With shifting demographics, higher expectations and favorable regulations, wealthtech has become a rapidly growing industry around the world. In Hong Kong, the wealthtech industry is gathering more momentum this year with several notable developments being recorded since the beginning of 2020.
In 2019, wealthtech continued to find traction with investors as companies in the field raised a total of US$474.1 million in funding through 29 deals, according to KPMG’s Pulse of Fintech H2’19.
The year saw a shift in funding strategy with many wealthtech investors focusing more on their portfolio companies looking for follow-up investments rather than betting on early stage companies with interesting ideas.
In Q1 2020, the wealthtech market continued to consolidate with numerous acquisition deals taking place, market intelligence company CB Insights notes in its State of Fintech Q1’20 Report. Notable deals that took place in Q1’20 include the acquisition of TD Ameritrade by Charles Schwab for US$26 billion, and Morgan Stanley’s purchase of E-Trade for US$13 billion.
China loosens rules
In China, regulators have been making big moves to open up the market and facilitate fund flows as the government seeks to bolster investing and wealth management.
On April 1, China scrapped the limitations on the ratio of foreign shareholding in securities and fund management firms, allowing foreign companies to set up wholly-owned units in the Chinese mainland and offering Chinese investors with a greater variety of financial products and services.
And just last month, the People’s Bank of China, the Hong Kong Monetary Authority, and the Monetary Authority of Macao announced that they will be implementing a pilot scheme to facilitate cross-boundary wealth management within the Guangdong-Hong Kong-Macao Greater Bay Area (GBA).
The initiative, called the Wealth Management Connect, will allow residents of Hong Kong and Macau to buy wealth management products sold by mainland Chinese banks located throughout the GBA.
Residents of the nine Guangdong provincial cities in the GBA will get access to wealth products sold by financial institutions in Hong Kong and Macau, according to a joint statement released on June 29.
Wealthtech developments in Hong Kong
Since the beginning of the year, the wealthtech industry in Hong Kong has seen several developments with a number of foreign players entering the market.
Consumer financial services platform Social Finance (SoFi) made its first expansion outside of the US with the acquisition of Hong Kong-based investing app 8 Securities in April. 8 Securities will rebrand to SoFi Hong Kong and will retain its social trading features as well as adding new ones.
Founded in 2012, 8 Securities was the first mobile-only investment service and robo-advisor to launch in Asia.
Earlier this year, Allfunds, a European fund distribution platform, was granted the proper licenses by the Hong Kong Securities and Futures Commission (SFC) to launch in Hong Kong. The company said in April that it will be opening a new office in the city which would act as its North Asia hub.
Allfunds, one of the wealthtech companies, provides a service offering that includes big data and analytics, portfolio and reporting tools, as well as research and regulatory services.
Meanwhile, Expersoft Systems, a wealthtech provider originally from Switzerland will be strengthening its presence in Asia this year, with a particular focus on Singapore and Hong Kong, its two main markets, Pascal Lemann, Expersoft Systems’ regional manager for Asia-Pacific (APAC), told finews.asia in February. Expersoft has served clients in Asia for a decade but it is further strengthening its position now
“Singapore and Hong Kong are our main markets in 2020 and 2021, where we see huge potential in the field of independent asset managers, and multi-family offices,”
Lemann told the media outlet.
“In emerging regions such as Vietnam, Thailand, the Philippines, Malaysia, and Indonesia we want to make our presence felt. We don’t want to rush things, but we are following the development and trends very closely. This is also true for Australia.”
Founded in 1993, Expersoft Systems is the developer of the award-winning PM1 solution designed to digitally transform the end-to-end operations of customers with a modular, configurable, multi-custody approach spanning portfolio management, regulations and compliance, order management, client management, consolidated report production, digital banking, and much more.
One important puzzle out of it is the multi-custody aspect. Multi-custody is a core requirement for independent asset managers and multy family offices, so they can consolidate their clients via several banks and assets, incl. non-bankable such as art, oldtimers, real estate etc.
PM1 is used by over 600 clients ranging from family offices and independent asset managers to several tier-1 global banks.
Expersoft Systems was named amongst this year’s Wealthtech100 List, which recognizes the 100 most innovative wealthtech companies in the world.
These foreign players will be competing in Hong Kong’s booming wealthtech market which counts the likes of homegrown Magnum Research, the firm behind the business-to-consumer (B2C) robo-advisory platform Aqumon, and Quantifeed, which provides white-labelled digital wealth management solutions.
Magnum Research has signed several clients including BOC Securities, CMB Wing Lung Bank, Guodo Securities, China Asset Management in Hong Kong, and China Resources Bank in Shenzhen, while Quantifeed serves the likes of Taipei-based Cathay United and DBS Bank in Singapore.
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