Asia: Singapore’s private banks to provide comprehensive financial advice service

Earlier this year, the Monetary Authority of Singapore (MAS), released a statement that the growth of the financial sector outpaces the growth of the overall economy of Singapore and is expected to continue doing so. The MAS is also looking to Singapore to be an international wealth management hub.

Following the direction set by the MAS, private banks in Singapore are looking to shift away from brokerage to comprehensive financial advisory services. To move towards wealth planning services, wealth managers will have to understand the long-term goals and investment plans of their clients. They will also be required to have a deep understanding of the clients beyond their financial needs.

Private banks in Singapore have started to see a change in the nature of demands coming from clients, with a notable shift towards more comprehensive wealth management services. The Bank of Singapore (BOS) has seen a 30% increase in the number of assets managed through discretionary portfolio management. While Credit Suisse also saw the bank’s discretionary and advisory solutions AUM growing 50% annually from 2014 to 2016.

Discretionary portfolio management allows wealth managers to shift investment positions on behalf of their client, based on the broad strategy of the client. The increase in assets managed through discretionary portfolio management shows the shift towards a true wealth management model as compared to a high-end brokerage model.

In Asia, discretionary portfolios make up just 5%-10% of the whole portfolio which is a stark contrast to Swiss private banks, where the discretionary component is at least half.

In addition to the shift towards an increased discretionary portfolio, banks like UBS and Credit Suisse are looking to enhance their advisory models. Credit Suisse recently launched a portfolio advisory service in Singapore to help clients who are making their own investment decisions, make more informed decisions. UBS, too, has launched a digital advisory platform that uses big-data analytics to scrutinise portfolios against critical risk factors to alert clients to deviations from their investment strategy.

According to RFi Group data, amongst the affluent priority account holders in Singapore, 51% make investment decisions on their own without relying on their financial advisors. Only 2% rely on their financial advisors to making most or even all their decision and 46% rely on financial advisors together with additional information available to support their final decision. This shows there is still much room for improvement towards a true wealth management model that is necessary for Singapore to be recognised as an international hub for wealth management.

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