Trends and changes among Asia's High-Net-Worth Individuals
A broadcast interview aired on MoneyFM 89.3 on 17 February 2022.
Vincent Magnenat, Limited Partner and Asia CEO for Lombard Odier recently spoke to MoneyFM 89.3 about how High-Net-Worth Individuals' (HNWIs) profiles and interests are changing, the growing divergence among HNWIs across Asia, the major trends facing the private banking industry, as well as trends and perceptions towards sustainable investing.
This was on the back of a study undertaken by Lombard Odier in collaboration with our Ecosystem of Strategic Alliances and close partners in Asia-Pacific. In the study, we surveyed over 600 HNWIs across the region, to understand the needs and perspectives of HNWIs in response to the global crisis, across three pillars – investments, family matters and sustainability.
The report notes that there is a growing divergence among HNWIs across Asia. Where are the growing divergences occurring?
The Covid-19 pandemic has greatly disrupted global economies and resulted in an increase in the level of complexity of many markets. From our survey findings, we are mainly seeing growing divergences among Asia HNWIs in their views towards sustainable investing and investment risk appetite.
In particular, sustainability has become one of the hottest themes for decision-making among private banks as clients become more conscious about the impact of their wealth. We are seeing the changing perceptions towards sustainability from just a “worthy cause" to a legitimate financial opportunity.
One interesting difference we noticed was the eco-gender gap among Asia HNWIs. Women are more convinced than men that taking sustainability into account can lead to superior returns. Next Generations (NextGens) are also more convinced about supporting sustainability and applying its principles than the older generations.
We are also seeing interesting differences in the risk appetite among older Asia HNWIs and the Next Generation wealth holders. Across age groups, NextGens are known to be less risk adverse. For instance, 55% of respondents between 18 and 24 years old expressed intentions to change their portfolio's liquidity, compared to 48% for those between 35 and 50 years old, and the willingness declines further up the age groups. This shows that the younger an investor is, the more willing he is to change his portfolio's characteristics.
Overall, many investors are expecting a lot of unpredictability for markets in 2022 vs the prior year. Where are the major sources of unpredictability, and how are HNWIs in Asia positioning themselves?
The market environment remains volatile two years on post-pandemic, as global economies are at different speeds of recovery, which is apparent in the diverging monetary policies at the start of this year. Investors across markets are increasingly seeking diversification, and having access to global markets locally is very important.
We also see clients and investors increasingly relying on banks and their expertise to guide and navigate uncertainties.
Private clients in Asia are combining a mix of long-term discretionary mandates with active advisory. On our end, it is important to remain holistic, and to understand the needs of clients and to manage expectations.
What are the major trends facing the private banking industry in the next 10 years – and how are these tied to the young HNWIs of the future?
We see four major trends that will impact the private banking industry in the coming years.
Sustainability
Firstly, it is the rising importance of sustainability. Our economy is already transitioning from one that is Wasteful, Idle, Lopsided and Dirty (WILD) to an economy that is Circular, Lean, Inclusive and Clean – we call this the CLICTM economy. We also see The Sustainability Revolution as the single biggest investment opportunity of our lifetime. In this aspect, NextGens are increasingly socially conscious when it comes to investing and the banks they want to work with.
Guidance
Secondly, we observe an increasing need for guidance in navigating the financial markets. The complex and uncertain environment has driven investors across markets to seek diversification. Investors rely on local banks' guidance and expertise to help them manage their portfolios in the current volatile environment. This will shape the way private banks structure their offerings.
Onshore private banking and family services
Thirdly, the rise of onshore private banking and growing demand for family services. At Lombard Odier, our ecosystem of Strategic Alliances and close partners, where we partner with six leading financial institutions in Asia-Pacific, allows us to leverage each other's strengths to capture onshore clients in the region.
Technology
And lastly, accelerating technological transformations. Digitalised platforms will be a key differentiator in NextGens' choice of private banks. We believe that human connection remains at the core of private banking services offerings.
These trends will all take place during one of the biggest transitions of wealth Asia has experienced as older generations begin to pass on their wealth and the reins of their businesses to the next generation. Asia's great wealth transfer will involve trillions of dollars and greatly impact today's NextGen.
You may tune in to link below to listen to the full show:
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