Insurer Axa is to close its multi-manager financial planning subsidiary ipac in Hong Kong and Singapore, affecting 2,000 individual clients and less than 100 staff in the region.
The ipac business was launched in Australia in 1983 and wholly acquired by Axa Asia-Pacific Holdings, the group’s Australian subsidiary, in 2002. It provides financial advice to retail clients through an initial upfront fee, with ongoing advisory typically deducted via product units.
Given its history, at least 50% of its clients are Australian. The business expanded into Hong Kong and Singapore in 2003 as part of a build-out into Asian markets. It also acquired a small operation in Taiwan.
Gary Harvey, chief executive of ipac wealth management for Asia, admits that when ipac started it took the path of least resistance, which was to obtain products from its parent. But he notes that over time it expanded its product range in Hong Kong and Singapore, with the majority of fund flows going through a product such as iFast.
But French listed entity Axa SA sold its ownership in Axa Asia-Pacific Holdings in March 2011 to AMP, including ipac’s Australian assets.
After that Axa carried out a strategic review of ipac’s Asia businesses and has concluded it was not in line with its strategy of growing material insurance businesses in emerging markets such as Asia. The ipac fund platform in Dublin will also be closing.
Harvey tells AsianInvestor that ipac’s assets have moved largely in line with equity markets globally. But he says the firm has been able to retain its clients, who are typically aged in their 40s with a long-term investment horizon.
“What we have seen over the past few years is a strong retention of clients,” he notes. “As a result of our model we have been able to keep clients invested throughout the period since the global financial crisis despite the ups and downs, including the difficulties in Europe.”
Asked why if client retention had been strong that the business was closing, he explains: “You have to look at it in the context of our shareholder being a global business. They have conducted a review and their strategy is one of growing material insurance businesses in the region.”
Harvey adds that the size of the advisory market it wanted to operate in has not grown to the same extent as the firm envisaged when it first looked at its entry plans in 2003.
“The IFA market has grown, but not so much of the ‘I’ and more of the ‘FA’,” he notes. “You look at the market and you see a lot of companies that are operating not as IFAs but as an agency force. I think the size of the market has been impacted, and this is Axa’s decision.”
The firm has sent out a letter to clients informing them it will cease to operate regulated activities in Hong Kong and Singapore at some point in the first half of this year. Over the next three or four months it will talk to clients about where they see their future advisory relationships.
“When that is all done we will hand back the regulatory licences and cease to give any financial advice in Hong Kong and Singapore,” he notes, adding that he will be working with staff over that intervening period to see if there are alternative opportunities for them within the Axa group.