Top challenges facing global IFAs in 2017
By International Adviser, 20 Dec 16
Advisers around the world give their views on how regulation, M&A activity and technology will affect their business in 2017.
Phil Neilson, chief executive, Just Services HK
While Hong Kong’s economy is dependent on the small to medium size business sector (SMEs) where they make up approximately 70% of the economy, it is quite the opposite in the financial advisory industry.
Whether it be insurance plans or the selling of securities, IFAs or brokers only represent approximately 10% of the market.
This is in complete contrast with Australia, the UK and the US where independents dominate. And the outlook for 2017 is for this to shrink even further.
The Hong Kong government and regulators (and there are several which compounds the complexity and confusion to the retail investor or insurer) focus on how big the company chequebooks are should the public ever be mis-sold or have a complaint.
This means they are more comfortable with the public purchasing from large institutions. Unfortunately, it is a secondary consideration on how well the sales process is conducted in the first instance.
The market is so difficult that many advisers have already left Hong Kong. Those who are left are, in the main, promoting either offshore investment property or UK pension transfers.
Those with significant numbers of existing clients do have the opportunity to take advantage of technology to deliver quicker, smarter and more relevant service to their clients, however it still takes time to transition from the historic dependency on upfront revenues.
There is no doubt 2017 will see consolidation and collaborations. While some businesses may embrace technology (often by collaborating with Fintech’s – in the same way as banks do) to reduce costs, lift recurring revenues (particularly advisory fees) and help retain advisers, their fixed costs may still be too high.
So, all in all, another tough year ahead for those who are not thinking outside the box or investing in new initiatives.