Jim O’Neill, chairman of Goldman Sachs Asset Management, is widely credited with coining the acronym 'Bric' in 2001, when he was Goldman Sachs' chief economist. And by 2003, Goldman’s research unit was forecasting that in 2050 Brazil, Russia, India and China would represent a larger economic bloc than the G6.
The work has been much debated in the intervening decade, but in wealth management terms one thing is clear, when it comes to creating wealth, two of the four nations stand head and shoulders above the others.
And Julius Baer recently added its weight to the growing body of evidence about the dominance of China and India as international wealth centres with the release of its Wealth Report: Asia. In the report, Julius Baer suggests that by 2015 China’s high-net-worth population will reach 1.38 million. Putting this into context, that figure is more than double CapGemini’s current estimates of the
country's HNW population. Using the same measures, India’s HNW population will triple to 403,000 (see graph, left).
Julius Baer further predicts that the wealth controlled by Asia’s wealthy will reach between $14.75 trillion and $16.7 trillion.
To some extent, this simply reinforces what many in the wealth industry have taken as fact for some time – that the future of the international wealth management industry will stem from Asia. What remains to be seen is whether this will mean in the coming decade that Asia’s own flavour of wealth management will emerge for re-export around the world.
Today, much of the discussion about the development of Asia’s wealth proposition reflects arguments already well rehearsed in the US and Europe - such as about the limitations of commission-based financial services and the pros and cons of advisory and discretionary solutions.
But if Asia emerges as the world’s largest wealth centre in the imminent future, then it may only be a matter of years before we find an Asian-infused wealth management proposition challenging on the international stage.
Based on our own recent research, we are strongly of the view that such a proposition will have technology, particularly digital, capability, far more in evidence than in the old wealth management models of the West. Indeed, in our most recent research we find the average Asian HNW spends at
least five hours a week online handling their banking and investments (see chart, left).
Meanwhile in China, the penetration of mobile banking and investment apps among millionaires is already at 73-83%, and across the region millionaires expect to do more of these activities online over the next five years.
At present, the wealth industry in the region is lagging behind its clients when it comes to the latest technology. Many still use inefficient or outdated systems that limit the ability of advisers to deliver a truly high-quality service.
In fact, during an average week, Asian advisers acknowledge that they spend less than two days engaging with their clients.
Without resources to streamline tasks, advisers only just have their heads above water. At 86 clients to each adviser (compared with an industry average of 50-60 for full-service wealth management – which, by the way, may not be an efficient number for the future), it is perhaps unsurprising that most feel they are working at capacity.
But as they vie for a larger stake in this competitive market, many will both need much higher levels of engagement with clients to deliver a truly high-quality service and also much higher client volumes.
Significantly, Asian advisers seem to be aware of this and have started to take matters into their own hands. A significant proportion are already using iPads and other tablets for presentations, investment research and portfolio analysis. Although they expect this usage to increase dramatically in the future, it is enhanced business intelligence, CRM systems and risk management tools that they want to be accessible on these machines to stay ahead of the game.
Clearly, in Asia, the wealth management industry is conscious of the digital needs of its clients. And given that our research shows demand for internet-based wealth solutions is strongest in the region, it is likely that solutions will emerge that fuse the best of bricks-and-mortar personal wealth management with unparalleled online access to market information, banking and investment solutions.