Wealth Management in Malaysia
Datamonitor, February 2012, Pages: 96
Malaysia's steadily developing and highly diverse wealth management sector is growing in importance as the market matures into a high income country and as it develops one of the world's pre-eminent Islamic finance centers. Few other countries offer Malaysia's mix of Asian and Islamic influences in their private wealth management market, providing an example to the world.
Scope of the report:
- Build your customer targeting strategy using in-depth HNW demographics and needs analysis based on Datamonitor's annual Global Wealth Manager Survey.
- Assess your competition through detailed profiles of notable players, including the customer targeting, marketing and product strategies they employ.
- Size your potential client base using Datamonitor's proprietary data, presenting the number of affluent individuals by liquid asset band to 2015.
Highlights:
- The consistently strong performance by the HNW segment in the Malaysian wealth market suggests that private bankers will be able to rely upon a steady stream of new clients for growth rather than having to win new clients from established rivals.
- As one of Asia Pacific's smaller yet open economies, Malaysia has closely tracked the regional average in terms of growth. In 2009, the country experienced a sharper contraction during the recession that resulted from the global financial crisis of 2008, much like Singapore did but suffered no contraction in the number of wealthy.
- Malaysian HNW individuals have devoted considerable sums to fixed income products, with 15.5% of aggregate financial wealth held in these products. Most of these fixed income products are likely to have been held through bond funds however as individual investors have not typically held bonds directly, despite its well developed bond markets.
Key questions answered:
- What strategies are my competition employing to win and keep affluent clients?
- How big is my target client base and how is it set to grow through to 2015?
- What are the most effective acquisition techniques that I should use to build up my client base?
- What products and services will have the strongest client demand going forward?
OVERVIEW
Catalyst
Summary
Methodology
EXECUTIVE SUMMARY
The growing affluent population accounts for only a tiny fraction of Malaysia's total adult population
High net worth Malaysians will total almost 27,000 individuals by 2015
Growth in HNW assets is forecast to remain largely consistent with pass trends at 7.1% on average
Real GDP growth in Malaysia has been running close to the regional average
The Malaysian wealthy individual is one of the more difficult to service in the region
Moderate knowledge and a conservative attitude make for a difficult client profile
In broad asset class terms, Malaysian HNW individuals have the largest proportion of their portfolio in equities
Malaysian wealth managers must be able to deal with high degrees of financial illiteracy
The Malaysian wealth management market is predominantly in the hands of commercial banks
The Malaysian financial services market operates a dual system: conventional and Islamic
Trends in Malaysian wealth favor a more prominent role for Sharia-compliant asset management
CIMB aims to expand AUM by 43% over a three year period
SIZING AND FORECASTING THE AFFLUENT MARKET IN MALAYSIA
Key macroeconomic data
Recent macroeconomic trends and performance
As measured by GDP, Malaysia is only a small country, ranking behind even the city state of Singapore
Malaysian inflation is below the regional average and forecast to remain moderate for the next four years
Long-term and short-term interest rates are trending higher, which should begin to impact on credit conditions
Stock market capitalization in Malaysia is small but growing in prominence in the region
Wealth in Malaysia is very unevenly distributed compared to the regional average
Regulation of wealth management in Malaysia
Industry regulators
Industry associations
Recent legislative developments
Sizing and forecasting the onshore affluent Malaysian population
The growing affluent population accounts for only a tiny fraction of Malaysia's total adult population
Malaysian affluent assets will total in excess of $200bn in 2015
The offshore market of Labuan is small but growing
The offshore Labuan market has been developing steadily, although it faces stiff competition from Singapore and Hong Kong
Labuan mainly provides HNW individuals with the opportunity to invest in Malaysian fixed income products
HNW CUSTOMERS IN MALAYSIA
Who is the Malaysian HNW investor?
