Solutions: Matching you with a wealth adviser


  • Numerous studies have shown that millennials in Asia tend to invest less, often keeping up to 40% of their assets in cash or savings

  • This is the fastest-growing region and Asia’s rate of development has seen millions rise out of poverty to become middle-class citizens. > Gamble
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This article first appeared in The Edge Malaysia Weekly, on November 21 - 27, 2016.

 

The digital revolution is shaking things up in the wealth management industry, with more of the young and affluent segment taking to the new analytical tools in the market.

However, much of Asia has been slow to catch up with this global trend, says Dominic Gamble, CEO of Find A Wealth Manager Pte Ltd (WEALTH). “Numerous studies have shown that millennials in Asia tend to invest less, often keeping up to 40% of their assets in cash or savings. This can be partly attributed to market conditions,” he says in an email interview with Personal Wealth. 

“And with the 2008 global financial crisis a recent memory, millennials may be nervous when it comes to handing over their hard-earned cash to professionals. Additionally, I think there is still a low level of financial literacy, which reduces the amount of investment opportunities available to the average investor.”

Nevertheless, there is no denying that opportunities abound with huge transfers of wealth underway as baby boomers age and pass their money to the next generation. “There are challenges of credibility, trust and knowledge that wealth managers need to overcome if they are to reach this segment. I believe that the industry in general has been quite slow to adjust to this reality and that the traditional techniques employed with baby boomers could work with this new segment [in getting millennials to start investing],” says Gamble. 

But despite the rise of automated advice in the form of virtual and robo-advisers and online services that offer algorithm-based portfolio recommendations, finding the right intermediary is not a simple matter, he points out. And traditional methods of looking for a wealth manager, such as word-of-mouth recommendations, anecdotal evidence and trial and error, can be “inefficient” as they take longer and the wealth adviser may not be the “right fit” for the investor. “That leads to big issues down the road and, sadly, money lost,” he says.

This is where WEALTH comes in. The platform, wealthinasia.com, allows investors to tap the expertise of a panel of experts who have been specifically chosen using a proprietary algorithm designed to generate “robust two-way matches” between the investors using the service and the wealth experts on its panel of available institutions. With the platform, investors can gain access to experts in a number of areas, including private banking, tax and legal matters and trusts, thus having a comprehensive range of services at their fingertips. 

“By leveraging technology, WEALTH is able to unlock the massive potential of Asia’s new class of investors by giving them the power to get their wealth working at their fingertips,” says Gamble.

“Globally, we have matched more than 5,000 investors to wealth experts [since 2012]. We have significantly increased the number of referrals our wealth management partners receive — by 100% in many cases — and have reduced their prospecting time by 90%, resulting in five times higher returns on marketing spend than they otherwise would via traditional marketing channels.” 

According to Gamble, the online platform has facilitated more than US$250 million worth of client assets in Asia, with a median opening account size of 

US$4 million. The platform is offered to high-net-worth individuals (HNWIs) and the mass affluent (those who have investable assets of at least US$250,000). 

“This ensures that wealth management expertise is now available to a much wider group of investors than before,” says Gamble, adding that the online matching service is supplemented with a team that possesses more than 50 years of wealth management experience between them, who are on hand to provide investors with further guidance.

Before the wealth experts can be listed on the platform, they are required to complete a comprehensive questionnaire on their offerings, such as the investment management, financial planning, legal, tax and trust services they provide. They also need to state the locations from which their services can be accessed and the minimum investment levels required. 

“Then, when users begin the matching process, their answers on the flip-side of those questions, along with other pertinent preference information, are used to filter the possible wealth managers. The algorithm at the heart of this process combines relief ranking [through scoring questions] and in/out criteria, such as minimum account size, residency and domiciliary status, to generate a maximum of three best-matched wealth experts that users can choose to have contact with and meet [those with highly specific needs may have fewer matches generated],” says Gamble. 

