers to articulate the quality of the service they deliver.

In relation to this, Bellingham said it will become increasingly important to separate a client’s understanding or acceptance of what they are paying for, and then how the adviser collects that payment.

Influence of regulations

Going forward, Bellingham said that any products which essentially have bundled fees or charges which are obscured to clients will be less acceptable.

This will lead to changes in the way in which some products are priced, and in turn might change the commission structure.

Bellingham said it is also interesting to see that regulators around the world are increasingly in dialogue and learning from each other to adapt the best points of regulation ion other markets to their own situations. This will lead to a more consistent regulatory framework globally, he added.

Evolving advice

The trends around the delivery of advice are that the focus will be around actual advice rather than on the product, said Bellingham, with standards needing to be improved.

In line with this, fee disclosure will come, and this is better for the consumer as well as providing good opportunities for IFAs like PIAS, he added.