Thai HNWIs step up search for onshore wealth solutions

As political calm returns to the country and restrictions are eased, Thailand's fast-growing rich are demanding more sophisticated wealth-management solutions, drawing the interest of global wealth managers. 

But it remains a localised market where foreign players must tread carefully. 

The number of high-net-worth individuals in Thailand – typically defined as people with investable assets of $1 million and above – rose by 12.7% to 107,800 in 2016, with a combined wealth of $548 billion, according to the World Wealth Report 2017 by Capgemini. 

That's pushing up demand generally but also boosting interest in more sophisticated and bespoke wealth-management strategies, in keeping with elsewhere in the region. 

Helping that demand has been the easing of some rules related to foreign Thai investments.

The country's strong trade surpluses since 2014 have prompted Thai regulators to ease restrictions on overseas investments to help counter some of the upward pressure on the appreciating baht currency.

In 2015, the central bank raised the annual cap on foreign property purchases to $50 million from $10 million and lifted the cap on foreign currency deposits to $5 million from $500,000. 

There is also growing demand for publicly listed foreign investments such as foreign investment funds (FIFs), which have helped to drive the local mutual fund industry's expansion.

The total net asset value of the mutual funds industry stood at Bt4.3 trillion baht ($137 billon) at the end of September, up 7% on where it had been at the start of 2017, according to the Bank of Thailand’s latest Financial Stability Report. The NAV of FIFs grew by 15% over the same period to Bt1,166 billion.

That growth in FIFs, about 6 percentage points of which comprised net new cash flows, suggests investors were chasing overseas returns at a time of low domestic interest rates, the report said.

WEALTH PLANNING

The Thai wealth market is also evolving in terms of demand for services such as wealth planning.

“When the Thai government first announced the enactment of the Inheritance Tax Act in August 2015, it gave rise to a more pressing need for wealth planning and management as Thai HNWIs started to rethink the way they manage their assets in light of the new inheritance tax,” Lombard Odier's Magnenat said.

Lombard Odier was one of the first international banks to operate in Thailand through a partnership with Bangkok-headquartered Kasikornbank in 2014. It was the Swiss private bank’s first regional partnership in Southeast Asia.

Fast forward to March 2018 and it has now been joined by rival Julius Baer, which this month announced a joint venture with Siam Commercial Bank.

One of the main aims behind the tie-up, according to Laliphat Toranavikrai, executive vice president for private banking at SCB, is to capitalise on Julius Baer’s international expertise as the Thai wealth-management market grows in sophistication.

“We wanted to elevate our offshore investment capabilities for HNWI clients who might be looking for offshore opportunities but are limited by a lack of knowledge and insights of the international market and have a minimum of Bt100 million to invest,” she told AsianInvestor.

SCB wants to provide services across asset classes – equities, bonds, currencies and commodities, as well as alternative investment products such as real estate, and passion investments such as art and wine, she said.

Other global and regional players have been a beeline for the Thai market too: in 2016, Credit Suisse set up a wealth management team through its local securities entity, offering clients an international investment and wealth management platform via its regional banking hub in Singapore.

CIMB Thai Bank, majority owned by Malaysia’s CIMB group, has also said that it plans to expand its wealth clientele and AUM in Thailand.

ONSHORE SERVICES GROW

Such partnerships are indicative of the growing maturity of Thailand's onshore private banking sector, which remains the first port of call for local HNWIs seeking wealth-management services.

Singapore and Hong Kong are the region's private banking heavyweights, serving as large offshore centres for investors from neighbouring markets. Both draw wealthy investors from across Asia who are attracted by their relative political stability and by the wider investment opportunities and wealth expertise accessible in these markets. But the return of domestic political calm plus supportive regulatory actions have, however, encouraged Thai HNWIs to largely stick with onshore wealth management institutions, said Vineet Vohra, wealth management practice leader at Singapore-based Arete Financial Partners.

A limited knowledge of Thai culture, language and investment appetites means international franchises are likely to struggle if they go it alone, wealth management experts say.  

“The advent of onshore wealth management rests on banks recognising the importance of adapting their services to the [different] cultural climates of the Asian markets,” Evrard Bordier, managing partner and CEO of Swiss private bank Bordier & Cie, told AsianInvestor.

Partnering has it own challenges though, of course, not least because local players tend to have the upper hand as well as majority stakes, according to Singapore-based Michael Chaille, executive director at Alpha FMC, an asset and wealth management consultancy.

“Foreign banks selecting this model must have the next move in mind to ensure that an ended partnership does not mean a forced exit [from] the market,” he told AsianInvestor.