RBC WM’s Philip Harris spies opportunities in Asia-Pacific wealth growth
Growing wealth in the Asia-Pacific region is creating significant opportunities for wealth managers, says Philip Harris, head of Private Clients at RBC Wealth Management.
Prospects for the growth of Asian wealth paint a promising picture for wealth managers. The Asia-Pacific region is set to become the largest wealth market as early as 2014, outpacing the rest of the world, according to the 2013 Asia-Pacific Wealth Report produced by Capgemini Financial Services and RBC Wealth Management.
The number of high net worth individuals (HNWIs) in Asia-Pacific grew 9.4% in 2012 to 3.68 million and the region has provided almost half of the global growth in the number of millionaires over the past five years, far outstripping the rates of its peers. While North America actually had the highest number of millionaires in 2012, Asia-Pacific is expected to reclaim the top spot in the very near future, with wealth anticipated to grow 9.8% to US$15.9tn by 2015.
Meanwhile against this backdrop, relationships between HNWIs and their wealth managers are undergoing a significant shift. A survey in the report of HNWI investor attitudes, including almost 1,400 respondents from Asia-Pacific, found that this move could be attributed to the changing regulatory environment that wealth managers are helping to guiding clients through, as well as the current investment landscape.
The survey found that over three-quarters of respondents in the Asia-Pacific region have high levels of trust in wealth management firms (78.8 percent) and wealth managers (77.9 percent) compared to two-thirds (66.8 percent and 65.9 percent) of HNWIs in the rest of the world. This was coupled with optimism about the environment in which wealth management firms operate. With sentiment towards a global economic recovery gaining some positive momentum, a high level of trust in the global markets was noteworthy.
This was not only reserved for the macro economy, with confidence in the infrastructure that supports the wealth management industry, specifically regulators. More than 70% of respondents surveyed in the Asia-Pacific region said they had confidence in regulatory institutions, far higher than the global average of 38%.
From an investment perspective the relationship between wealth managers and their clients is increasingly one of managing expectations. Wealth managers have an important role to play in helping individuals to deal with the altered risk/reward dynamic of today’s investment environment. Given reduced yields in traditional asset classes, a more active strategy which may incorporate the use of tools beyond the traditional asset class set is increasingly important to meeting investment objectives. Even with this approach, firms need to help clients understand and accept that the reality that increased risk and lower yields means the returns seen pre-financial crisis are unlikely to reappear for the short to medium-term.
Successful advisers will be able to accurately assess the individual’s expectations and risk profile and translate this into a suitable investment strategy that puts their assets to work. Furthermore, a lot more time will need to be dedicated to regulatory processes, particularly in regards to requests for detailed personal information and documentation to meet broader anti-money laundering and know-your-customer requirements. Firms will need to be clear and open with their clients about how and why these processes are being undertaken as the regulatory landscape becomes ever more complex.
The growth of wealth in the Asia pacific region represents a compelling opportunity for wealth managers in the region. Given the comparatively high levels of trust in wealth managers, regulators and financial markets, the foundations are in place for growth in the sector to service the rapidly increasing number of HNWIs in the region.
To view a copy of the Asia-Pacific Wealth Report, including infographics online, visit: http://www.worldwealthreport.com/apwr