Emerging Markets

Julius Baer Study Explains Thai Wealth Adventure

Tom Burroughes, Group Editor, 13 June 2019

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The figures underscore why the Swiss bank, and a number of its rivals, have set up wealth management operations in the Southeast Asian country.

Julius Baer, which recently launched a Thailand wealth management joint venture with a local firm, is confident in the rapid growth of the Asian nation’s high net worth population and assets, expecting wealth to reach $401.2 billion by next year.

That rise equates to a compound annual growth rate of 9.9 per cent in the five years from 2015, the joint venture, called SCB Julius Baer, said in its debut report on the country. 
Drivers behind this growth include steadily growing household wealth, economic development and a buoyant property and stock market. The SET Index of equities is forecast to reach 1,800 points by the third quarter of this year, while the country remains fiscally strong.

The Wealth Report Thailand has been issued at a time when a number of wealth management organisations have targeted the country. Liechtenstein-based LGT in early March created a Thai business, called LGT Securities (Thailand) Limited. Some firms have been in the country for some time, such as Credit Suisse, which recently named a new Thailand CEO. Thailand’s overall wealth market is estimated to be around $300 billion, with a rapidly growing population of high net worth individuals of approximately 30,000, according to the BCG Global Wealth Report 2017. The move also shows that Swiss banks are among those tying the knot with Asian partners. As reported last year, the Swiss Bankers Association said the shrinking number of Swiss banks should consider teaming up with other firms to expand in Asia with its rising number of millionaires.

“The Thai wealth market has grown tremendously in recent years and this trend is expected to continue as the overall population grows wealthier. We see vast potential for the market as compared to more mature markets in the region, as Thai HNWIs grow more sophisticated and regulations and policies are liberalised,” Jiralawan Tangitvet, chief executive, SCB Julius Baer, said.

The report charts the Thai onshore wealth market, showing that HNW individuals have an overall preference for wealth creation over wealth preservation. They share a similar portfolio allocation to global HNW individuals in liquid assets such as stocks, bonds and funds. However, the majority of these assets are in onshore investment products. 

Alternatives potential
Thai HNW individuals are not as heavily invested in real estate and alternatives with a portfolio allocation of 7 per cent and 6 per cent, respectively, whereas global HNW individuals’ allocation in these asset classes is 17 per cent and 9 per cent, representing an untapped opportunity.

“Our decision to commission an in-depth client survey underscores our commitment to deliver the finest product and service offering in Thailand. Our research shows that Thai HNWIs are under-served and possess a keen interest in offshore investments. We believe our newly established joint venture is well positioned to help our clients achieve their long-term goals and objectives,” Jiralawan Tangitvet concluded.

Among other findings, the report shows that slightly less than half of respondents hold at least one offshore investment. Of these, equities and fixed income are most widely held in investment portfolios, followed by funds and direct real estate.

Three distinct client profiles were identified from the survey - the Millennial entrepreneur (up to 40 years old), the mature investor (41-60 years old) and the techie retiree (older than 60 years).

The report showed that Millennial entrepreneurs place a “relatively high” importance on digital financial services, and prefer wealth creation over wealth preservation owing to their growth-oriented mindset. Surprisingly, compared with the other two profiles, they have the least understanding of how to gain access to offshore investment opportunities.

The mature investor is the most educated of the three profiles and has a slightly better understanding of how to access offshore investments. They currently have the greatest exposure to offshore assets.

The techie retiree is the least familiar with offshore investments and expresses the greatest desire to have his or her money professionally managed. Interestingly, they are the most social media savvy of the three profiles, it continued. 

Lifestyle
The report also focuses on Thailand’s ranking in the 2018 Julius Baer Lifestyle Index, which is based on a basket of 22 luxury goods and services that represent discretionary purchases of HNWIs in the region. It showed that Bangkok maintained its status as a relatively inexpensive city for shoppers, staying in seventh place among 11 Asian cities from 2016 to 2018 in dollar terms.

Luxury goods are more expensive in Thailand due to excise taxes on some imported luxury products, whereas luxury services are generally well-priced due to lower operating costs in Thailand. Throwing an opulent wedding is the cheapest in Bangkok, for example. However, shoppers undergoing lasik surgery, fitting for a man’s suit, or purchasing a box of cigars would have to pay the most extravagant prices in the region.

(For the purpose of the survey, HNW individuals are defined as people with net investable wealth of $1 million or more, excluding property that is their main residence. 2018 data for the Julius Baer Lifestyle Index were collected during the period of June 2017 to July 2018.)

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