Asia-Pacific's great wealth transfer: what are Nextgens looking for?
A series of Q&A with Lombard Odier's Ecosystem1 of Strategic Alliances
Asia-Pacific is set to become the largest wealth hub by 2026, with an estimated population growth of 59.8% and 32.7% for High-Net-Worth Individuals (HNWIs) and Ultra High-Net-Worth Individuals (UHNWIs) respectively, according to a report by Knight Frank2.
The region currently houses the greatest number of Next Generation (Nextgen) UHNWIs, with inter-generational wealth transfer gaining prominence as Asian families manage the transition from one generation to the next1. This has direct implications on the wealth management industry, with increasing emphasis on family services offerings and value propositions relating to sustainability and digitisation – trending topics for Nextgen clients, especially in the aftermath of the COVID-19 pandemic.
Find out about our insights on the needs and expectations of NextGen in Asia.
We speak to our Ecosystem of Strategic Alliances to understand emerging trends and topics of interest for Nextgen clients in each market. We discover their take on what the wealth management industry can do to address existing challenges, and explore the insights gained to learn how we can better serve our clients.
Surge in demand for succession planning and family services advisory
In Taiwan, the uncertainty caused by COVID-19 led to widespread anxiety and a sense of helplessness among older HNWI clients, prompting them to put more emphasis on the succession process and wealth succession planning. According to Taipei Fubon Bank, there has been a surge in demand for wealth succession planning services among HNWIs, reflecting their desire to find the most appropriate tools for passing on their assets to future generations.
In addition, Taipei Fubon Bank observed that clients' expectations have grown more sophisticated as they consider their needs at different stages of their lives, and wealth management teams need to be able to provide solutions that extend beyond the investment portfolio. One interesting possibility would be the inclusion of solutions that focus on clients' health, where the bank draws on different ecosystems such as preventive medicine and smart health care, along with insurance and financial tools.
“Compared with the previous generation, Nextgen clients are also more adept at tapping personal networks to help their own businesses. Taipei Fubon Bank conducts Nextgen courses which serve as a platform to assist such clients in broadening their contacts while supporting their efforts to make their businesses more sustainable," said Taipei Fubon Bank.
Arlene Joan T. Agustin, Senior Vice-President, Private Banking Group Head, UnionBank of the Philippines, noted that UnionBank Private Banking seeks to ease the transition by equipping Nextgens with the tools and insight to propel their family businesses into the future in a sustainable manner.
“This is done via the annual NextGen Academy program which features topics such as succession planning, incorporating sustainability in the business, and wealth transition," she said. “In addition, UnionBank Private Banking has in-house legal counsel to serve the Family Services advisory needs of its clients."
Sophisticated Nextgens embracing digital transformation and sustainability
Like many other markets, the pandemic drove home the need for businesses to engage in digital transformations and to embrace ESG practices in order to be able to operate sustainably in the future.
In Taiwan, Nextgen clients are particularly interested in digital transformation and ESG (Environmental, Social, Governance) topics. According to Taipei Fubon Bank, “There is no time like the present to optimise our operating models. We believe the wealth management industry has yet to address the challenge of redefining the spectrum of value propositions presented to clients and how value is delivered to clients through a mix of products and services, channels, and pricing."
“Digitisation is also at the top of our agenda. Clients today are exposed to significant innovation in many aspects of their lives, and digital tools can enhance their relationships with their financial consultants and the overall client experience," the bank added.
Similarly, in the Philippines, there is a bigger emphasis on incorporating sustainability and digitisation into family businesses, brought about by Nextgen leaders entering the business. Trending topics amongst these Nextgens include sustainable investments, sustainable and scalable business models, propelling the family business into the digital future, and non-traditional assets and offerings, amongst others.
On the topic of digitisation, UnionBank of the Philippines believes that the future of business is in its ability to digitise its proposition, operations, products and services, as well as platforms.
“Digitisation will enable businesses to efficiently and sustainably grow and expand to take advantage of opportunities amidst the current pandemic. There is no time like the present to utilise a more data-driven approach to wealth management. The wealth management industry can rely on customer information and data to devise more appropriate investment strategies and recommendations to clients," said Arlene Joan T. Agustin.
Moving forward with private banks
According to Lombard Odier's latest study on Asia-Pacific's wealthy population, aligning family interests with inter-generational investment decisions can be complicated, and requires knowledge and patience from all involved. This includes getting family members on board with sustainability, as Nextgens often face numerous barriers when persuading older generations to consider sustainable investments, with concerns such as relative underperformance of financial returns and a lack of investment opportunities with a proven track record. Of the Asia-Pacific respondents surveyed, one-third are still not sure what sustainability really is.
Vincent Magnenat, Limited Partner, Asia Regional Head and Global Head of Strategic Alliances, Lombard Odier said, “This provides an opportunity for private banks to step in as HNWIs seek to better understand the risk/return characteristics of sustainable investing. Banks can act as a communication bridge between generations and also offer a more precise definition and explanation of sustainability and how it may bring superior returns."
“While the pandemic has accelerated digitisation as an enabler, our study shows that it has also, ironically, emphasised the key role of a physical presence across several functions. Banks must therefore engage more and adapt their value proposition and business models to win the hearts of the Nextgens and younger generation, especially during succession transitions." he added.
1A unique model in Asia, Lombard Odier's Strategic Alliance Ecosystem brings the bank's investment and family services expertise together with that of the leading local financial institutions in the region to holistically serve the wealth management requirements of entrepreneurs and families. Clients are offered a tailored level of excellence to satisfy both their local and international private banking and investment needs.
2 https://www.knightfrank.com/research/article/2022-07-21-the-wealth-report-2022-10-key-highlights-pertaining-to-the-asiapacific-landscape
Important information
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