Assets under management (AUM) in APAC are set to grow at a faster rate than any other region in the years to come. Indeed, wealth management firms foresee strong growth in investing following a rise in the region’s growing mass affluent in particular. According to Accenture, AUM are expected to nearly double by 2025. Investing is on the up!

In terms of where to invest, American exchanges are home to some of the world’s largest and most valuable companies so the US remains the dominant market. In particular, there is a lot of interest in the US market given its stability, size, depth, liquidity, economic strength and innovation. The US Dollar remains the de facto reserve currency today.

Intra-Asia investment will also increase due to local growth, demand for capital, large markets, and expected liberalisation of market structures and investment rules. This growth in investing will likely be uneven and because APAC is in various stages of development and stability, it is likely that many investors will look cross-border to meet their needs.

For example, Hong Kong is a significant capital market in its own right, listing a great number of Chinese companies. As a stable and well-regulated regime, it attracts a lot of capital inflows from the region and globally. And like Singapore, it is a regional financial centre seeking to attract global investment, so has pro-investor tax laws, with deeper markets and relatively stable rules of law.

The current asset management hubs of the region, Singapore, and Hong Kong will be joined by a third, namely Shanghai. This would make Asia one of the largest infrastructure investment regions globally.

In addition, the expectation is that more markets like Australia, South Korea and Japan will start to open up and grow over time, creating more intra-Asian investment opportunities.

As these elements come together and a combination of intra-regional initiatives, like the Asia Region Funds Passport, come into play, investment providers will have a larger audience and greater pool of assets for investors wanting to invest in stable and liquid regimes within the region.

Democratisation
Outside the true High-Net-Worth (HNW) space, however, the means to access these investments in different jurisdictions are largely provided by online brokerages. The growing demographic of younger investors with easier access to financial education compared to their predecessors also seek to be more engaged with where their money goes. Indeed, the ubiquity of smartphones and the convenience they offer has driven this trend, giving rise to the neo-broker. WealthTech startups are disrupting the investment and wealth management sector by creating finance apps that make stock markets and innovative tools accessible to a wider audience, for example with micro-investment or fractional investment opportunities.

This democratisation of the sector through the emergence of neo-broker apps has done more than just disrupt legacy providers; it is also helping breed a new generation of financially literate investors – who are rapidly growing in number.

The idea is that people who want to trade more frequently, and with more choices, can do so mostly with no initial subscription fee and only small transaction fees. An investor can now instantly place a commission-free trade. But obviously, the offering differs from provider to provider.

But no matter what the access point is, a commonality here is a stronger need to have cross-border payments and currency capability. The rising technology and cost pressures see WealthTechs increasingly working with partners who can expedite the process of setting up payment capabilities while they then focus on the core proposition of their business that their target segments care about. The value of outsourcing the building of payments infrastructure elevates them in differentiating their offerings across the competitive landscape as they have more time to focus on the customer offering.

Existing investment companies and new WealthTechs can target and serve growing investor demand by working with specialist firms e.g. in FX and cross-border payments that enable the wealth investment firms to provide their services at greater speed, lower cost and with more ease.

Indeed, by integrating APIs directly into its app or core banking system, WealthTechs and wealth managers can offer the investment community instant access to stocks and shares by executing instant buy and sell orders with unlimited commission-free trading and lower FX rates. These customers can regularly trade in real-time and instantly convert currencies when it suits them and without incurring any hidden bank fees.

There are also other benefits like automation for smoother and faster reconciliation and the ability for the business to determine its own pricing strategy for FX.

Having a third party that can do all that in local time and use a bundled approach is efficient and also saves both time and money. It feeds into a successful model that delivers the ability for local investors to access other markets. The value in the partnership is that the end clients get a holistic offering through a strong ecosystem built by WealthTechs outsourcing parts of their supply chain to maximise efficiency.

Ultimately, there is a compelling case for wealth management firms to embed finance into their core capabilities. Doing so provides better services and accessibility to their intended client segment (be it HNW or retail) and so increases their AUM and revenues.

This article is from The Wealth Mosaic’s APAC WealthTech Landscape Report 2023. Access the full report here.