The number of ultra-wealthy individuals continued to increase in Singapore despite the impact of the pandemic, making it the Asian country with the second highest rate of growth in 2020. According to Knight Frank’s 2021 Wealth Report, the population of ultra-high-net-worth individuals (UHNWIs) in Asia Pacific region is forecast to increase by 33% in the next five years, which is significantly higher than the global average of 27%.
Nevertheless, the upward trajectory of Asia’s wealth also brings about a multitude of considerations for the region’s burgeoning community of wealth managers and family offices, as investment appetite and expectations among high-net-worth individuals (HNWIs) are constantly evolving amid an increasingly volatile macroeconomic environment.
ESG gaining traction
The younger generation of affluent investors globally and in Asia is increasingly realising that the top should look at more than the bottom line. In fact, there is an increasing demand for environment, social and corporate governance (ESG) considerations when it comes to wealth management. A report by RBC Wealth Management revealed that more millennial investors believe that societal causes hold greater importance in defining their legacy as compared to wealth accumulation.
A majority (79%) of Asia Pacific investors accelerated their ESG investments in the wake of the pandemic, according to a recent MSCI 2021 Global Institutional Investor Survey, slightly higher than the global average of 77%. The experience of Covid-19 serves to highlight the significance of ESG issues among investors as it demonstrates the unpredictability and fragility of the financial ecosystem.
This shift towards sustainability is further supported by the robust investment performance of ESG funds and investment products during the pandemic. S&P’s report found that many large funds that integrated ESG criteria outperformed the broader market between March 2020 and March 2021, as their focus on non-traditional risks enabled them to build portfolios of companies that showed greater resilience and stronger performance during the Covid-19 downturn.
Emphasis on wealth creation and legacy planning
There are also notable differences in wealth management objectives and investment strategies among different HNWIs across the Asia region. New research from Quilter International noted that over half of Singapore’s HNWIs are more concerned with wealth creation, as compared to wealth preservation.
Singapore’s supportive policies and infrastructure that encourage entrepreneurship are among the key factors that contribute to the inclination towards wealth creation strategies among Singapore HNWIs. Quilter International’s research noted that there are three times more Singapore HNWIs that run their own businesses as compared to Hong Kong.
In addition, the Covid-19 pandemic has prompted HNWIs across the region to place more emphasis on proper succession planning, asset diversification and holistic wealth management in order to better safeguard their legacies and estates across generations, especially during times of market volatility. In this context, independent wealth managers are uniquely positioned as they add “alpha” to their client relationship through estate and legacy planning and an in-depth understanding of their goals and preferences — going beyond mere portfolio construction.
Rising demand for external wealth management advice
While earlier generations of HNWIs in Asia tend to be more hands-on when it comes to wealth management and they generally prefer self-directed investing, the younger generations prefer to have their wealth professionally managed so that they can focus on their core business and priorities. This is underscored by a survey by Accenture Consulting, which revealed that four out of 10 millennials are more focused on short-term goals, and require tangible advice to enable them to reach these.
Against this backdrop, perhaps the most interesting evolution is that young HNWIs avoid putting on the many hats of an investment professional while pursuing their career and personal passions. Compared to previous generations, they have different mindsets, aspirations and goals, and they are more open to external advice to develop personalised approaches to wealth management, succession planning and real estate that cater to their individual interests and risk appetites.
Evolving digital expectations
Lastly, HNWIs in Asia possess a high level of digital literacy, especially the younger HNWIs under 45 years old, and they are also expecting a seamless digital wealth management experience from their advisers.
Although they may have reservations about technology that draws on their personal data, many HNWIs in Asia regard this as a necessary price for enjoying the convenience that personalised digital services can bring.
However, a recent Refinitiv report showed that affluent Asia Pacific investors are among the least loyal and most frustrated, by their digital platform experiences. In fact, 22% of investors in the region are willing to switch platforms within a year because of their poor digital experiences, which underlines the need for the wealth management industry in Asia Pacific to cater to changing investor expectations for a seamless digital experience.
An independent wealth management model for today’s investors
Although the investment priorities and habits of Asia’s HNW community have shifted considerably in recent years, one thing remains constant: the need for trusted investment support and advice. In fact, a PWC report found that more than half (52%) of HNWIs worry about being taken advantage of.
Leaner and more agile, independent wealth managers serve only the interests of their clients, and their flexibility and independence are strong selling points as an alternative model of wealth and asset management that caters to the evolving needs of sophisticated investors.
Independent wealth managers operate an open architecture model that enables them to select the best-in-class products and platforms in the market that are well-suited to meet each client’s individual needs and objectives. This helps to minimise potential conflicts of interest and any bias in advice or products that clients will receive, thereby allowing them to serve as trusted stewards of clients’ assets. Without being constrained by internal structures and legacy policy issues, independent wealth management firms are uniquely placed to harness digital technology to deliver seamless, personalised experience for clients.
Ultimately, independence, alignment of interests, ability to provide bespoke solutions and adaptability to fast-changing market environments enable independent wealth managers to be well-positioned to better meet the changing needs of HNWIs in Asia.
Chiara Bartoletti is committee member, regulatory & advocacy, at The Association of Independent Wealth Managers (Singapore) and COO at Eightstone Oclaner