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Asia’s IAM industry primed for consolidation: UBP

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Independent asset managers (IAMs) and family offices in the region are forecasted to consolidate their oft-limited resources in response to Asian HNWIs’ demand for a “one-stop shop” that offers a wide range of expert services, according to UBP.

Benoit Barbereau, UBP

“IAMs in Switzerland and in Asia are quite different in the parameter of services they offer,” Benoit Barbereau, head of EAM at UBP, told Asian Private Banker during his recent trip to Asia.

Most IAMs in Switzerland tend to specialise, he said, while IAMs in Asia are often set up as “one-stop shops”, offering a range of services — from wealth structuring to managing financial and non-financial assets to assisting in children’s overseas education plans. However, Barbereau noted that resourcing issues will lead to more instances of consolidation.

“M&A or partnerships are foreseen, combining pure family office entities with investment firms. Meanwhile, firms with niche expertise in hedge funds or private equity will also have a role to play, and the landscape will be more similar to Switzerland once it matures,” he said.

To help IAMs provide a broad range of services despite often limited internal resources, Barbereau said banks like UBP can assist as a business partner by offering expertise such as CIO views, investment specialists, and wealth planners who offer an international perspective.

“In turn, we expect IAMs to grow the partnership with us and source clients in markets where we don’t operate,” he added.

Based in Switzerland where IAMs hold roughly 15% of the total AUM in the country’s wealth management business, Barbereau oversees the bank’s global EAM business. Comparing the Asian IAM landscape to its Swiss counterpart, he said Asian IAMs currently hold a small portion of the region’s overall wealth, but that this will change as the first major wealth transfer transpires.

Indeed, according to Asian Private Banker‘s 2018 IAM Report, Hong Kong and Singapore are home to some 160 IAMs which together only command a 5.5% market share of the jurisdictions’ wealth management industries.

“I believe this is the right moment for UBP to put a greater emphasis on our IAM business here in Asia,” he said.

According to Barbereau, given Hong Kong’s proximity to Mainland China, the city’s IAM industry is “catching up” as there is strong demand for wealth management services in China. In fact, the Private Wealth Management Association (PWMA) in Hong Kong recently pointed out that family offices — effectively a type of IAM — present a major growth opportunity for the local wealth management industry.

“The IAM business is not as prevalent in Asia because it implies a delegation of investment decisions. The vast majority of HNWIs in Asia represent the first generation of wealth, so most of them still prefer to take a hands-on approach to managing their assets,” he said.

“But we are on the cusp of a game-changer — with the second generation coming up, there will be an increasing demand for family offices in China.”

As it already has a number of established competitors in Asia, UBP is exploring business relationships with new entrants and boutique IAMs in the region, aiming to become their “preferred banking partner” in the longer term in order to meet its goal of having the Asia IAM business manage “at least” 5% of the bank’s total AUM in the region, which is roughly on par with the industry average.

Despite Singapore regulators shifting their focus from private banks to IAMs regarding AML reporting, Barbereau said that within the bank, there is no difference between due diligence standards for IAM clients and normal private banking clients. In fact, he added, there is an additional layer of due diligence as IAMs have to conduct their own onboarding regulatory procedures.

“Trust is absolutely central to the IAM business, and a robust regulatory framework is key to giving clients the confidence and guarantees they are looking for,” he concluded.

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