What Wealth Managers in Singapore Struggle with?
No. 1 – Compliance
Since the collapse of Lehman Brothers in 2008, global regulations on banking had intensified. Basel III has enhanced Basel II guidelines and United States introduced FATCA (Foreign Account Tax Compliance Act) to deter tax evaders and to raise revenue for the bailout spent during the 2008 Global Financial Crisis.
Alongside other new and enhanced regulations, it has resulted in increased layers of administration, disclosures and agreements between customers, wealth managers and the banks.
In Retail Banking, there are increased scrutinies of cash deposits, funds transfer and remittance. In Private Banking, account opening can take as long as 6 months to 12 months. Many accounts have been closed.
Wealth Managers spend a great deal of time understanding the regulations, explaining and getting clients to agree with the new regulations. These reduce the time spent on understanding clients, building quality relationship and generating Wealth Management businesses.
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No. 2 – Competition
14 Retail Banks, 47 Global & Regional Private Banks, 26 Leading Fund House, 10 Large Insurance Companies, 13 Stock Brokerages and many more in Singapore.
Clients have on average 3 banks and for High Networth clients – more than 5 banks.
Wealth Managers have a tough time trying to convince clients theirs is “the bank” to be with. With the collapse of Lehman Brothers in 2008, and the near failure of Citibank and AIG, clients are keeping their money diversified.
Sidenote: In Singapore, the Deposit Insurance Sheme provides $50,000 of insured deposits to all eligible & agregrated accounts in each bank. Most or all financial investments are custodised assets, and therefore, is independent and do not fall under the Deposit Insurance Scheme. Visit SDIC for more info.
No. 3 – Growing Savviness
Singapore has a high literacy rate and one of the most active housewives in the world participating in the stock market. In the last 10 years, the property boom had provided clients with confidence in learning about investment opportunities and self-directed decisions.
Clients are able to access information from many Internet sources such as Bloomberg, Reuters and Investopedia. They may also have multiple trading accounts such as Etrade, Optionsxpress, Saxo Markets, IG Markets that provide them with investment information.
Wealth Managers have to keep up with the high level of knowledge and be able to communicate Wealth Management advice and solutions to different customers.
” You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ ”
~ Warren Buffett
No. 4 – Behaviorial Traits
In Asia, customers places strong faith towards properties, gold and cash. In investments, they gear towards stocks.
Asians exhibit gambling & trading mentality, but at the same time value family and traditions. This is why most investors flock into stocks and properties and are very willing to buy life insurance policies for themselves and family so that the family can be well-taken care of if something happens to them.
With high employment rate resulting in fast growing wealth and strong peer pressure into hot opportunities, they neglect understanding the fundamentals of investments, portfolio and wealth management.
Wealth Managers have a difficult time trying to educate customers. Unless customers are so busy and leave the wealth management work to the professionals, convincing them to build a house portfolio is near impossible. It is all the more impossible as a customer banks with 5 financial institutions, and start building portfolios in each bank, rendering the entire financial planning exercise, an exercise.
No. 5 – Cultural & Demographic Diversity
Singapore is one of the most cultural diverse cities in Asia. Given the country status as an Asian and Financial Hub, with people from all parts of the world. Similarly, local Singaporeans have also become global citizens by travelling, studying or working overseas.
The demand for Wealth Management services for different demographic groups such as Retirees, Working Adults, Professionals, Businessmen, Housewives, Expatriates has increased tremendously. A retiree at 65 years old and one at 85 years old needs different advice. The retiree at 65 years old may be concern about medical bills, regular income from investments and being able to get their busy children involved in their investment decisions. The 85 years old has difficulty in understanding wealth mangement solutions due to the complex jargons and documentations.
This diverse culture creates difficulty in providing an easy suite of effective Wealth Management solutions. Wealth Managers have to spend considerable time in connecting, communicating and understanding the clients.
No. 6 – Asia Growth
Asia is growing at an incredible pace. There is fast rising middle income class and with China, India and Indonesia modernising extremely quickly. Together, the 3 countries contribute to 40.84% of the world’s population and 19.33% of the World’s GDP.
Wealth in the countries are also generated very quickly, making it difficult for clients to accept portfolio solutions that generate 5% returns. Central Bank rates in China and India is 4.85% and 7.25% respectively, where bank deposits can earn high interest rates.
- There are 562 Billionaries from China and India
- There are 536 Billionaries from United States
5 Richest Man from China and India
- Jack Ma $22.7 Billion – Alibaba
- Wang Jianlin $24.2Billion – Dalian Wanda
- Li Hejun $21.1 Billion – Hanergy
- Mukesh Ambani $21 Billion – Reliance
- Dilip Shanghiv $20 Billion – Sun Pharmaceuticals
5 Richest Family from Singapore
- Robert & Philip Ng $8.7 Billion – Far East Organisation
- Kwek Leng Beng $7.2 Billion – City Development
- Goh Cheng Liang $6.9 Billion – Nippon Paint
- Khoo Family $6.4 Billion – Diversified
- Wee Cho Yaw $5.5 Billion – UOB Bank
Source: Forbes 2015
These 6 struggles prevent Wealth Managers from being able to effectively provide high quality Wealth Management advice to a wider pool of customers.