Thoughts from Leading Market Practitioners on the Evolution of Wealth Management in Vietnam

The last panel discussion of the morning at a recent Hubbis Forum focused on the evolution of the wealth management model in Vietnam, with a group of experts on the domestic scene offering delegates some invaluable pointers on current and anticipated trends.

Chair

Michael Stanhope
Founder / CEO
Hubbis

Panel Members

Eric Levinson
Head of Business Development
VinaCapital

Gauraw Srivastava
Head of Private, Affluent, Mass-affluent Banking & Wealth Management
VPBank

Key Takeaways from the Discussion

The Vietnamese wealth management market is rapidly growing, albeit from a low base and modest sophistication, highlighting the need for a collective approach to advancing the diversity of the product suite available, the competitive environment, the regulatory protocols and liberalisations, the advisory proposition and talent development.

Difficulties (some might call crisis) in the relatively immature and thin domestic bond market over the past 18 months prompted the experts to call for increased education and awareness of risks associated with what might seemingly be low-risk products, but that require greater discernment amongst the private customer community, with some calling for access to bond assets to be solely through professional intermediaries and under advice.

Advocating a multi-year perspective to improving financial education, the experts highlighted the need for a better understanding of risks and the positioning of financial products amongst the advisory community and a greater emphasis on nurturing an understanding of the opportunities and risks amongst all types of private clients.

The panellists urged collaboration among regulatory bodies, wealth industry players, and market development bodies for the overall improvement of the wealth management ecosystem and practices.

Characterising the evolution of wealth creation and advisor relationships in Vietnam as transitioning from product selling to advisory and embracing financial planning concepts, the experts hailed the progress to date, but said that all parties must work closer together to achieve this type of transition.

Despite recent slowdowns and hiccups such as the bond market fiasco, the panel observed positive trends in business expansion, pointing to ongoing growth in demand for financial advice and planning focused on the longer-term horizons, rather than nearer-term trading gains (which can often be losses).

With a young and industrious talent pool in the country, the panellists felt encouraged that some excellent younger individuals were entering the wealth industry, or shifting their careers from mainstream banking to priority banking and private banking, but they acknowledged a shortage of seasoned RM and advisor expertise due to the relative state of evolution of the wealth market compared to more mature jurisdictions.

The panel stressed the importance of patience, investment in people, a holistic approach to talent and to the clients, and careful guidance through a learning journey for the development of expertise in Vietnam's nascent wealth market.

They called for a more rapid transition from a typically short-term trading mentality amongst clients to a longer-term perspective on wealth and again reiterated the need for ongoing education in terms of boosting understanding of diverse asset classes, enhancing planning skills, raising advisory expertise and even enhancing the softer skills around client engagement.

They emphasised the collective responsibility of regulators and private sector industry participants (local and international) for shaping the sustainable development of the wealth management industry in Vietnam, calling for a centralised industry development body to help expedite communication and achieve more rapid progress.

Key Insights & Observations in More Detail

Opening the dialogue, an expert addressed the importance of a recurring question in the context of Vietnam’s emerging financial landscape, acknowledging the slow evolution of discussions on this matter since 2018. He said that despite the promising opportunities presented by various macroeconomic factors such as demographics, population growth, numerous vast construction projects, and the rising involvement of banks and non-banking financial advisory firms, there continues to be a sense of something missing and he, therefore, called for greater action and more speed.

The bond market fiasco tells a cautionary tale

This expert delved into the various challenges the nascent bond market had faced over the past 18 months, problems which had actually been long brewing. This led him to highlight questions as to whether fixed income was appropriate for domestic private investors of all types, pointing to the need to enhance education and awareness of risks associated with what might on the surface appear to be low-risk products. He lamented the fact that these problems had arisen and indicated it would take a while for this setback in sentiment and confidence to be papered over.

Education is vital as the catalyst to maturation

He doubled down on the need for increased emphasis on education in the coming 5-10 years. The key focus should be on ensuring that both financial advisors and clients thoroughly comprehend the underlying risks and positioning of certain financial products.

He argued that in particular many have underestimated the risks associated with unlisted corporate debt, and he advocated a shift towards using managed portfolios and professionally managed funds to mitigate risks, especially for those in the early stages of their investment life, and at least until they become more comfortable managing their portfolios.

Collaboration is the key to pulling in the right direction

Looking ahead, this speaker envisioned a greater emphasis on education also amongst the regulatory bodies, the industry players, and the market development bodies to drive awareness and understanding of financial products. He advocated more proactive measures that could push for greater collaboration amongst these parties for the betterment of the overall wealth management ecosystem and, therefore, to the advantage of private clients.

