Julius Baer has issued a report pointing to the big upside potential for growth in the independent wealth management sector in Asia, still a relatively young market.

The number of independent asset managers in Hong Kong and Singapore will rise by 50 per cent and 25 per cent by 2020, respectively, while both centres will be home to 130,000 individuals each by next year, holding $1.3 trillion of assets, according to a new report by Julius Baer.

The Zurich-listed bank, which has described Asia as its second home market in recent years, has issued a report on “financial entrepreneurs” – or independent wealth managers – a sector it expects to expand rapidly in the next few years.

The report comes shortly after Credit Suisse, a rival Swiss house, reminded the industry that another wealth sector – single family offices – has huge potential in Asia because SFOs in Asia account for only 3 per cent of the world’s total, while the region’s population of ultra high net worth individuals account for about a quarter of the total.

Such a survey by Julius Baer and others also points to how banks are trying to earn revenues by providing a range of services to independent wealth management firms. Last autumn, ClearView Financial Media, publisher of this news service, issued a 68-page research report in conjunction with Coutts about the Swiss market. (There are around 2,600 Swiss-based IWMs; the previously mentioned SFr400 billion AuM figure accounts for 13 per cent of total private banking assets.)

The Julius Baer report is called Independent Wealth Management Report: Asia, and conducted on the bank’s behalf by St Gallen Institute of Management In Asia. It said that while growth rates in Singapore and Hong Kong for managers and their clients are expected to be strong, it says, growth rates in countries such as Mainland China, Philippines and Indonesia are likely to be even faster, partly because in percentage terms they will be rising from a lower starting position.

“This considerable growth [of business in Hong Kong and Singapore] will be accompanied, influenced and supported by ever-increasing complexity of financial markets and regulation, which implies that the numbers are to be understood on a net basis. While new entrepreneurs will endeavor to enter the market, others will consider combining forces in an effort to achieve economies of scale and-or broaden or complement their existing capabilities in different areas,” the report said.

2020
“By 2020 the assets under management overseen by independent asset managers in Hong Kong are forecast to more than double to $26 billion, while Singapore should see very significant growth as well, with assets doubling to 30 billion,” it continued. When combined, average assets under management of individual independent asset managers are projected to increase in both locations to comparable levels from today’s $200 to $250 million to $400 to $430 million.

The report said there needs to be a distinction between the increase in overall wealth in Hong Kong and Singapore versus the assets managed by independent asset managers: “As these firms may well have clients from around the world, choosing to deploy part of their wealth in either of our focus jurisdictions for any number of reasons, the path of wealth creation in Asia alone would not tell the whole story.”

At present, combined AuM run by such independent wealth houses stand at around $27 billion, with just over half of that sum in Singapore and the remainder in Hong Kong. These numbers represent about 2.5 per cent of private banking assets in Hong Kong and 4 per cent of those in Singapore. By comparison, in Switzerland – the world’s biggest offshore market – about 15 per cent of wealth management assets are run by independent asset managers.

“This difference [between the cities and Asia] reflects the fact that this industry emerged in Switzerland in the 1980’s and has matured alongside the broader wealth management space. Some of the first independent asset managers in Asia are reportedly the subsidiaries of parent companies based in Europe, but the current, new generation of independent asset managers in Asia appears to be home-grown,” the report said.

Among other details, Julius Baer’s report noted that Singapore is home to approximately 60 firms while the population in Hong Kong is smaller with about 40 such institutions.

“While Hong Kong has seemingly fewer independent asset managers than Singapore, typical size per firm is larger in Hong Kong. The typical firm in the field study has on average, eight employees. In Hong Kong, a relationship manager at a typical independent asset manager would have about 50 clients, whereas the number in Singapore is a bit smaller, at around 40.

The report also noted that based on the firms surveyed, the share of discretionary mandates is reportedly higher in Singapore than in Hong Kong, but discretionary investment services are prevalent in both locations. In terms of asset allocation, the overall picture points to a balanced investment strategy, with equities taking up about half of the assets.

In terms of methodology, the report excludes single family offices and affluent-oriented advisors, concentrating on multiple family offices and external asset managers, classifying them together as independent asset managers.