Providing advice in a more structured and consistent way is essential in preparing investors’ portfolios – especially in an environment where the potential for correction, plus disruption from the march towards digital, looms large - according to speakers at the flagship Hubbis Investment Solutions Forum 2017 in Singapore in early June.
A key goal for wealth managers in Asia should include delivering sustainable performance but in a way that helps position and protect investors’ portfolios against the chance of any correction or digital disruption.
This is especially important against a backdrop of a successful run in the markets since mid to late-2016, continuing into the first quarter of 2017.
So with most wealth management firms and their clients doing well during this period, where do they go from here?
This is an ever-more pointed question given the efforts by robo-advisers and other emerging platforms to challenge the traditional investment process and distribution channels.
It relies, however, on several key areas in which the market needs to evolve.
For example, most clients still believe in market timing, agreed speakers, with an estimate that probably only about 20% properly understand asset allocation.
Yet at the same time, there are various tactical plays for advisers to discuss with their clients in the coming months, based on market outlook and investment sentiment.
More broadly in providing – and justifying – value to clients, there has to be more of a concerted effort by institutions to help clients tally all the charges they incur to ensure there is no lingering distrust.
The flurry of activity around digital platforms makes this pressing. The inevitability of greater price competition from new entrants will lead to the increasing use of algorithms along with more structured data.
These were among some of the most important conclusions of speakers at the annual flagship Hubbis Investment Solutions Forum in Singapore in early June.
Key event take-aways
• According to 70% of poll respondents, the fees that private banks charge HNW clients in Asia are not transparent.
• 61% of delegates don’t think HNW clients really understand and take seriously enough the risks in their portfolio.
• To give consistent and structured portfolio-led advice – rather than just execute single trades – 49% of poll respondents said more alignment of suitability / risk profiles is required. This beat client education (33%) and use of data / algorithms in showing benefits (11%) as the two closest other options.
• While 49% of poll respondents said a typical Asian HNW client’s view of ‘long term’ is 5 years, 40% said it was only 2 to 3 years. Only 2% said client perception of ‘long term’ is 10 years.
• 59% of poll respondents said the level of engagement by their clients in DPM is between 0% to 10% – with only 28% opting for 10% to 20%, and a small number saying it is over 20%.
• Bankers, not clients, need the most education to boost DPM in Asia, said two-thirds of delegates. Yet nearly 75% of poll respondents said DPM should be done in-house, not outsourced.
• Collaborating with robos, not buying them or building them in-house is the future in Asian wealth management, according to 52% of poll respondents.
• 55% of poll respondent said user experience far outweighs cost and performance as the key factor when digitising the investment process.
• Yet the majority (37%) of poll respondents to the query over time before robo-advisers make a real impact, opted for 3 years – with 12% saying it will take a decade, and 9% choosing ‘never’.
• Compared with structured products activity in the first quarter of 2017, 43% of delegates said they believe volumes will be higher in the second half of the year.
• 96% of poll respondents said Asian clients should look for principal protection, not leverage, for the rest of 2017.
• Equities will be the clear favourite asset class as the underlying for structured products for the rest of 2017, said 62% of poll respondents; funds followed at 19%.