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Date: 15/10/2019

Title: The Future of Advisory in Asia — Managing the Implementation of New Advisory Models

Teaser: With the movement towards advisory-based private banking in Europe, many private banks have brought similar offerings to the Asian market, experiencing mixed levels of success despite the multiple advantages that sophisticated advisory models offer to both the bank and the client.

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The Future of Advisory in Asia — Managing the Implementation of New Advisory Models

Authors: Salomon Wettstein ¦ Michael Benz ¦ Andreas Mettenberger

Advisory Services – Quo Vadis?

In response to new regulations and lower revenues resulting from trade execution, financial institutions have begun to develop new advisory models. Wealth managers in Asia have so far seen little demand for these sophisticated private banking advisory models compared to their European counterparts.

With the movement towards advisory-based private banking in Europe, many private banks have brought similar offerings to the Asian market, experiencing mixed levels of success despite the multiple advantages that sophisticated advisory models offer to both the bank and the client.

This paper presents an overview of the different advisory models and looks at the reasons for the so far slow transition in Asia. Based on surveys and interviews with institutions in the industry, this research provides insights on the most valued services by clients and the importance of certain aspects. Our research has found that clients place most value on the relationship with their advisor, followed by price transparency. When it comes to advisory services, clients expect timely advice on market momentum, access to product specialists and regular proactive investment proposals.

Another key element for a successful relationship is to provide research that is highly customized and in line with the client’s preferences.

Synpulse has identified the main drivers for setting up a successful advisory model. Wealth managers need to clearly differentiate their offerings in order to justify a pricing strategy. Moreover, providing the right services with a high level of personalization is key to success. To foster the transition to more sophisticated advisory models, relationship managers need to be educated accordingly and incentivized for their efforts.

White paper

The Future of Advisory in Asia 

Managing the Implementation of New Advisory Models

Download the white paper

Conclusion

While the advisory landscape in Asia is still very much dominated by traditional Adhoc advisory and execution only on one hand and a steadily growing discretionary asset base on the other hand, more sophisticated advisory models are on the rise and supposed to fill the void in-between Adhoc advisory and Discretionary.

Compared to Europe, where push factors such as regulatory requirements as well as pull factors such as changing customer expectations have led to strong pick-up rates of fee-based advisory models, regulators in Asia have not (yet) forced a shift towards fee-based advisory models. Although these fee-based advisory models are nothing new in Asia, the success of implementing in has been mixed.

Mainly European banks have tried to implement their European advisory models in Asia with the aim of achieving less volatile recurring revenues and aligning client’s and bank’s interests. However, without tailoring the advisory offering to Asia requirements, the implementation cannot be successful. With often extensive Adhoc advisory offerings, defining additional value drivers for fee-based advisory offerings is challenging.

The Synpulse market research on what Asian clients are willing to pay for has shown that there are multiple services which are highly appreciated by Asian clientele. Service offerings covering investment, research, risk analysis and non-investment related Private Banking services have been identified. Understanding existing and future clients’ needs as well as reasons why clients are banking with the financial institution in question will allow for the definition of a bespoke value proposition for various client segments of the bank. Alongside a new value proposition, the pricing of the new service model needs to be defined as well.

Firstly, conducting a thorough analysis of the existing client book is key in order to understand existing revenue streams. Shifting from transaction-based revenues to recurring revenues leads to less volatile results which is positive, but you would not want clients taking advantage of your pricing structure and arbitraging.

white paper

The Future of Advisory in Asia

Managing the Implementation of New Advisory Models

Download the white paper


Therefore, understanding on a clientby-client basis which pricing structure makes the most sense for both client and bank is important and the pricing may be as bespoke as the value proposition itself. The shift in bank’s operating models as a result of the implementation of more sophisticated and mandated advisory solutions is surely going to change the advisory landscape in Asia and it seems like it is rather a question of when than if.

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Salomon Wettstein

Hong Kong

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