CanDigitizationOfferAsiaaNewFormofAdviceDrivenWealthManagement?

en.privemanagers.com /blog/candigitizationofferasiaanewformofadvicedrivenwealthm

InAsia,wealthmanagementserviceshavebeenfocusedon,anddominatedby,acommissionbasedstructurefocusedonsalespitches,callsandconversationsall
relatedtothenewestinvestmentproductandreturnonaproductbyproductbasis.ThishasbeenasideeffectofAsianinvestorsbeingmorehandsonandmoreactive
withrespecttomanagingtheirwealth.

However,withchangingendcustomerexpectations,increasingregulationsandtheneedforadvisorstodifferentiatethemselvesinanevercompetitivewealth
managementmarket,digitizationhasmadeitpossibleforthemarkettoevolvetoascalable,advicedrivenwealthmanagementmodel.

ChangingEndCustomerExpectations

Fromtheendcustomerperspective,experiencingavolatilemarket,wherewrongdecisionsareunforgiving,hastemperedtheaversiontoafeebasedadvisory
approach.Coupledwiththerecognitionthatpersonalizedwealthmanagementisvaluableinanunpredictableenvironment,endcustomersarenowprivytomore
information,whichmayormaynothaveaneffectonfinancialdecisions.Bothfactorshaveledtothedemandandexpectationforanincreasingamountofengagement
throughdiverseandalternativemeans.Asaresult,technologyhasdeveloped,andisdeveloping,adigitizedmeansofmeetingendcustomerexpectations.

Formofpersonalization.Thisimpliesahigherexpectationfrombeingofferedaonesizefitsallwealthsolution,tothebeliefthatanadvisorshouldpersonalizewealth
managementforeachendclientregardlessofamount.Thegrowingnumberoffinancialinstitutionsandadvisorsdigitizingtheendclientjourney,fromonboardingand
KnowYourCustomertosuggestingpersonalizedportfoliosandexecutionofautomaticandpersonalizedrebalancingprovesthat,inresponsetochangingend
customerexpectations,theprocesscanbesystemizedandconstructedinascalableway.Bymeetingthedemandforpersonalization,advisorsareabletomore
efficientlyserviceendcustomersandgeneratemorevalueadd,whichwillresultinmorerevenuesandalargershareoftheendclientswallet.

Abilitytocreatemultipletouchpointsforendcustomers.Thisallowsmoreopportunitiestocommerciallyengageanendcustomer,butmoreimportantly,itenables
advisorstolearnmoreabouttheendcustomerandsolidifythatrelationship.Theonlydifferencebetweenthetraditionalmethodofgainingthisinformationandthedigital
methodisthatitcanbedoneinamoreconsistent,scalableandresultorientedwaywithdigitalmedia.Throughthesemeans,digitizationallowsanadvisormoreinsight
intohowtoserviceanendcustomer.Bydigitizingtouchpoints,thepossibilityofamistake,oversightorinconsistencycanbereduced,andcertainopportunitiescanbe
flaggedandconvertedintorevenue.Insteadofcreatingmistrust,knowingandspeakingtoanendcustomerabouttheirinterestsandgoalsallowsarelationshiptoform.

IncreasedRegulationsinAsia

Althoughregulationshavebeenslowrelativetotherateatwhichdigitizationchangesindustrylandscapes,digitizationcanassistadvisorstomitigatethechallengesof
increasedregulatorymeasures,whichhavehighlightedstatutorydutiesofadvisorstoserviceendcustomers.Thishasledtotheinverserelationshipoftheadvisors
abilitytochargecommissions.Forexample,withtheadventofproductpushing,conflictofinteresthasbeenoneofthemainproblemsinthewealthmanagement
industry.Consequently,manyregulatorshavebeentryingtoreformtheindustrybyrepositioningclientsattheforefront,withthemajorityofregulationfocusedonbetter
meetingtheirneeds.
AlthoughoneofthemostsignificantattemptshasbeenledbytheU.S.withtheamendmentofretirementregulations,Asianregulatorshavenotbeenfarbehindin
institutinggradualchanges.TheseproactivemeasuresincludetheMonetaryAuthorityofSingaporerequiringadvisorstomeetkeyperformanceindicatorsthatarenot
relatedtosales,suchasprovidingsuitableproductrecommendationsandmakingproperdisclosureofmaterialinformationtocustomers.Inaddition,theHongKong
SecuritiesandFuturesCommissionhasmadeseveralrecentchangestoitsrulesandnowrequiresadvisorstoenterintoacontractualobligationtorecommendsuitable
investments.

EveninJapan,therehavebeeneffortstomakecommissionsmoretransparentininsuranceproductsand,thus,thetransparencydemandedincommissionsreceivedby
advisorsasaresultofnewregulatorymeasureshasjustbegun.Itisclearthatthepurposeoftheseregulationsistostopadvisorsfrompositioningtheirowninterests
overclientsinterestsofobtainingthebestinvestmentsatthelowestprices.

Theresultinganticipatedchangeswillenforceanewlevelofdisclosureandahigherburdenforadvisorstomeetthisthreshold.Anunintendedeffectoftheseincreased
transactionalandmaintenancecostswillbethatbusinessmodelsformostfinancialadvisorsunderthesenewrestrictionsoncommissionsmaynotworkwithsmall
accountbalances.Thus,managingsmalleraccountswilllikelybecomecostlierandincreasetheriskofliabilityforbrokerdealers,advisorsandothers,whichwill
challengethemtoseektechnologyenabled,outsourcedsolutionstoservesuchsmalleraccounts