Sector strong despite woes
Demand for advisers continues to grow, especially for ultra high-net-worth clients amid global financial problems, writes Raymond Ma
While demand has fallen for many job sectors in Hong Kong in recent months, market watchers are continuing to predict growth in opportunities in the wealth management field.
To find out how this sector is bucking the trend by creating jobs in a time of economic uncertainty, we spoke to Kwang Kam-shing, a certified financial analyst and market manager at JP Morgan Private Bank in Hong Kong, where she is responsible for expanding its business presence and client base.
How do you see the wealth management sector faring in Asia, particularly in Hong Kong?
Demand for wealth management has increased significantly in Asia, as we see more new wealth being generated across the region. The ultra-high-net-worth in Hong Kong, which my company defines as those with more than US$25 million in liquid assets, in particular, have accumulated their wealth for a relatively longer period than most of Asia. The city is now experiencing a transition from first-generation wealth to second-generation. We therefore see greater demand and awareness for succession plans and wealth advisory.
What are the economic factors that have led to the boom in the wealth management sector in the region?
As Asian markets become more open and developed, we see greater creation of wealth in the region. The ultra-high-net-worth individuals have increasingly more complex demands for managing their wealth, so more are seeking professional help. For example, the composition of wealth today often consists of illiquid assets such as real estate and restricted stocks. JPMorgan Private Bank has seen an increase in demand for managing the liabilities side of clients' balance sheets by offering leverage solutions.
We have also seen greater tax planning needs as our clients and their families become citizens of different parts of the world and are governed by different tax laws.
In what demographic and geographic areas of the wealth management industry do you see the biggest boom? Previously we have predominantly advised successful business people who have accumulated their wealth through decades of hard work in the manufacturing, real estate, shipping and banking sectors. Recently we have seen a growing trend to include younger entrepreneurs and professionals in relatively newer age industries, such as IT and finance. Geographically, we have seen the biggest boom in Greater China and other parts of Southeast Asia.
Why is wealth management in Asia usually divided into Southeast Asia and North Asia segments, and is there any real difference between them from your perspective?
Culture, language and investment behaviour is very different across the entire region. North Asia consists of more developed economies, such as Hong Kong, Japan and South Korea. Southeast Asia generally consists of emerging countries, such as Indonesia, Thailand and Malaysia. We feel the needs of the two areas are very different and, by splitting our offices in two locations, we can better specialise in the needs of each and provide better wealth management advice overall.
How will cyclical events in Asian economies affect the demand for wealth management services?
JPMorgan applies a wealth preservation strategy with a focus on consistent growth, where we do not follow market trends if we do not think popular products match our clients' profiles. Such was the case with accumulators last year. We discouraged our clients from taking on highly leveraged positions in these structured products and, as a result, our clients were able to avoid big margin calls. With this strategy, our clients have been able to weather the ups and downs of markets, testifying to the strength of our private bank. From the current financial crisis, more people are realising the importance of wealth management via diversification of assets and more, in turn, will seek professional advice.
What are some of the changes and trends we are likely to see in the industry in the foreseeable future?
Over the past few years, we have seen an overexpansion in the wealth management industry. In a bull market, it is harder to filter out the good players in the industry from the bad. However, in the current financial crisis it has become obvious who the strong players are. Eventually we expect to see a consolidation in the industry where stronger players remain.
(in total high-net-worth wealth by region, 2006 to 2007)
Latin America 20.4%
Middle East 17.5%
North America 4.4%
Source: Merrill Lynch/Capgemini World Wealth report 2008