Are External Asset Managers (EAMs) the future of Wealth Management in Singapore and Hong Kong?
External Asset Managers (EAMs) – also known as Independent Asset Managers (IAMs) or Financial Intermediaries (FIMs) – have been a burgeoning community within the wealth management and banking space.
Growing presence in Singapore and Hong Kong
Prevalent in the European Union, EAMs have had a growing presence in Singapore and Hong Kong over the past 10 years. These countries are well-established financial centres, and thus favoured destinations to build an EAM business. Authorities in both centres endeavour to create favourable conditions for the wealth management industry.
Reported by Synpulse, the number of EAMs is projected to increase by 25% for Singapore and 50% for Hong Kong. Given this promising outlook even during a global pandemic, we find out from Charlotte Chen, Recruitment Consultant of Huxley Singapore, why EAMs are the future-proof model for businesses today.
Why are EAMs the future business model?
- Greater Alignment of Interest and Autonomy
Unlike traditional private banks, EAMs sits outside of the large financial institutions’ ecosystem. This allows them to align their interests completely with that of their clients without being bound to rigid structures. This includes not being forced into meeting stiff sales targets, which eliminates conflict of interests of having to product push for in-house investments.
Experienced Relationship Managers (RMs) have a very good understanding their clients’ financial needs and appetite. This platform thus allows them to provide optimal, unbiased and comprehensive investment advice, along with solutions tailor-made to the best interest of their clients, whilst building long-term partnerships with them.
- Greater Flexibility
The new standards of client data requirements are constantly evolving, which leads to complex onboarding processes for banks. Insufficient prospect management structures and lack of end-to-end digitalisation have led to poor customer experience and even poor prospect conversion rates.
Missing flexibility to cope with new regulatory requirements also causes high implementation costs and compliance risks. Given this, EAMs are highly preferred as being independent, they are able to choose from the list of service providers for the most reliable technological platforms. These platforms allows them to provide consolidated statements and electronic banking capabilities to trade online.
- ‘One-stop Shop’
With full autonomy and an overview of different service providers, EAMs can choose to work with a list of custodian banks that best fit their criteria. This includes qualifying their reputation, pricing, and dedicated EAM service offering platforms.
By being able to choose accordingly, they would then be able to provide that high-quality, strategic advice that would benefit their client.
Nonetheless, clients can also choose to maintain multiple existing relationships with banks. This is possible if the banks fit the requirements of the EAM. Ultimately, approaching EAMs can be the one-stop shop to help manage your total wealth portfolio.
- Greater stability
Compared to private bankers, EAMs provide clients with a sense of stability as they are less likely to change employers. It is very likely that we will see stronger partnerships and continual growth between EAMs and private banks in Asia. This will enable both parties to work hand in hand to create the most seamless onboarding process for their end-clients.
In the long run, these partnerships could help improve efficiency and deliver stable business relationships. They would also help to manage rising costs for both EAMs and banks due to regulatory pressures and compliance costs from regulatory parties.
Outlook amidst a global pandemic?
During this period, most banks are facing hiring freezes, as well as working extra hard to conserve existing headcount to prevent additional costs.
In contrast, EAMs are cushioned from this scenario. EAMs and boutique asset management firms work in small cohesive teams. Even during the pandemic, they are fortunate to be able to afford hiring because they only hire when the business requires additional support.
To put it simply, EAMs grow at their own pace. Charlotte also shared that they are always in search of the right fit. This can also be like-minded entrepreneurial private bankers who are keen to explore an autonomous lifestyle, fully aligned with the interest of their clients.
EAMs are also skewing towards partnering with banks that possess strong online offerings. Given the current circumstances, businesses are moving more processes to digital. This may pose a challenge to those who do not have the tech know-how and infrastructure in place – however, it is not all doom and gloom.
Overcoming challenges with support from the government
The EAM business model requires a properly defined business and IT architecture to ensure their platform can cater for the different EAM use cases. This includes specific EAM user identification, and even complex data reports.
Singapore and Hong Kong are renowned tech hubs in the Asia region, with solid support, investments, and funding from the governments. The Monetary Authority of Singapore for instance is initiating consultations with small boutique wealth firms to work on digitising processes and using IT infrastructures.
More businesses are moving data silos to the cloud, enhancing their Customer Relationship Management (CRM) and portfolio management. To ensure that this is cost-effective for the business, investments in cybersecurity to ensure that data is protected and secure is necessary. This is also another focus of both the Singapore and Hong Kong governments, to boost training and development for cyber talent across the financial space.
Thinking of going independent with EAMs?
If you are an established private banker looking for an entrepreneurial platform that allows you to build a long term, autonomous end-to-end relationship with your clients, now is a good chance to make a break into the market and reap the opportunities. As Asian markets have matured and wealth has increased, there is a booming client base of affluent young people who are open to different forms of wealth management. There is now demand for EAMs in emerging markets such as China, Thailand, Indonesia, and the Philippines, as well as powerhouses such as Singapore and Hong Kong.
Here at Huxley, we have fantastic opportunities for you in this sector, as well as the market knowledge that can support you in your understanding of this growing market.