Financial intermediaries, under different names, are expanding in Asia but how independent and open are they, and what are the tests that matter? This publication, in conjunction with UBS, recently held a briefing in Singapore to examine the state of play.
Financial intermediary businesses in Asia are on the rise, challenging existing operating models and responding to client demand for more diverse offerings and independence. But cost pressures could force consolidation, industry figures said at a recent Breakfast Briefing in Singapore.
The forces creating new financial intermediaries (FIMs) in Asia and how issues such as demand for more fee/cost transparency will play out have been on the radar of this news service for some time, as seen by recent research reports. Gathering at the offices of UBS at One Raffles Quay, Singapore, a number of wealth management figures debated the issues. The event was organised by WealthBriefingAsia.
Kicking off the event was Hugo van Kattendijke, head, Financial Intermediaries APAC at UBS. He outlined a recent report on the EAM and related market in Asia-Pacific.
“We see a material increase in the number of FIMs, whether they be EAMs or FOs being set up in APAC. Part of that is through completely new FIMs, part of that is drive by FIM headquarters in other locations, such as Europe and the Middle East setting up regional offices in Singapore and Hong Kong,” Van Kattendijke told delegates.
“If FIMs are indeed able to induce...attract senior banker talent to the industry, surely this will be indicative that this perspective on growth is more broadly based than just in the financial intermediary industry. Otherwise senior bankers surely would not make the switch,” he said. “Anecdotal evidence [at UBS] is supportive of healthy growth,” he said.
There were signs of more sophisticated and complex offerings coming through, although this may be more of a “nascent” development in the sector in Asia, he said. Van Kattendijke, referring to other recent survey evidence, said he saw more of a move towards a fee-based model among FIMs; at present the industry did not see fee transparency, however, as critical to business success.
At the panel discussion were Rohit Bhuta, CEO of Crossinvest (Asia), Urs Brutsch, managing partner and founder, HP Wealth Management; Steve Knabl, COO and managing partner, Swiss-Asia Financial Services Pte; Stefano Veri, group managing director, head global financial intermediaries, UBS Wealth Management, and Van Kattendijke.
Briefing chair Andrew Deane, Asia Publisher at WealthBriefingAsia, asked whether there was a need to have clearer definitions of terms such as “external asset manager”, “multi-family office“, and the like.
Bhuta replied that “We use poetic licence to describe ourselves every which-way”. He discussed how terms such as external asset managers, independent asset managers and IFAs were often not particularly external or independent – creating confusion. To overcome the problem, he said that it was essential to be clear on three main points: understand who the client is, the client proposition and the way a firm gets paid.
It was okay to take retrocessions but they have to be disclosed to a client for the term independent to be legitimate, he said. “We as industry players we should be able……to say that we are independent, completely transparent and stand behind what we do for our clients,” Bhuta said.
Talking about potential threats to retrocessions from regulators such as the Monetary Authority of Singapore, meanwhile, Bhuta said: “100 per cent of our revenues are from our clients”. He said he would rather sacrifice revenue growth and AuM inflows because he knows he could say he relied entirely on the client and therefore independent.
Picking up on the issue of definitions, Brutsch said: “It does not matter what you call yourself but what you do for your client.”
When an institution was called a multi-family office, the work was more about strategic asset allocation - not just investment. The biggest defining quality of independent asset manager was alignment of interest, he continued.