Will the formation of the Asean Economic Community change the wealth management space in the region? In the final part of a three-part series, Personal Wealth looks at how players are positioning products for investors.
 

AS there are varying levels of maturity and sophistication among investors in Asean, the challenge lies in creating suitable products for them. Players such as Maybank will introduce plain vanilla products in each market before launching more complex ones. 

“At the end of the day, we want to make sure our clients know what they are investing in. We will judge the market maturity before launching products,” says Lee. 

“We place a lot of emphasis on segmentisation and selling the right product to the right people. Not every mass affluent will understand what discretionary portfolio management is, or a high-yield bond with junk status.

“As a bank, we are very conscious and conscientious. Internally, we have a product approval committee to make sure the right products are offered to the right people. We do client profiling to understand their needs and risk tolerance.”

This would mean different product offerings in different markets. Lee says this should not be a problem, and Singapore being the most advanced financial centre could potentially offer its full suite of products. 

“That is why our centre of excellence for wealth management is based in Singapore, as that’s where the expertise lies. From there, we will transfer these ideas [to its wealth management arms in other countries]. But, of course, subject to local regulations.”

Lee does not underestimate the maturity of Malaysia’s investors, calling them second only to the Singaporean market. “Singaporeans are more into principal-guaranteed products, bonds, structured products and dual currency investments as they travel very often,” he says. 

“Malaysians are more prepared to take risks [compared with Singaporeans]. They love to trade equities, are increasingly more open to discretionary portfolio management, which means trusting professionals to manage their wealth, and are more prepared to take on gearing. 

“Thailand is a hard market to comment on, as it is slowly opening up. Meanwhile, [we observe that] 

Filipinos are into fixed income, while Indonesians like currencies. With the rupiah being very volatile, they are looking to park their money elsewhere to hedge against depreciation.”

Islamic wealth management and the Asean Economic Community

With Malaysia and Indonesia being strong Islamic finance centres, Islamic wealth management will be an integral part of the Asean Economic Community (AEC). This should not be a problem for banking groups such as Malayan Banking Bhd (Maybank), which already has Islamic wealth management as part of its strategy.

“Maybank has had a head start among Asean banks as we have the market share. This is driven by the fact that we think Malaysia will continue to attract Islamic money,” says Alvin Lee, managing director of private wealth at Maybank. 

“A lot of tourists from Arab and Gulf Cooperation Council (GCC) countries are coming to Malaysia and Singapore. Previously, they would only go to places like London or Paris.

“Another reason is that Islamic products just aren’t popular among Muslims. About 40% of Islamic products are bought by non-Muslims. Seeing as the UK and Hong Kong governments also issued sukuk last year, all is going well for Islamic finance as a whole.”

Lee says Malaysia and Indonesia are key markets for Maybank in the Islamic wealth management space, and that Kuala Lumpur will always be a bigger hub than Singapore. As it also has a presence in Bahrain, Maybank plans to tap the GCC market. 

CIMB-Principal Asset Management Bhd CEO Munirah Khairuddin holds the view that Islamic wealth management will differentiate Malaysia from its competitors in the region. 

“It will play an important role because the largest country in Asean is Indonesia, and that is where the majority of the Muslim population in this region live. Malaysia is second. Then, you have Brunei, where there are very high net worth investors,” she says. 

However, Malaysia is ahead of the curve as the Islamic wealth management industry here is more developed. “Other countries can learn a lot from Malaysia,” says Munirah. 

However, a different approach is needed in some Asean countries. “For example, Thailand’s Islamic wealth management market is relatively difficult to penetrate. You cannot pitch it as a faith-based concept, but rather a more socially responsible type of investing,” she explains.

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

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