In a retrocession-driven industry, Paragon Capital Management has built a niche with its discretionary model in Singapore. Now, the independent asset manager (IAM) is setting its sights on replicating that success in North Asia, a region where clients remain more comfortable with the advisory approach.

Spearheading the expansion is Hong Kong-based CEO Arthur Fong, who joined the firm about a year ago. With over three decades of private banking experience and three terms as a Member of Parliament in Singapore under his belt, Fong has been tasked with growing the firm’s presence in Greater China and diversifying its client base beyond its Southeast Asian core.

Today, 70% to 80% of Paragon Capital’s clients are based in Singapore, with the rest mainly in Malaysia and Thailand. To broaden that footprint, Fong has been growing the Hong Kong office, onboarding new advisers and building out the team.

“Business planning-wise, my immediate move was to onboard about five advisers,” Fong shared with Asian Private Banker. “I want to distinguish the fact that I don’t usually say bankers. They are ex-bankers, but they are advisers now who work with our clients.”

“With that, our priority is portfolio asset gathering through adviser onboarding, no different from any other young, growing business,” he added.

​​With SGD 1.2 billion in assets under management (AUM), the IAM earns by charging a percentage of AUM, not transaction-based fees. It manages three open-ended public market funds and two closed-ended private market fund, so its income is tied to fund performance.

“We may be a new entity in Hong Kong, but Paragon Capital Singapore has been around for eight years, successfully with growing assets,” said Fong. “That’s something that differentiates us from other new startups in Hong Kong.”

Earning trust

Fong believes the firm’s discretionary model fosters an ethical alignment, where Paragon Capital’s performance is directly tied to the growth of client assets. “We want to see those assets,” he said, adding that “most experienced clients understand and appreciate this approach.”

Still, he acknowledged that scepticism can linger, often shaped by clients’ past dealing with private banks. “When the clients make money, the banks make money. But when the clients lose, they often say, ‘well, you’ve already taken your fees, right?’ That’s a bit cynical, but some clients do express that view,” he said.

“For us, having a fee-based model gives clients the assurance that we’re on their side and we’re aligned with them. That’s one important aspect to explain.”

Offering flexibility 

When Paragon Capital entered Hong Kong, the team was aware that clients in Greater China still prefer advisory-based relationships. Senior advisers are also more used to this model, and some clients tend to be more trading-oriented, depending on their portfolio profiles.

As a result, while the firm ultimately aims to move towards a fully fee-based model, it remains open to offering a retrocession structure for advisers in the meantime.

“We are open to both at this stage,” Fong explained. “That’s sensible, especially in a region where wealth is increasing and many clients are still unfamiliar with the IAM model.”

He said many clients are used to working with banks, where the impact of fees is not always immediately visible, and the focus tends to remain on investment or trading outcomes. Offering both advisory and discretionary puts Paragon Capital on equal footing with other IAMs in Hong Kong or those looking to enter the market.

“Ultimately, we want the client relationship to be on a management fees basis,” Fong said. “But that takes time, both for advisors and for clients. It also depends on the nature of the account, and whether the client is ready to say ‘yes, a management fee is the right fit for me.’”

Cost pressures

The ex-private banker expects more consolidation in the IAM space, driven by rising costs. He believes firms must define their cost structures early, cautioning that copying bank-style pay may be unsustainable and attract the wrong advisers.

Key decisions, like whether offering a draw will shape the kind of talent a firm brings in. For Paragon Capital, it is more about finding advisers at the right stage of their careers, with strong client ties and a mindset suited to an entrepreneurial setup.

“That’s what ultimately drives a firm’s long-term success,” he said.