Stronger demand expected to boost wealth-management business

By DALJIT DHESI daljit@thestar.com.my

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PETALING JAYA: Despite the forecast for a moderation in economic growth, the wealth-management business is poised for better times in line with stronger demand from customers to grow and preserve their wealth.

The rise of the mass-affluent segment is also seen as a catalyst in boosting the revenue of banks offering such services.

The local wealth-management industry is slated to grow at 12% to 14% in terms of revenue this year, driven among others by the mass-affluent segment, according to Citibank Bhd head of wealth management (products and Citigold segment marketing) Ronnie Lim.

Ong Shi Jie says there are many catalysts to propel the industry forward
 

“In the next three years, we expect our wealth-management business to outgrow the market by 2.5 times. Our focus will continue to be on investments, treasury products and bancassurance,” he told StarBiz.

Lim said the second wave of quantitative easing (QE2) by the US Federal Reserve would spark further demand for treasury products in the emerging market.

Treasury products like high-yielding retail bonds, derivative products with equity and foreign exchange as the underlying assets were likely to experience good demand, he noted.

QE refers to the Federal Reserve's efforts to jump-start the economy and stave off deflation by buying back US$600bil in Treasury bonds, hence putting more money into the system.

OCBC Bank (M) Bhd head of wealth management Ong Shi Jie, without specifying the numbers, said the bank expected percentage growth in the “high teens” for its fee income-related wealth-management products like unit trusts, structured investments and insurance.

“There are indeed many catalysts to propel the wealth-management industry forward. For example, the insurance product penetration in Malaysia is still low compared with our neighbours. Our capital markets are liberalising and becoming increasingly plugged into the global landscape.

“Furthermore, Islamic financial planning is still at its infancy stage and, hence, there is a lot of room for growth. This augurs well for the wealth-management business,” she added.

United Overseas Bank (M) Bhd (UOB) head of wealth management (investment, personal financial services division) Samantha Lim expects the bank's wealth-management business to pick up this year as more sidelined investors return to make use of the opportunities and ride on the momentum of global activities.

She said the bank's wealth-management business was currently growing at about 30%, especially the investment business.

“Liquidity is ample, investors are looking for yield pick-up over deposit returns,” she said.
Moving forward, the investment opportunity in emerging markets, the US and in sectors such as commodities would provide room for the business.

Alliance Bank Malaysia Bhd head of integrated wealth management Marc-Olivier Francq expects overall retail wealth-management business to improve across various products such as investments, insurance, takaful and stock broking due to various macroeconomic factors.

On the challenges facing the business, Citibank's Lim said it was two-fold talent and the ability to roll out new products that could cater to the needs of the mass affluent.

“In the wealth-management space, talents such as treasury specialists, relationship managers, investment consultants, product managers and wealth practitioners are very much needed in Malaysia. Key to a sustainable growth is the ability to hire and retain talents,” he noted.

UOB's Lim said one of the immediate challenges in wealth management was the ability to effectively balance the risk of interest rate hikes while continuing to ride on the wave of liquidity as sudden interest rate hikes might adversely impact certain investments.