Digital Disruptors To Shape Asian Wealth Management Product Space

Financial technology (fintech) firms are rapidly changing the wealth management landscape, especially for traditional banks. However, digital disruption has so far only had an impact on the distribution end, and not in product creation.

Global financial services research firm Cerulli has identified three types of digital disruptors. First, there are the aggregators, which form the bulk of disruptors at present. These companies provide a bird's eye view of a wide range of products with greater transparency on pricing and services to investors.

Online fund supermarkets are prime example of aggregators. Korea's online supermarket, Fund Online Korea (FOK), and India's MF Utility (MFU) were launched in April 2014 and March 2015, respectively. They were heavily championed by the country's regulators and fund associations, underscoring a commitment to increase mutual fund penetration.

The second type of digital disruptors are known as disintermediators, which eliminate the need to go through traditional banking channels. Fintech start-ups, such as Nutmeg, Wealthfront, and Eight Securities from Hong Kong, are examples of such disruptors in the wealth management industry. They offer prepackaged customized solutions to investors for a fraction of the usual fees.

Lastly, the innovators harness front-end technology platforms to meet evolving client behavior and needs. "While these are not applicable in Asia yet, there are social trading platforms, where investors mirror real trades of successful individual or professional traders," says Shu Mei Chua, an associate director at Cerulli Associates.

Examples of these companies include Covestor, eToro, and Ayondo. The underlying concept is simple: Investors from all over the world are linked to a single network, whereby each investor benefits from the collective wisdom of the crowd.

Cerulli predicts that the next wave of disruption will involve the integration of client data as inputs during the product manufacturing process. "The disruptors of the future will take on a very different nature by offering products and services before customers realize their need for them," Chua adds.

Big data analytics or consumer behavior data are offer the possibility of asset managers structuring a product or service based on the collective "unspoken" needs of clients. We are now only in the early stages of the use of big data and analytics across all industries. Many see it as the next big thing. It seems unavoidable for asset managers too, especially on the back of the ubiquity of social media and the internet.

"It may help them understand why mutual fund penetration is low in Asia compared to other financial products such as savings and deposits, and stocks, and come up with an action plan to bridge the gap," says Yoon Ng, Cerulli's Asia research director.



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