The growth outlook for the private wealth management industry in Hong Kong remains strong, with a majority of the firms surveyed in the Hong Kong Private Wealth Management Report 2018 anticipating the industry's Assets under Management (AuM) to double over the next five years.
The rapid growth underlines the greater need to invest in technology and talent to enable ongoing development of the industry to realise its potential, according to the report jointly published by Private Wealth Management Association (PWMA) and KPMG China.
In its third year, the report aims to provide a view of the Hong Kong private wealth management industry landscape as well as its growth outlook and issues/challenges for the next five years.
Fuelled by the significant wealth creation in China, the 2018 report reveals that almost 80% of respondents agree China is the main driver of growth in the private wealth management industry, and that up to 49% of Hong Kong's AuM could come from mainland China by 2023.
Hong Kong is expected to benefit from its unique position as the traditional gateway to mainland China, while over 80% of respondents also highlight the Stock Connect as a key differentiator for Hong Kong.
Besides China, family offices and the next generation of clients are ranked as the second and third most important growth drivers for Hong Kong's PWM industry going forward. Over 40% of respondents cited family offices as an increasingly important source of business, while attracting the next generation is identified as another growth area in the midst of generational shift and digital transformation.
Amy Lo, chairman, executive committee of PWMA, says, "The Hong Kong private wealth management industry continues to expand this year, reaching US$1 trillion in AuM according to recent figures from the Hong Kong Securities and Futures Commission. Taking advantage of this growth, however, requires a strategic approach toward seizing the opportunities as well as tackling the challenges ahead such as regulatory complexities, technological disruption and talent shortage."
Other key findings of the Hong Kong Private Wealth Management Report 2018 include:
· Technology is a key growth enabler
Without doubt, technology is transforming the private wealth management industry via enhanced efficiencies and staying relevant to the next generation of clients.
While more than half (54%) of the survey respondents note that the industry's current digital capabilities are not meeting client needs, the industry plans to invest significantly in technologies and digital solutions in the next two years to address this issue, and to prepare for competition from new entrants.
· Onboarding and regulation are top concerns
On the other hand, the challenges of onboarding and regulation are having a significant impact on industry costs and customer experience. In this year's report, respondents identified sales practices and suitability (100%), Know-Your-Client/Anti-Money Laundering (95%) and tax transparency (61%) as the regulatory areas where they are spending the most resources. According to the survey, the PWM industry is responding to this challenge by investing in processes and technologies to manage these issues.
· Talent gap most critical in RMs and compliance and product specialists
The robust growth of the industry has led to a greater focus on talent recruitment and retention. Two-thirds (66%) of the survey respondents note a "limited talent pool" as the biggest supply-side constraint. While relationship managers (RMs) are considered to be the most critical talent gap (76%), the industry is also looking for compliance (53%) and product specialists (53%) to support RMs to drive growth and mitigate industry risks.
Furthermore, in order to meet the demands of increasingly sophisticated customers including those from family offices and the growing popularity of discretionary asset management, the skillset of RMs will also need to evolve.
Paul McSheaffrey, head of banking and capital markets, Hong Kong, KPMG China, says, "The report shows that respondents expect the industry's AuM to double over the next 5 years. To address this opportunity, wealth managers will need to think ahead to invest in line with key market trends, upgrade their technology platforms, and execute a long-term talent strategy"
Peter Stein, PWMA's Managing Director, says, "In the coming years, the significant industry growth will fuel increasing demand for PWM professionals, leading to a greater focus on talent recruitment and development. On the talent supply side, the Pilot Apprenticeship Programme for Private Wealth Management, co-organised by the Hong Kong Monetary Authority and PWMA, continues to gain momentum and we are now gearing up to recruit the third class of students."