The discussions also took in the evolving landscape of wealth creation, developments in advisor relationships, and the dynamics within the financial markets. The wealth market’s situation was characterised as a half-way house between the older approach of product selling and transitioning more towards advisory and embracing financial planning concepts.

Growth is tangible, but there will always be ups and downs

Drawing on his experience since arriving in Vietnam in 2020, an expert highlighted the positive trend in his firm’s business expansion and their positive experience in collaborating with an increasing number of domestic and regional banks over the years. However, he acknowledged a recent slowdown in activity at certain local banks due to their being caught up in the Vietnam corporate bond troubles, but he expressed optimism that the path would smooth out and progress resume.

Nurture talent and nurture the client

He stressed the value of nurturing the talent pool and the customer base with skills and education, pointing out that the longer-term trend toward understanding the necessity of providing financial advice and educating clients on diversification is positive and accelerating. Despite short-term disruptions caused by the recent [bond market] crisis, he expressed confidence in the ongoing growth in demand for financial advice in the longer term.

Learning from crises and errors

Taking an optimistic view, he said to remember the adage to “never waste a good crisis”. He argued that such situations reinforce the idea that financial institutions and wealth management providers can play a crucial role in guiding individuals through market fluctuations and volatility. He observed that the value of robust advice is heightened in such environments, and there is often a flight to quality assets and quality intermediaries and advisors.

A banker commented on the evolution of skills and talent, noting that in the relatively youthful economy and with young demographics, younger talent is embracing the wealth industry and its long-term potential.

There are plenty of smart young people that can develop their skills

He highlighted the great enthusiasm he and colleagues observe during interviews, noting a trend of young talent seeking to transition into priority banking and private banking. He emphasised that this interest spans various backgrounds, with individuals who may have been retail bankers selling normal banking products also keen on making the transition to asset and wealth management careers.

However, he did acknowledge the challenge of translating this initial excitement into expertise and competence, and he said there is a shared responsibility on both individuals and organisations to improve matters.

Plugging the gaps where visible

He addressed the common dilemma of build or buy, noting that as the youthful Vietnamese wealth market lacks a genuine depth of readily available expertise, organisations must be patient, invest in people, and guide them through a learning journey. He remarked that Vietnam's wealth management industry could consider following paths laid out in markets such as Singapore, with certification and more comprehensive licensing processes that mandate a certain level of expertise before advisors/RMs engage with clients.

Growth should be consistent and studied

He underscored the significance of treating wealth management as a high-skilled business, cautioning against underappreciating its complexity. He conceded that there is still a long way to go in developing the wealth management industry in Vietnam, but remarked that this is entirely understandable for an emerging economy that is still a frontier market.

Transitioning toward longer-term planning

Discussing the transition from a short-term buying, selling, and trading mentality to embracing a longer-term perspective on wealth, a guest emphasised that individuals do have an increasing sense of why they are investing, but their goals and their planning toward those goals vary based on factors such as awareness, education, experience, age and wealth.

For younger investors, the focus may be on accumulating wealth for future plans like buying a home or funding children's education. In contrast, individuals with more substantial wealth might prioritise diversification, especially if they already own a business or property.

Do you know what long-term really means?

He explained that the challenge lies in educating clients about the real meaning of long term and the value of investing early and compounding returns. He highlighted a common trend where people tend to view property as a long-term investment, often passed down through generations, but fail to hold on to capital market assets long enough.

When it comes to financial instruments like mutual funds, investors may often have a shorter-term perspective, thinking about trading in or out within only months, and not appreciating that lock and leave could produce far better outcomes for their futures.

Diversity, balanced allocation, patience

He said the educational aspect, particularly regarding the concept of long-term holdings and the value of assembling a diverse array of holdings and asset classes within a portfolio, is a relatively new dimension in Vietnam. He also stressed the importance of ongoing education to help clients adhere to their long-term goals and navigate the complexities of different asset classes within their portfolios.

The path to a sustainable wealth market ecosystem

The experts agreed that there is a collective responsibility of regulators and industry participants in shaping the development and sustainability of the wealth management industry in Vietnam. A guest proposed the need for a stronger development body to enhance engagement and push for progress across various directions, especially with the surge in investor numbers and accounts since the beginning and aftermath of the pandemic.

The discussion closed with the speakers agreeing that remuneration must also reflect alignment between wealth managers and clients. They highlighted the fiduciary responsibilities of advisors and asset managers and pointed to the value inherent in stimulating more holistic conversations between banks, relationship managers, and clients, with a focus on aligning behaviours to the benefit of the end clients.