As the affluent segments of Asia continue to expand, an increasing demand for more sophisticated wealth management has taken centre stage. The wealth pool of this rapidly growing market is expected to reach an astounding $4.7 trillion by 2026. 

These customers seek tailored advisory services, often favouring remote and digital channels. To capture this opportunity, banks and wealth managers can use digital products and services that are more personalised and tailored to the needs of specific customer segments and have a lower cost to serve than traditional client interactions.

With about 80 percent of Asia’s affluent market expressing a willingness to receive advisory services remotely through digital channels, the future of wealth management is evidently digital.

Even more encouraging, a high percentage of investors, 87 percent in developed markets within Asia and 64 percent in developing markets show readiness to pay advisory fees.

To delve deeper into this topic, Fintech News Hong Kong spoke to Eddy Kwong, Director, Digital Business Lead, Asia Pacific at AllianzGI, to discuss current trends and future predictions in digital wealth management in Asia.

Are digital banks the answer to traditional gaps?

One of the most significant trends reshaping the financial landscape of Asia is the rise of digital banks. Unlike traditional banks with a brick-and-mortar presence, digital banks operate online, providing efficient, convenient, and tailored services to the digital age.

As the financial landscape evolves, digital banks rise as the torchbearers of change, primarily catering to the traditionally underserved or underbanked sectors. Traditional banks and digital banks are not necessarily targeting the same customer segments. 

“In Hong Kong, for instance, digital banks have gained good traction among small and medium-sized enterprises and the mass/mass-affluent segments,” said Eddy.

“Their unique composition sets digital banks apart, often founded by consortia spanning diverse industries such as banking groups, telecoms, and consumer tech platforms,” he added.

This setup fosters a sense of partnership and ecosystem play, enabling digital banks to offer differentiated products and services through collaborations with domain experts. Consequently, digital banks are more open to partnership opportunities, creating customised and cost-efficient solutions.

Traditional banks and digital wealth management

While digital banks pave the way, traditional banks are not far behind in the digital wealth management race. These banks are actively adapting to the rise of digital wealth management platforms and changing customer expectations. 

Most traditional banks have embarked on their digital wealth journey to meet evolving customer behaviour and demands.

However, traditional banks face significant challenges in this evolving landscape. Unlike pure-play digital wealth platforms, traditional banks have extensive channels and customer touchpoints to consider.

Adapting their existing platforms to incorporate digital wealth management capabilities requires significant effort and complexity. Traditional banks often have to navigate legacy systems and processes, hindering their digital transformation initiatives.

This is where digital wealth platforms gain an advantage. Their product offerings are often simpler, and they don’t have the burden of outdated technology infrastructure. With their nimble and technology-driven approach, digital wealth platforms can swiftly adapt to the changing landscape and meet customers’ evolving needs.

Nonetheless, Eddy emphasised that traditional banks are not standing still in the face of this digital wave. They are increasingly exploring partnerships with digital platforms to deliver digital wealth solutions. 

A collaborative approach to wealth management

Future trends in digital wealth management indicate a shift towards collaborative approaches among traditional banks and digital wealth solution providers. 

In the past, traditional banks believed they had the capabilities to develop digital wealth solutions for their customers, whether in-house or outsourced. However, investment and wealth advisory is becoming increasingly complex, especially in the face of rising market volatility.

Eddy stated, “One of the trends we are already seeing is that even traditional banks are now more open to partnership opportunities when it comes to offering digital wealth solutions.”

“Questions around providing more strategic asset allocations, portfolio construction models, and risk management based on individual customer risk tolerance are no longer taken lightly. Neither building nor buying alone can serve these needs in the medium to long term, which is why a new partnership model is emerging,” said Eddy.

Hence, a new collaborative model is on the rise, with banks looking to asset managers like Allianz Global Investors to co-create customised solutions for their customers.

Technological advancements are also expected to play a critical role in shaping the future of wealth management. For instance, Open Application Programming Interfaces (APIs) have gained significant traction. 

Eddy noted, “Open API is what the future is all about. APIs enable banks and asset managers to externalise their advisory services, making them more accessible and efficient.”

Leveraging technology

Digital wealth management platforms leverage technological advancements to enhance investment strategies and portfolio management. Cloud and API technologies, in particular, are being used to ensure scalable solutions. 

These technologies facilitate seamless and rapid expansion across multiple markets, offering robust platforms for wealth management services.

“Many digital wealth management platforms leverage cloud and API technology to ensure scalability because their ambition often extends beyond a single market. Those successfully implementing scalable solutions are already reaping the benefits in multiple markets,” said Eddy.

Another buzzword in the industry is artificial intelligence (AI). Many digital wealth management platforms are exploring the potential of AI to enhance investment strategies. 

However, Eddy cautioned against over-reliance on AI, emphasising the crucial role of human judgment and experience in investment decisions.

“Effective utilisation of AI requires substantial amounts of data and training, often requiring significant resources. Additionally, investment decisions should not be solely data-driven. Human experience and individual circumstances are crucial in making informed investment choices. We strongly believe in combining human intelligence with AI to make investment decisions,” said Eddy.

AI serves as a tool for analysing large volumes of data and text, which was not possible before, providing valuable inputs for decision-making.  However, the final investment decisions are made by experts considering both data-driven insights and their experience in the field.

The AllianzGI-WeLab Bank partnership

An example of collaboration in digital wealth management is the partnership between Allianz Global Investors and WeLab Bank in Hong Kong. 

Together, they launched the GoWealth Digital Wealth Advisory platform, offering retail investors a goal-based wealth advisory solution. 

This successful collaboration demonstrates the potential for partnership between asset managers and digital banks in delivering innovative wealth management solutions.

“Given AllianzGI’s capabilities on bringing investment and technology together, we have garnered interests for partnership in Southeast Asia,” said Eddy.

This highlights the growing demand for digital wealth management solutions and the willingness of institutions to embrace collaboration to meet their customers’ evolving needs.

As the Asian financial ecosystem continues to grow and evolve, these trends and developments in digital wealth management will play an increasingly critical role in shaping the region’s future. 

The collaboration between traditional banks, digital banks, and asset managers will drive innovation, personalisation, and accessibility in wealth management, ultimately benefiting the mass-affluent and affluent customers in the region.