Last updated: 09:05 / Wednesday, 29 June 2016
Cerulli Associates

Robo-advisors Are To Disrupt the Asset Management Industry in Asia

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Robo-advisors Are To Disrupt the Asset Management Industry in Asia
  • Asian asset managers are increasingly entering into strategic partnerships with other managers in the region
  • They look for various business strategies which could potentially enhance their revenue streams as cost pressures rise and competition stiffens
  • Many managers have come to the conclusion that digital channels are set to play a big part in the next stage of distribution

Asian asset managers are increasingly entering into strategic partnerships with other managers in the region as they look for various business strategies which could potentially enhance their revenue streams as cost pressures rise and competition stiffens.

This is one of the key findings of Cerulli Associates' newly-released report, Asian Distribution Dynamics 2016: Responding to an Evolving Landscape.

Excluding Hong Kong and Singapore, most Asian markets are still inaccessible to foreign managers, with some markets, such as Taiwan and Korea, showing an increase in home bias. "An absence of distribution partners and lack of brand recognition are problems new entrants have to contend with and partnering with a local partner is seen as the best way to raise assets without a large initial investment," says Shu Mei Chua, an associate director at Cerulli, who led the report.

She notes that strategic pacts are largely aimed at three key areas: asset growth potential, product development, and distribution dynamics.

E Fund Management entered into a partnership with Danske Capital to "jointly design and promote" investments. Korea's Samsung Asset Management and its sister company, Samsung Securities, together have four pacts with other Asian or global managers and serve as the prime example to either co-develop products or to bring recognizable global managers to Korean shores.

"While most partnerships entered into so far are targeting joint product developments, we expect strategic partnerships to get more creative in light of a tighter regulatory environment and the rise of financial technology," Chua adds.

Many asset managers are looking to alternative methods of distribution in the region dominated by brokerages and banks. Many have come to the conclusion that digital channels are set to play a big part in the next stage of distribution.

In fact, digital marketing has already made its headway in key markets in the region. Managers in China and India had the largest budget allocations to digital marketing among Asian markets and are using various digital tools to reach end investors.

"For instance, the use of messaging app WeChat to promote funds and provide investor education is considered indispensable for managers looking to gain customers in China," notes Ivan Han, a senior analyst with Cerulli.

He adds that robo-advisors are possibly on the cusp of disrupting the asset management industry in Asia in a positive way by forcing the industry to consider how to offer inexpensive, scalable advice to the majority of investors who are often ignored because they have smaller accounts.

"Robo-advisory is more of a distribution story in that it allows managers to tap capital from investors who had been reluctant to invest in mutual funds due to a lack of advice," Han says.

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