Financial Updates - Malaysia

Hubbis’ 6th annual event in Kuala Lumpur for the Malaysian wealth management community, came at a time when the industry is facing one of its toughest-ever years. Markets are clearly tough for everyone, and challenges are mounting across all aspects of the service and product offering. 

Finding the right balance in terms of the fee model and incentive structure to drive this represents a key component. As is the education and retraining of sales staff, to get them thinking and acting in a way where they sell solutions, not products.

The industry must ensure it can evolve in these and other ways to avoid missing out on the opportunity to manage more wealth onshore, rather than the continued flood offshore. This also requires diversifying the distribution channels for insurance products.

There is little doubt that the dynamics, regulatory intent and demographics are all on Malaysia’s side when it comes to developing a healthy and sustainable wealth management market. The question-mark is over the pace it is moving.

For example, a lot of assets still flow into Singapore, which is in part because private banking in Malaysia has not developed quickly enough with sufficient investment options. In line with this, the lack of a deeper capital market in the country makes it difficult to compete head-to-head with Singapore and Hong Kong.

These were some of the views of leading market practitioners across private banking, retail banking, insurance, independent firms and asset management.

Spurring market development

There are several key ways in which Malaysian wealth management can move to the next level of development.

First, there is a need to embrace change, given the inevitable emergence of fintech, the next generation of investors, new competitors and regulatory reform, among various changes underway.

Secondly, players must focus on building the right culture; this needs to come via innovation and human capital. But this is not just about product innovation; rather, new ways to engage consumers and leverage relationships. 

Thirdly, it must be easier for clients to do business, by giving them multiple points of contact through greater collaboration. Tied to this is the need for clearer and more targeted communication for clients.

Fourthly, there should be more investor education and awareness generally, with all industry stakeholders required to play a role in ensuring this.

Evolving offerings

For banks to grow their wealth management capabilities in Malaysia, the focus is more likely to be in local currency and Islamic products. 

Yet the relatively higher interest in MYR makes it more compelling for these institutions to offer non-MYR products, which also address customers’ need for building their investment portfolio.

Asset managers, meanwhile, need to extend their global offering to the local market, providing professional money management in non-retail structures.

Solution-based versus product-based offerings will also enable stronger manufacturer-gatekeeper relationships.

For Islamic wealth management, in particular, there is an opportunity for the Islamic banks to also focus on HNW business in addition to the retail market.

More specifically, there needs to be more choice of products and services in the traditional asset class; when it comes to alternatives, more are needed, and more quickly. Track record also needs to improve, along with AUM, as well as to ensure cost efficiency. 

This is more likely to happen if there is greater awareness of Islamic options among intermediaries. Further, the merit of investing into Shariah-compliant products also needs to be clear to non-Muslims, beyond just performance.

In the insurance space in Malaysia, providers can play a much bigger role within the country’s wealth management sector if they are able to embed advice into product distribution and offer more protection. 

Some of the biggest opportunities for these companies include: the low life insurance penetration rate; the insurance protection gap; the potential for Malaysians to save more; rising healthcare costs coupled with increased life expectancy; and banks and IFAs as leverage to strengthen the distribution force.

On the flipside, challenges exist in various forms, for example: a general disinterest by banks in promoting life products; the EPF scheme as the preferred option to protection vs the private retirement scheme; competition between family Takaful products versus conventional insurance; saturation within the potential pool of buyers of life insurance; and changing business operations to keep up with new technological advances and customer demands.

Delegate, speaker and sponsor summary

• 30 high-profile speakers

• 290 senior individuals attended

• Delegates included CEOs, senior management, product gatekeepers and business unit heads from the leading Private Banks, Retail Banks, IFAs, Insurance Companies and local Asset Management Firms

• Sponsors:Allocated Bullion Solutions,Intellect Design Arena,Henley & Partners,Heritage Trust Group,IRESS,Sun Life Malaysia, Vermillion Software,Franklin Templeton Investments, Mercer,Morningstar,Rosemont, Swiss Asia,Temenos,The Iyer Practice,Thomson Reuters

Key topics and themes 

• Is wealth management in Malaysia progressing too slowly? Will the opportunity pass us by?

• When will we stop being obsessed with short-term revenue - and start focusing on generating long-term value?

• Driving Malaysia’s Islamic wealth management industry forward

• What’s the role for insurance companies in Malaysian wealth management?

• Product manufacturers and fund gatekeepers - a slow, slow dance, and a small shuffle towards advice

• Everyone is worried - what should I do with my money?

Finding the right balance in terms of the fee model and incentive structure to drive this represents a key component. As is the education and retraining of sales staff, to get them thinking and acting in a way where they sell solutions, not products.

The industry must ensure it can evolve in these and other ways to avoid missing out on the opportunity to manage more wealth onshore, rather than the continued flood offshore. This also requires diversifying the distribution channels for insurance products.

There is little doubt that the dynamics, regulatory intent and demographics are all on Malaysia’s side when it comes to developing a healthy and sustainable wealth management market. The question-mark is over the pace it is moving.

For example, a lot of assets still flow into Singapore, which is in part because private banking in Malaysia has not developed quickly enough with sufficient investment options. In line with this, the lack of a deeper capital market in the country makes it difficult to compete head-to-head with Singapore and Hong Kong.

These were some of the views of leading market practitioners across private banking, retail banking, insurance, independent firms and asset management.

Spurring market development - There are several key ways in which Malaysian wealth management can move to the next level of development.

First, there is a need to embrace change, given the inevitable emergence of fintech, the next generation of investors, new competitors and regulatory reform, among various changes underway.

Secondly, players must focus on building the right culture; this needs to come via innovation and human capital. But this is not just about product innovation; rather, new ways to engage consumers and leverage relationships. 

Thirdly, it must be easier for clients to do business, by giving them multiple points of contact through greater collaboration. Tied to this is the need for clearer and more targeted communication for clients.

Fourthly, there should be more investor education and awareness generally, with all industry stakeholders required to play a role in ensuring this.
Evolving offerings

For banks to grow their wealth management capabilities in Malaysia, the focus is more likely to be in local currency and Islamic products. 

Yet the relatively higher interest in MYR makes it more compelling for these institutions to offer non-MYR products, which also address customers’ need for building their investment portfolio.

Asset managers, meanwhile, need to extend their global offering to the local market, providing professional money management in non-retail structures.

Solution-based versus product-based offerings will also enable stronger manufacturer-gatekeeper relationships.

For Islamic wealth management, in particular, there is an opportunity for the Islamic banks to also focus on HNW business in addition to the retail market.

More specifically, there needs to be more choice of products and services in the traditional asset class; when it comes to alternatives, more are needed, and more quickly. Track record also needs to improve, along with AUM, as well as to ensure cost efficiency. 

This is more likely to happen if there is greater awareness of Islamic options among intermediaries. Further, the merit of investing into Shariah-compliant products also needs to be clear to non-Muslims, beyond just performance.

In the insurance space in Malaysia, providers can play a much bigger role within the country’s wealth management sector if they are able to embed advice into product distribution and offer more protection. 

Some of the biggest opportunities for these companies include: the low life insurance penetration rate; the insurance protection gap; the potential for Malaysians to save more; rising healthcare costs coupled with increased life expectancy; and banks and IFAs as leverage to strengthen the distribution force.

On the flipside, challenges exist in various forms, for example: a general disinterest by banks in promoting life products; the EPF scheme as the preferred option to protection vs the private retirement scheme; competition between family Takaful products versus conventional insurance; saturation within the potential pool of buyers of life insurance; and changing business operations to keep up with new technological advances and customer demands.