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WEALTH REPORT


disclosure statements so they know exactly what they are investing in, and they expect better and more frequent reporting of portfolio activity and performance.” ƒ Value of advice: “They increasingly expect specialized and objective investment advice, and want to be sure the proposed investment strategies align with their financial goals and risk profile.” ƒ Portfolio and risk management: “Asia-Pacific HNWIs are especially keen to understand where the risks lie in their portfolios and to achieve more balanced asset allocations. As a result, they want more evidence (such as risk-scenario analysis) to guide their investment decisions.” None of this is as easy as it may sound, says the


report. “Regional firms in particular have continued to rely on proprietary products long after firms in more developed markets have embraced open architectures and high-end services to deliver to niche segments or broaden their offerings. Some Asia-Pacific firms were not motivated to veer far from proprietary products in the past because they could protect margins and fees (which are higher on in-house products) without displeasing HNW clients.” In order to retain their clientele, firms will need


to ensure that the products they offer truly align with their clients’ individual risk and asset allocation priorities – and this means sourcing products from third parties as well as in-house. This, the report warns, will have “significant repercussions in Asia- Pacific where business models, people, organizations, processes and technology have long been aligned behind the proprietary-product approach”. Among the challenges this approach will pose are:


ƒ Client reporting and due diligence: “If one firm offers another’s products, it will need to meet reporting and compliance standards around those third-party products as well as its own.” ƒ Advice on third-party products: “Firms will need to train advisers to be proficient in discussing product specifics and risks.” ƒ Risk modeling: “To properly manage risk and balance asset allocations, firms will need to be able to value third-party products accurately, track their performance and properly understand the correlations to in-house and other third-party products in a client’s portfolio.” ƒ Operational issues: “Platforms will need to be integrated to ensure seamless access to third parties and their products, as well as the information around the products.” Moreover, different markets within the Asia-


Pacific region are at different levels of maturity, and regulation may limit key products and services in a given firm’s offering. “This creates challenges for firms when their HNW clients have sophisticated product needs, but offerings are limited by the maturity of a country’s financial system or by product-specific regulation.”


FAMILY OFFICE: ASIA TOMORROW 17


Client servicing models This has implications too for other aspects of firms’ operations. In the new open architecture era, not all staff may be knowledgeable enough to address client concerns about product choice and suitability. Some firms are therefore moving to models that pool their specialists. Team-based advisory models are gaining


prominence, says the report, because they deliver benefits that align well with clients’ changing needs, including asset allocation and risk management expertise built on in-depth research, and specialized, consistent, value-added advice, even when the adviser changes. These models do however bring inherent challenges


– around team compensation; cross-team (not just individual) transparency; and ensuring the availability of a critical mass of specialists (far from easy for a small firm). Most important, this new climate poses substantial


people management issues. “Advisers must understand asset allocation and risk management principles, provide due diligence on products and explain competitors’ offerings. But expertise is in short supply in Asia-Pacific, where many advisers are relatively young and inexperienced.” In Asia-Pacific (excluding Japan), financial advisers are on average much younger and much less experienced than their North American and European counterparts. Training – particularly in advisory skills, domain


knowledge and product knowledge – is a pressing need. The shortage of ready talent means firms must look internally as well as externally for future advisers, and pay particular attention to staff retention strategies – not just compensation, but defined career paths and opportunities for development.


31%


THE INCREASE IN THE COMBINED WEALTH OF ASIA- PACIFIC’S HNWIS IN 2009 – MORE THAN ERASING THEIR 2008 LOSSES


The report is available at www.capgemini.com/services- and-solutions/by-industry/financial-services/publications/ asiapacific-wealth-report-2010--english-version/


FOCUS ON AISA-PACIFIC


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