Will the formation of the Asean Economic Community change the wealth management space in the region? In the second of a three-part series, Personal Wealth looks at the strategies of the local wealth management players.

IN anticipation of the growing competition across the region, Malaysia’s wealth management players have devised strategies to set themselves apart from the rest. For RHB’s U, opportunity lies beyond our shores. He says the bank aims to increase its overall contribution from overseas markets to 40% by 2020 from 12% currently.

“It is essential to look at larger economies, such as Indonesia, where current penetration rates [in the wealth management industry] are lower,” he says. 

“We are looking to make acquisitions in markets where we are not yet present but want to grow — for example, a commercial bank in Indonesia. The Philippines is another key market for us to expand into.”

Singapore is a large part of its strategy. “We are not a universal bank [which provides commercial and investment services] there, so we can’t open more branches. But one of the areas we have identified is developing our wealth management platform there,” U said in a wealth management report by Hubbis, a wealth management advisory group, last year. 

“We want to create a very strong regional value proposition to attract private funds to come to Singapore. We can use this to create crossover opportunities with clients in Thailand, Indonesia or elsewhere, especially if they are already corporate customers. We can offer a seamless movement of funds across the region,” he was quoted as saying in the report.

Having a presence in both the domestic and regional markets, he adds, will allow these banks to compete more effectively for HNWI assets. As for Malaysia, he believes it can target onshore wealth via financing and lending. But in markets such as Singapore and Indonesia, the plan is to focus on wealthy investors who typically prefer to hold a certain portion of their wealth offshore. 

“The strategy is well-timed in relation to the UHNWI segment. As this segment grows, so does the potential for offshore expansion as these individuals are looking to increase their allocations in developed markets,” says U.

CIMB-Principal is confident its multiple differentiators will help it stand out in a crowd. CIMB Group currently has a presence in 18 markets, including eight countries in Asean (It is not present in the Philippines and Laos). CIMB-Principal is the second largest player in Malaysia’s wealth management industry, with 13.6% market share. Regionally, it is the third largest, with US$14.2 billion under management. 

In preparing for the growth of wealth in Asean, Munirah feels that CIMB-Principal’s current position will be strengthened with the formation of the AEC as well as Malaysia’s growing wealth management industry. 

“We are strengthening our governance and infrastructure in terms of regulations. With the AEC, what we hope for is coherence in governance and infrastructure [across the region],” she says. 

“[As for the] private sector, we don’t know if it will be a smooth ride. But it is certainly something we want to put our money into because of the potential.”

According to Munirah, the potential lies in having a discerning investing public. Even with the AEC, investors will continue to choose consistent portfolio managers and fund houses with good track records.
“[For example, we have] a full-fledged investment team who speak the local language, study the local companies and get firsthand news from local regulators,” she says.

“We are a bottom-up stock picker, which is something a lot of companies do. But [the fact that we are] close to the ground is very advantageous.”

In anticipation of the AEC, the Securities Commission Malaysia announced on Feb 28 that CIMB-Principal and Maybank Asset Management Sdn Bhd had received approval to launch funds under the Asean qualifying collective investment scheme. 

CIMB-Principal, which was the first to receive approval, launched the CIMB-Principal Asean Total Return Fund earlier this month. The fund targets a return of 9% over the medium to long term by investing in companies with above average growth potential. 

The fund is suitable for investors with a moderate risk profile. The minimum initial investment is RM500 or US$200. “We expect to see RM300 million in sales,” says Munirah. 

Maybank Asset Management’s Maybank Bosera Greater China Asean Equity-I is an Islamic fund. It is a collaborative effort between Maybank Asset Management and Hong Kong-based Bosera Asset Management. 

The two companies announced at the end of last year that they would be looking to launch a fund in the first quarter of this year that will invest in shariah-compliant equities and equity-related securities with a focus on Asean and the Greater China region. 

The companies share the belief that while Hong Kong can leverage Malaysia’s Islamic fund management capabilities, Malaysia stands to benefit from Hong Kong’s strength as an international financial centre.

The move is expected to promote the Asean-Greater China Strategic Partnership and build on the bilateral trade between the two regions. 

It was also announced that the Monetary Authority of Singapore (MAS) had approved three other funds — Maybank Asset Management Singapore Pte Ltd’s Maybank Asian Equity Fund and Maybank Asian Income Fund as well as Nikko Asset Management Asia Ltd’s Singapore Dividend Equity Fund. 

How will Malaysian investors feel about the liberalisation of the market? Munirah believes local investors will embrace it as many of them already have diversified investment options beyond Malaysia. 

“Today, a typical Malaysian investor will have Malaysian assets and liabilities to fund. But increasingly, they also have US dollar, British pound or Australian dollar liabilities,” she says, adding that a liberalised market should be a natural fit for this type of investors because they have exposure to foreign currencies and want exposure in different markets.

“Malaysia is probably ready for more funds to come to our shores. But investors may have to be quite careful with unfamiliar names,” she says. 

Munirah is a strong advocate of good customer service. As products become more homogenous these days, there is no way players can compete on pricing alone, she says. Hence, it is important for a fund house to have that local touch so that the customer experience can be enhanced. “We are culturally more sensitive to the markets we are in,” she adds. 

For a regional player like Maybank, the next step would be to enhance its presence in the right market. Its presence as the only Asean bank in all 10 Asean countries is an advantage. Since the group has strong balance sheets, Lee says it is always looking to grow its footprint and will consider inorganic growth for its private banking segment.

“As we speak, we are rolling out [our] regional premier wealth platform targeting the mass affluent. We will target Indonesia in our wealth management space. It will be a key market for us, given the sheer size of its population,” he adds. 

“We will also target the Philippines. The literacy rate there is very high, so the scope for economic growth is tremendous. In the last 10 years, we have seen its gross domestic product grow north of 5% consistently. Politically, it is a lot more stable than before. Also, we will definitely target Malaysia and Singapore. 

“Maybank has the ability to collaborate across business sectors and borders. People are willing to share best practices and come together for the betterment of the group.”

Cambodia, Laos, Myanmar and Vietnam are not high on Maybank’s priority list as the level of affluence in these countries is not on a par with the rest of Asean. 

Despite being the fourth largest bank in the region in terms of assets, Maybank is not one to rest on its laurels. Since wealth management is about scale, Lee says the group aims to gain critical mass. 

“When you have enough customers and AUM, you can support a bigger specialist and sales team, which is quite important for us. We want to be a fairly significant player within a short time frame. So, with Maybank’s rich client base, that will be easy to achieve over time.”

DBS Bank Ltd and OCBC Bank of Singapore are the largest wealth management players in Asean. DBS’ AUM stands at US$54 billion and will surpass US$88 billion with the acquisition of Societe General’s

Asian operations. OCBC currently has US$46 billion under management. Comparatively, Maybank’s private wealth arm, launched 1½ years ago, has US$4.2 billion under management. 

The group, however, is not underestimating the competition from outside the banking arena. “It is not just banks we are competing with, but also non-banks, like family offices, independent financial advisers and even Internet companies, such as Alibaba, have started providing money-management services that are traditionally offered by banks under the supervision of central banks,” says Lee. 

“It is going to be a challenging landscape as it becomes more crowded. The bank that can bring sustained values to clients will survive longer.”
 

This article first appeared in Personal Wealth, a section of The Edge Malaysia, on March 30 - April 5, 2015.

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