“Our algorithm and matching process ensure that investors detail exactly what they require — factors such as risk appetite, growth rate and expectations — and the top wealth advisers are filtered to match those needs. Clients, therefore, have a shortlist of institutions to consider while the wealth experts themselves can reach individuals they are best placed to serve. This can be done online or via mobile phone or tablet.”

WEALTH charges two types of fees — a leads-based fee for wealth managers and a flat annual fee for professional services firms. “The flat annual fee is the same for all firms, regardless of their size, so wealthy individuals who use our service know that the firms they are matched with are chosen based on merit and suitability to their needs, and not the fees they pay us. This dual structure allows us to offer the service free of charge to investors,” says Gamble.

The financial technology (fintech) that the platform uses works best when it is supplemented with traditional approaches, especially for accounts that require a tailored solution, he says. “I think there will always be room for traditional approaches. As much as it is tempting to claim that fintech and other disruptive firms will spell the end of traditional banks and banking models, this is not true. On the contrary, fintech has actually benefited traditional financial firms in many ways and plugged gaps in customer service that would have otherwise gone unfilled. 

“Our core USP [unique selling point] is the platform’s ability to make the wealth management industry more accessible to more investors. Furthermore, we only partner wealth management firms and experts that are ‘best in class’, and we are confident that they operate with the wealthy individuals’ best interests in mind.” 

WEALTH was launched in Singapore last year. To date, it has managed to make more than 500 matches for reputable firms in the city state. As Malaysians make up 20% of its customer base, the platform was opened to Malaysian wealth management institutions in July.

“Malaysia has always been on our radar screen for a number of reasons. One of them is that it is now very connected, with a high internet penetration rate [of 72.2%] and one of the highest smartphone penetration rates in the region [which is expected to exceed 100% by 2018],” says Gamble. 

“This means that Malaysians are very comfortable using technology and the internet to organise their daily lives, from purchasing cinema tickets to buying their weekly groceries. So, it is only a matter of time before they start managing their investments and finances online.”

 

Asia-Pacific market

On the whole, the Asia-Pacific market offers huge potential for the firm, says Gamble. In fact, according to Capgemini’s annual World Wealth Report, it surpassed North America last year to become the region with the greatest number of wealthy people and the most amount of wealth in the world at US$17.4 trillion.

The Capgemini researchers only looked at individuals with US$1 million or more in investable assets, whose combined wealth was almost US$58 trillion. According to the report, investable wealth excludes their primary residences, collectibles, consumables and consumer durable goods, but includes their retirement funds and other savings.

“This is the fastest-growing region and Asia’s rate of development has seen millions rise out of poverty to become middle-class citizens. The number of 

HNWIs stood at 4.32 million in 2014 — a 17.3% jump from the year before. To put this into perspective, the US has 4.33 million HNWIs,” says Gamble, citing Capgemini’s 2014 report. 

However, Asian HNWIs have been deprived of more effective ways to manage their wealth, he says. “While the jump is good news and a reflection of strong regional and national growth, Asians with investable assets are often forced to rely on basic financial services and structures, preferring to leave their cash in bank accounts rather than look for ways to grow their wealth. They lack both knowledge of the financial products available and the access to expertise that can help them make their cash work for them. Furthermore, the traditional way of engaging with wealth experts — through word-of-mouth — is imperfect, opaque and often results in a bad match for both the investor and wealth expert.” 

Last year, a PwC survey showed that inheritors of wealth over the next 5 to 10 years will not necessarily choose to keep their parents’ financial advisers. The report strongly recommended that wealth companies design an onboarding strategy for generations X and Y as they will control more than half of all investable assets, or about US$30 trillion, by 2020.

“We are seeing more and more online solutions being developed for millennials. The key will be to guarantee credibility and quality. Processes must be robust enough to give investors the peace of mind needed to actually go online and use this service. Otherwise, millennial investors will continue to stay at home,” says Gamble.