IFAs interviewed in key Asian markets (ex-Japan, Australia and New Zealand) said they expect to see their annual premium equivalent this year grow by 17% to $1.4bn, and more than 20% in 2012, according to the data, which was unveiled last month in Hong Kong by the Singapore-based consulting firm.
The 2012 projection of 20% was scaled back from the 25% to 35% initially turned up in interviews with some 120 local and expat-specialising IFAs, bankers and brokers, in order to account for the anticipated effects of the downturn in markets and outlook that occurred after the interviews were conducted in May and June, according to Sandeep Rao, partner at NMG.
Source: NMG Consulting
Nevertheless, a 20% growth forecast for 2012 “is still pretty good”, Rao said, although he noted that the projection was made on the assumption that there would not be another global financial crisis in the interim.
Rao added that the market for IFAs in Asia, though still growing, presents challenges to both providers and distributors, owing to continuing, fundamental shifts in regulations, customer demographics/preferences, product mixes and business models in the region’s various individual markets.
Other key findings of the NMG report:
- The proportion of their clients in the HNW category – defined as those with more than $1m in investable assets – that expat-specialist IFAs in Singapore said they were looking after in 2011, leapt to 40% of their total expat client base from 34% last year, as the number of HNW and UHNW expatriates moving into the city-state grew. The comparable jump in Hong Kong was to 27% from 14%.
- IFAs in both Hong Kong and Singapore remain dependent on initial commissions as a source of income, with the percentage of their total revenue from this source given by interviewees in these markets as 72% and 60% respectively.
- Asked if they were shifting to a fee-based remittance model, 44% of Hong Kong IFAs said “no” in 2011, a statistically-insignificant one percentage point more than last year’s 43%. In Singapore, the flat “no” responses fell to 20% this year from 58% last year, with half saying they were moving to a fee-based remittance system, “but gradually”.
- A decline in offshore products is evident, and is offset by an increase in platform and onshore products, while protection insurance still continues to be just 6% of total new business, suggesting an area of potential growth.
Commenting on the research, Rao noted that the trends it highlighted had implications for the “long term competitiveness” of financial institutions operating in all of the markets surveyed. The long term sustainability of distributors and providers alike in these markets, he added, will hinge “on their ability to diagnose, understand and adapt to these changes”.
“This is further exacerbated by the fact that Asia is not a homogenous mix of countries, but [is comprised of] many nations, [each] with its own individual dynamics,” Rao said.
It is the fifth year in a row that NMG has researched the Asian IFA and private banking market, which it calls its Asia Premium Advisory Research programme.
The data has particular value for the financial services industry because it was obtained through independent research that was not commissioned by any specific provider, and because unlike many other data sets, it includes offshore flows, NMG said.
As in the past, The Hong Kong portion of the IFA research this year was conducted in conjunction with the Hong Kong Independent Financial Advisors Association, an association of more than 40 advisory firms located there.
The organisation’s vice chairman, Platinum Financial Services chief executive Mark Kirkham, said the research gave the IFAA “a good market overview, and insight into competitive dynamics and industry trends that we have always found to be extremely beneficial”.