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Asset Management / Wealth Management
Why external asset managers are gaining acceptance in Asia
External asset management thrives in a sign of a maturing wealth management market
Bayani S Cruz 1 Jun 2017
Until recently, external asset managers, including multi-family offices, were relatively rare in Asia and unknown among the region’s high net worth investors (HNWIs).

But in recent years a combination of an increasing supply of talented bankers who are setting up their own independent external asset management businesses, a clearer regulatory environment for operating such businesses, and greater confidence among HNWI clients on the multi-family offices model has led to increasing acceptance for external asset managers in the region.

According to a WealthBriefing Asia, a study of external asset managers in Asia conducted for UBS, as Asia-Pacific continues to mature as a wealth management market generally, the shift towards fee-based advice and relationship-driven (rather than transactional) partnerships is rapidly gathering pace.

Asian external asset managers are overwhelmingly positive on their sector’s growth in terms of new business launches. Over three-quarters (76%) of the 2017 cohort see the number of external asset managers in their location increasing over the coming three to five years (2016, 80%). It is estimated that Singapore currently has no more than 200 true external asset managers in operation and Hong Kong no more than 100.

Aniruddha Ganguly, head of financial intermediaries (FIM) Singapore at UBS Wealth Management, cites three reasons for the growing acceptance of external asset managers:

Firstly, there is now a deep pool of bankers who have sufficient experience in private banking, wealth management, investment banking as well as asset management who are ready to leave their parent banks and set up their own external asset management businesses.

Secondly, the regulatory environment for operating an external management firm is much clearer, particularly in Singapore and Hong Kong, making it easier to set up such firms.

“Five or seven years ago if you wanted to set up an external asset management firm it wasn’t clear what the regulations were, what licenses were needed, and what the set up will be. But today the regulatory regimes in Hong Kong and Singapore are fairly clear,” Ganguly says.

Thirdly, HNWI clients are now more familiar with the benefits that can come from using an external asset manager and how it compares to using an independent financial advisor or maintaining their traditional relationship with a private bank.

“Clients have become wealthy enough that they want someone who interacts with the same institutions (private bank and custodian bank) but from their side of the table. They are now willing to give mandates to a properly-licensed external asset manager with a good set up, a talented team, and with a banker whom they have trusted for many years but who has now become independent, and is now providing independent advice on their portfolios which then gets executed through a custodian platform,” Ganguly says.

According to Kitty Chou, executive director, head of business development, global financial intermediaries Hong Kong for UBS Wealth Management, the wealth management industry is now in a transition with independent financial advisers (IFAs) making way for more multi-family offices.

In practice, IFAs do not provide independent financial advice to their clients but tend to promote some key, specific products, while external asset managers focus on the overall asset allocation and management of their clients’ portfolio.

“There’s now more confidence in the multi-family office. They are using their assets to vote for the independence of the advisers that they trust and work with,” Chou says.

External asset manager have their unique approach to constructing precisely the right service and investment package for their clients. They also perform intermediary role in orchestrating a wide range of financial and legal service. As such, external asset managers might arguably be seen as embodying a “best-of-breed” approach to managing wealth.

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