BDO's trust arm aims to get ahead of the wealth game

BDO Trust & Investments Group (BDO-TIG), a division of BDO Unibank, aims to expand on its status as the Philippines' leader in unit investment trust funds (UITFs) to set the pace in new products and services.

The wealth management market in the Philippines has barely got started, yet presents a huge potential opportunity.

BDO-TIG aims to get ahead of the game by expanding upon its status as the country’s leading UITFs player by creating new products and educating investors, according to executive vice president and head, Ador Abrogena, and senior vice president Noel Andrada.

“The potential for growth is there, especially now that the savings rate has moved up,” Abrogena explains. “People have more disposable income and money to save, and the Philippines is no longer a net borrower.

“We are a net lender to the world so that means there will be an accumulation of investable funds.”

At the moment wealthy people in the Philippines tend to leave the country to seek out viable investments, targeting places like Hong Kong and Singapore, although this is less common than it was before the financial crisis.

“There are a lot of HNW individuals who go out of the country just to have access to what is available in other markets, such as exchange-traded funds (ETFs) and real estate investment trusts (REITs),” adds Andrada.

Building relationships

They both believe the current opportunity in the Philippines is to target the mass affluent segment. For BDO-TIG, this means people with at least US$200,000 of investable funds. They estimate that HNW individuals make up less than 10% of BDO-TIG’s total trust accounts.

“You will only have a few family offices that manage funds here in the Philippines,” says Andrada. “There is a growing number of HNW individuals who will go to a branded bank, trust institution or wealth management group, but you will only have a few family offices that manage funds, and the biggest proportion of clients are mass affluent.”

 Even when HNW clients do look at managing their wealth, however, they tend to “self-direct, believing they can oversee their investments themselves, but BDO-TIG takes every opportunity it can to develop relationships with individual clients through existing, institutional accounts, Abrogena says.

“Relationships matter in this business. We know the managers of institutional accounts such as schools, foundations and retirement plans, and if they like how we manage their funds they will put their own money with us, sometimes on a discretionary basis.”

As well as this existing opportunity, BDO-TIG is also aiming to tap the emerging new wealth in the Philippines, much of which is coming from international companies, budding real estate moguls and outsourcing entrepreneurs.

“Broader economic growth is what is driving the growth of the middle class in the Philippines,” says Abrogena. “Employment with multinationals, a rise in net worth and rental income from individuals who have real estate, and businesses that ride the wave of economic expansion such as outsourcing are also generating wealth.”

The big opportunity for wealth management in the Philippines will take off when the general population becomes more knowledgeable about the types of investment that are available, rather than focusing on simply saving money in the bank.

“This is why we are very aggressive in promoting investment products,” he says. “We have our own scheme which is allows people to invest in our UITFs on a regular basis through debiting their accounts, and this is getting some traction already.

“We pursue this market because we understand that if we don’t do it then someone else will.”

Product diversity

On the product front, the company offers two pure wealth management services, namely its customised investment portfolios, which can either be held under a trust structure or an investment management account, and investment management advisory.

It provides a wide range of services under the first umbrella, including peso-denominated employee benefit and retirement funds, institutional and corporate trusts, and corporate investment management, as well as US dollar-denominated trust accounts and investment management.

BDO-TIG manages clients’ funds, including investment in securities, through these services. Its parent bank has its own securities business, BDO Securities Corp, which it gained from the merger with Equitable PCI Bank.

As for investment management advisory, BDO-TIG describes this as “advisory and consultancy services aimed at creating and increasing wealth through investments and other available means.”

Taking things further up the wealth scale, it also provides fiduciary and agency support services for both individuals and companies that want to tap the debt and equity markets in the Philippines. It does this through the company’s Special Trust & Corporate Agencies Division.

By far its largest business, however, is unit investment trust funds (UITFs). It oversees these as trustee for its parent bank, BDO Unibank.

The funds are peso- and US dollar-denominated and include fixed income and equities. BDO is also extending its reach to include feeder funds for accessing overseas markets such as China and Japan.

As things stand, however, investment in such products is still low as a percentage of the Philippine population.

Abrogena believes that only 1% of people are investors, and says BDO-TIG itself is taking up the mantle of educating people about investments as well as selling them:

“We are more proactive than other banks [in promoting investment], as we know that UITFs are a difficult product to sell given the level of understanding of financial and investment products in the Philippines remains very low.”