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Re-calibrating the wealth management market in Thailand

  • May 19, 2017

Our 6th annual event for the community in Thailand explored how to capitalise on the ever-wider opening of the market and opportunities to service the investment, family and protection needs of domestic Thai affluent and HNW clients.

Now seems to be the best time in the history of Thai wealth management for the industry to grow – both in terms of size and capability.

Regulators have created channels for domestic investors to access a greater variety of offshore investments. This has created greater awareness – and appetite – of opportunities to diversify portfolios. 

For example, the recently issued regulation in early 2017, the Ultra-Accredited Investor Mutual Fund, shows the regulators are keen to allow asset managers to offer more investment alternatives to local investors.

Combined with a more realistic client mind-set in terms of investment returns and a hunger by local and foreign players alike to participate in the growth of the Thai market, the potential finally matches the optimism.

At the same time, much more has to be done to enhance standards and training – both for advisers and clients alike. Further, with efforts via platforms like FundConnext to facilitate mutual fund distribution in a meaningful way, advisory capability and process are under the spotlight.

These were among some of the key-take-aways from the 6th annual Hubbis event for the leading practitioners across local and international institutions operating in wealth and asset management, as well as insurance.

A clear focus

So what are the ways forward for wealth management firms of all types to maximise this opportunity?

The Thai wealth management market is certainly now big enough for everyone to participate; it depends on which segment a firm focuses on.

For some banks which operate across the wealth spectrum, top-tier HNW clients tend to generate less profit than the mass and emerging affluent segments. 

Across the board, most Thais investors still put more money into deposits and low-risk products.

What each banks needs to do, according to market players, is identify which segment and sub-segment they want to grow. This will then drive their strategy and customer value proposition to match clients’ needs.

One option from this is to focus on investment advice – something that every wealth manager claims to offer. Yet the conflict here between adviser and client is rooted in the fact that many Thai clients look for short-term returns while the right type of advice requires an approach that focuses on planning and long-term goals. 

In most cases, a client’s preference wins out; they lead advisers to take a product-specific view

As a result, industry leaders say that they need to train their front-line staff to be able to focus on goals and long-term client needs while also responding to the need for market views that satisfy an appetite for information about the short-term.

Overall, the local retail banks in Thailand seem best-placed to be more successful and profitable in wealth management over the next 5 years than any other type of organisation, according to the results of a poll.

Forging a new path

To move faster, while many players are likely to want to eventually develop their own in-house capabilities, in the interim it might be a more effective strategy to leverage off partners who have an established platform offshore.

This might be for the provision of products and also for the exchange of information and expertise to help the onshore business grow and local players become more competitive. 

One of the earliest examples of this approach, in late 2014, was the strategic agreement that Lombard Odier signed with Kasikornbank. At the same time as expanding its footprint in Asia, it leverages on the skill-set, client network and knowledge of the Thai bank’s private clients to give them access to global investment solutions and wealth management expertise. 

More recently, Phatra Securities inked a path-breaking agreement with the part of Credit Suisse’s business which covers external asset managers (EAMs). It essentially provides onshore clients with access to the suite of investment products available on the Swiss bank’s platform. This was driven by the changes in regulations to give Thai investors much greater international access.

For Thai banks, they also realise the importance of aligning with global partners which can help them to meet the needs of their mainly entrepreneurial client base, especially in terms of addressing issues relating to business and family wealth.

Clients’ expectations are also moderating. Whereas in the past they looked for double-digit returns, today they realise that 6% to 8% is more realistic, according to practitioners.

At the same time, and in line with the growth of the industry as a whole, a growing number of forward-thinking financial institutions are shifting their focus in this way – from single transactions towards solutions.

A shift in the offshore-onshore balance

For the universal banks, the more domestic open regime means they can finally now deliver in Thailand a similar value proposition they promise around the world, in terms of products and services.

It is about time, judging by the significant interest among Thai clients – not only in accessing offshore products from an onshore platform, but also in a buying a greater variety of product.

The potential to do more onshore is highlighted by the results of a poll – with 44% of respondents expecting Thai HNW wealth to stay onshore over the next 5 years. 

Indeed, more business will be created onshore. Further, the regulatory liberalisation efforts reduce the need to go offshore.

Of the remaining 56% – those respondents who believe wealth will go offshore – the growing view among senior market practitioners is that it will head to other locations like Singapore based on concerns over issues such as political stability or domestic debt levels.

At the same time, there is a growing awareness among Thai investors of their need to be more globally diversified.

For the many existing HNW clients who have wealth located offshore, meanwhile, some practitioners said that although they may well keep assets in locations such as Singapore, they are likely to keep more of any additional wealth they create onshore

In response, however, the advisory capability of most front-line staff needs to be improved to manage the wealth onshore, said practitioners.

Meeting the needs of wealthy business families

A growing opportunity in Thailand also lies in servicing the need for wealth solutions and other family-focused advice for business-owning families.

In fact, for most wealthy Thais, 70%-plus of whom are self-made, their major concern is continuity of the family business.

This is based on the fact that the next generation either doesn’t want to carry on running it, or might lack the skills-set to do so.

Speakers also urged the domestic institutions competing for market share to avoid offering perks to clients – and instead provide relevant information and drive conversations aligned with their real needs and goals.

Indeed, finding a new or different way to service Millennials extends to protection, too.

Innovation is key in Thailand to be able to sell traditional insurance to this demographic, which means a greater role for digital to make buying convenient and transparent, said senior practitioners.

The sector more broadly, however, needs to address issues over competency of agents, to overcome some of the reputational issues it faces due to question-marks over the quality of advice.

Keeping a strong momentum 

Keeping the momentum going in Thailand will depend on the ability of firms to not get carried away with new-found freedoms and fall into the trap of chasing excesses, according to senior practitioners.

If they can learn these lessons from other, more developed markets, they can make the most of the more open and sophisticated environment to ensure the market is attractive, to foster innovation and generate much more competition.

Collaboration by engaging with regulators is also essential say industry leaders, to ensure there is mutual understanding about what framework and policies will best enhance the Thai market.

At the same time, standards among advisers are also in need of improvement to help drive growth in Thailand.

There is clear consensus on this, it seems – 100% of delegates who responded to an online poll at the event, said a minimum standard of certification should be mandatory for all local wealth managers – amid efforts to enhance the industry.

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