Asian Private Banker/Julius Baer 2018 IAM Report: HK & SG IAMs hit US$91.5 billion in AUM, DPM penetration rate of 71%

The report provides the most accurate available breakdown of Asia’s independent asset manager (IAM) market, and details the opportunities and challenges for the rising intermediaries segment in Hong Kong, Singapore, Mainland China, Australia, the Philippines, and Thailand.

Highlights:

Hong Kong and Singapore have a total of 160 independent asset management firms, and collectively manage US$91.5 billion in private wealth as at 2017-end, accounting for 5% of regional high net worth wealth

IAM revenues and relationship manager headcounts grew at an average of 40% and 38% year-on-year, respectively, on a robust average cost-income ratio of 65%

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Relationship manager remuneration increased at an average of 45-51% upon moving from a bank to an IAM

Asia’s IAMs, on average, use more than six banks for custodial services, but 80% of assets are concentrated in their top three banks of choice

The average asset-weighted discretionary portfolio management (DPM) penetration rate of Asia’s IAMs exceeds 65% — well above private banks’ average of approximately 8%

HONG KONG, June 8, 2018 /PRNewswire/ — Asian Private Banker, in collaboration with leading Swiss private bank Julius Baer, has released its report “2018 IAM Report: Asia-Pacific Ready for Take-Off?”. The report, the most accurate and complete of its kind, draws on quantitative and qualitative data collected from 66 key leaders from the intermediaries industry in Hong Kong and Singapore.

The research reveals that Hong Kong and Singapore are home to 160 IAMs with a total assets under management of US$91.5 billion, which represents 5% of the region’s total high net worth individual (HNWI) wealth and a three-fold increase since 2013-end. To leverage various capabilities and best execution, IAMs work with an average of 6.3 custodian banks but approximately 80% of assets are booked with their top three banks of choice.

2017 represented a strong year for IAMs with an average revenue increase of 40%. Only 6% of IAMs surveyed recorded year-on-year decreases. Headcount also grew, with half of all respondents increasing their relationship manager (RM) numbers at an average of 38%. As a whole, the segment remains profitable, with an average cost-income ratio of 65%.

Financial incentives for private banking RMs to switch to independent setups are attractive given an average wage increase of 45-51% for those that make the change. Along with remuneration, the opportunity to offer a higher quality of service, including the ability to spend more time with clients and work with a broader selection of products, are also critical factors that inform RMs’ decisions to shift to an IAM outfit.

Discretionary portfolio management (DPM) solutions represent a key offering for IAMs in Asia. The average DPM penetration rate reached almost 71% in 2017, well above the 7.7% rate for Asia’s private banks (Source: Asian Private Banker 2017 DPM Report).

Beyond the Hong Kong and Singapore market, this research covers the IAM markets of Australia, Thailand, Mainland China and the Philippines. In Australia, advisory service offerings are mainstream, but IAMs are increasingly looking to boost their DPM offerings to drive future business. In Thailand, the prospect for the IAM industry is particularly positive, and the recent recent partnership between Julius Baer and Siam Commercial Bank (SCB) demonstrates growing local investor demand for international wealth management services.

“The robust financial performance of IAMs in Hong Kong and Singapore, along with their burgeoning market share, allows us to say with confidence that the IAM market in Asia is ready for take off.  Flexibility in product offering and a client-centric strategy lie at the core of the IAM business model, and they offer a significant differentiator in Asia’s rapidly evolving wealth management industry,” says Stratos Pourzitakis, Asian Private Banker’s head of research.

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