Standard Life Investments in talks with China P2P firms
Traditional fund distributors in Asia may dismiss concerns that financial technology will take business away from them, but asset managers are clearly eyeing the potential of new electronic channels, particularly in China.
Mainland peer-to-peer lenders have been setting up online wealth management platforms, and Standard Life Investments is in early discussions with some of them, said Virginia Devereux Wong, head of Asia wholesale business at the UK firm. She declined to name the firms in question.
Online wealth hubs generally are expanding their presence overseas, in Hong Kong, Singapore or London, Wong told AsianInvestor. They can sell different types of funds to mainland clients through offshore branches.
"They have reached out to asset management firms in search of product,” she said. “They know what they want. They are not going for plain-vanilla products but for the best proposition to develop building blocks for their client’s portfolio.”
Wong said the starting point of discussion with these firms centred on satisfying know-your-customer (KYC) requirements, which focus on ensuring compliance with anti-money-laundering rules, among other things.
Two examples of large P2P players developing onshore and offshore businesses are Credit China and CreditEase. The former has sought to tap Swiss private bank Bordier's wealth management expertise through a partnership, while the latter has focused on putting in place in-house resources.
Such developments, and those around electronic distribution and fintech in general, have sparked debate about potential disintermediation of traditional distributors in the wealth management segment.
While the consensus opinion of executives at AsianInvestor's Fund Selectors Forum last week was that fintech would not usurp the traditional distribution business, they acknowledged that they must position themselves for technology’s progress and changing customer behaviour.
Roger Steel, president of new markets and business development for Asia at insurer Sun Life, said fintech would not take business away from traditional distributors, at least in the near term.
“Our model is very much B2C [business-to-consumer], and we tend to reach the mass affluent through face-to-face distribution,” he noted.
However, new models are evolving in China on “thought-provoking” scale, said Steel. For instance, Sun Life’s joint-venture insurance business with China Everbright Group, has had success using online distribution, he noted. The platform does not sell typical insurance products, but very short-term investment products with fixed interest rates and low margins.
“The volume sold was extraordinary,” noted Steel. “The first time we did it we had 300,000 customers who were unable to buy, as the products sold out in two minutes.”
Another panelist, Chuang Shang, head of international operations at Chinese wealth manager Noah Holdings, said his firm embraced technology. But he did not believe automated tools such as robo-advisers would affect its business, because of the type of clients that Noah served.
“We are not worried, because we are focused on advisory. Wealth management is not just investment; it also includes wealth planning,” he said. Advice on wealth transfer, for example, cannot be provided by automated platform, he added.
Credit Suisse’s Hong Kong head of mutual fund and ETFs, Charis Wong, agreed that clients’ need for complex financial solutions could not be provided by any financial technology. “I don’t think fintech will replace our jobs,” she noted.
Others too are sceptical about, for instance, the rise of robo-advisers. Fund research firm Morningstar has argued that many such set-ups will not achieve the scale necessary to sustain a profitable business.
Nevertheless for certain parts of the wealth management business, robo-advisers are seen to have massive potential, with the US the big growth market right now. Reportedly robo-advisers were managing less than $20 billion in assets globally as of end-2014, but research house Cerulli Associates predicts that figure will soar to $489 billion by 2020.
Asset managers have have reportedly already forayed into this segment. BlackRock is acquiring FutureAdviser, a San Francisco-based robo-adviser founded by former Microsoft executives; Schroders acquired an equity stake in UK-based robo-adviser Nutmeg last year; and Fidelity is offering a product from US robo-advisory firm Betterment to its investment advisers.