Canada's Manulife has merged its asset and wealth management arms in Asia, and appointed Michael Dommermuth, its president for international asset management, to head the combined business.
The current Asia head of wealth management, Donna Cotter, will take on a newly created role as vice president of strategy and business development at Manulife Japan. She will report directly to Gavin Robinson, general manager for Japan and join the Japan executive committee.
Industry observers see the insurer's move as reflecting a trend in an under-pressure financial industry, following similar reorganisations by firms such as Credit Suisse and Deutsche Bank. Where capital requirements such as those under Basel III had hit banks, so insurers are under pressure to meet capital thresholds and reporting requirements as a result of regulations such as Europe’s Solvency 2.
Manulife's move reflects a rising trend to seek synergies and cost savings by integrating the operational platform across business divisions, noted a Hong Kong-based consultant. They are looking at having shared services within their groups, that support both asset and wealth management, he said, since both divisions invest in securities.
The consultant said Kai Sotorp, Manulife's new global head of wealth and asset management, has experience of helping integrate functions across those divisions in his previous role at UBS.
Other insurance firms are moving in a similar direction, noted the unnamed consultant. For example, several asset-service providers are busy working with insurers in this area, helping them to gain more predictability in cost of operations.
However, he added, there will be some restrictions as to how far they can go on this front, given the fact that some onshore regulations require certain functions to be carried out onshore.
“The move to merge asset management with wealth management reflects the general trend in the past three years towards consolidation and cost-efficiency in the financial industry in Asia,” agreed Steven Seow, Asia head of wealth management consulting at Mercer.
Distributors from banks to insurers to IFAs are under pressure to improve their cost-income ratio and achieve sustainable profitability in an environment of rising regulation, growing competition and falling margins, noted Singapore-based Seow.
These three factors are driving CEOs of big financial organisations to look at how to run businesses more cost-effectively, he added. “Initially we saw this hitting investment banks, then private banks and now insurers, and it is having an effect on IFAs [independent financial advisers] as well.”
Manulife declined to comment on the extent to which its decision was driven by a desire for greater cost-efficiency and improved operational integration.
It said in a statement: “Integrating these two successful business lines under Michael will create an even stronger platform for future growth. Importantly, it will allow us to bring needed and relevant investment solutions to more clients and distributors.”
Meanwhile, although open architecture in terms of product selection is still prevalent in the industry, more banks are moving towards discretionary portfolio management, particularly when they can combine asset and wealth management expertise effectively, said Seow. This suggests a gradual shift back towards a closed architecture, he added.
Based in Hong Kong, Dommermuth reports to Sotorp and Robert Cook, senior vice-president for Manulife Asia. A spokeswoman declined to say whether staff will be laid off as a result of the integration of the AM and wealth units.
Combined, Manulife’s Asia wealth and asset management division has some 800 employees. Of the total wealth asset under management, Manulife Asset Management has $63 billion in assets under management in Asia and $276 billion in assets under management globally as of September 30, 2014.