Most HNW individuals are between 31 and 50 years old
Women account for only a minority of the market, making it easy to overlook
The majority of HNW individuals have amassed their fortunes through entrepreneurship
Malaysian HNW individuals are heavily exposed to equities
In broad asset class terms, Malaysian HNW individuals have the largest proportion of their portfolios in equities
Detailed asset class analysis shows Malaysian HNW individuals have the most invested in equities
HNW portfolios are expected to be stable over the next two years as internal drivers continue to influence growth-oriented assets
The Malaysian HNW individual has little in the way of sophisticated wealth services available
Current provision of wealth services is low, with a focus on planning rather than management
Credit cards and cash management are the few services that attract significant levels of demand
Looking forward two years, strong demand for mortgages is anticipated
Malaysian HNW individuals are not financially sophisticated but are open to switching
Malaysian wealth managers must be able to deal with high degrees of financial illiteracy
A high premium is placed on face-to-face contact
Malaysian investors are open to new wealth managers, making retention an ever-present issue for the market
Malaysian HNW individuals tend to work with three to five wealth managers
The majority of Malaysian HNW individuals hold one-fifth to one-third of their portfolio with a single wealth manager
Customer referrals followed by referrals from a retail bank are the most effective means of customer acquisition
COMPETITOR DEVELOPMENTS IN MALAYSIAN WEALTH MANAGEMENT
Introduction
Business models of Malaysian wealth managers
The Malaysian wealth management market is predominantly in the hands of commercial banks
However, there are some notable independent wealth managers
Competitor trends
Significant competitor entrants and mergers and acquisitions have been more muted than other markets
Trends in Malaysian wealth favor a more prominent role for Sharia-compliant asset management
Directly held fixed income products are likely to grow in importance
Key competitors in Malaysian wealth management
AmBank
CIMB
HSBC
Maybank
APPENDIX
SUPPLEMENTARY DATA
Definitions
High net worth (HNW)
Liquid assets
Mass affluent
Measures of growth
Onshore
Sharia-compliant investments
Sukuk
Takaful
Methodology
Overall methodology
Global Wealth Model methodology
Global Wealth Managers Survey 2011
Selected bibliography
Articles
Further reading
Ask the analyst
Disclaimer
TABLES
Table: Malaysia – macroeconomic indicators
Table: Number of affluent individuals in Malaysia, 2006-15f
Table: Number of mass affluent Malaysian individuals by asset band (000s), 2006–10
Table: Number of mass affluent Malaysian individuals by asset band (000s), 2011–15
Table: Number of HNW Malaysian individuals by asset band (000s), 2006–10
Table: Number of HNW Malaysian individuals by asset band (000s), 2011–15
Table: Mass affluent Malaysian assets ($bn), 2006–10
Table: Mass affluent Malaysian assets ($bn), 2011–15
Table: HNW Malaysian assets ($bn), 2006–10
Table: HNW Malaysian assets ($bn), 2011–15
Table: Domestic banking groups by license and wealth management activity, 2012
Table: Foreign banking groups by license and wealth management activity, 2012
Table: Capital Markets Services License holders for Financial Planning
Table: AmBank figures (MYRm), 2010–11
Table: CIMB wealth management (MYRm), 2010–11
Table: Maybank AUM and fee income (bn), 2010–11
Table: Labuan deposits split by residency and mutual fund statistics, 2008–Q3 2011
FIGURES
Figure: Malaysian HNW individuals favor equities over any other asset class
Figure: Malaysia's economy is dwarfed by its neighbors
Figure: Malaysian GDP growth is expected to keep the country expanding at approximately the regional average
Figure: Malaysia has managed to achieve a below average inflation rate for the Asia Pacific region
Figure: Interest rates in Malaysia are forecast to rise, increasing the attraction of Ringgit deposits and bonds
Figure: The more stable Malaysian equities market has seen the country's share of regional capitalization climb since 2007
Figure: Malaysia has an above average concentration of the nation's wealth in the hands of the rich
Figure: The affluent population is growing, but remains a tiny fraction of the total adult population
Figure: Mass affluent numbers have grown through two major global disruptions
Figure: 2011 was the first year that Malaysia could boast more than 20,000 HNW individuals
Figure: Affluent assets have risen steadily during both boom periods and the global recession
Figure: Malaysian mass affluent assets are concentrated in the $150–300,000 range
Figure: The Malaysian HNW and ultra-high net worth segments hold the single largest pool of assets
Figure: Offshore deposits are up in Labuan, but mutual fund values are down
Figure: The LFX has attracted a steadily growing pool of Islamic debt while conventional bonds have stagnated
Figure: Malaysia has a much greater concentration of wealth by age than is typical of the Asia Pacific region
Figure: The Executive Takaful Retirement Plan allows for Sharia-compliant retirement planning
Figure: The Malaysian HNW market conforms to the overall regional average
Figure: CIMB Wealth Advisors offers women additional cover from AIA that addresses female=only protection concerns
Figure: HNW individuals in Malaysia are most likely to have generated their wealth from their own businesses
Figure: Malaysian HNW individuals favor equities over any other asset class
Figure: When viewed in more detail, Malaysian HNW individuals' reliance on equities is even more pronounced
Figure: There is expected to be a minor redistribution of cash into riskier assets
Figure: Outside of basic transactional banking products, wealth managers in Malaysia have a patchy lineup of services
Figure: Few wealth managers are looking to invest in their asset management services
Figure: Asset management services in Malaysia are characterized by low client demand
Figure: Of any credit products, only credit cards and the status they can bring see strong demand
Figure: Strong demand is largely absent from the Malaysian market, although Sharia-compliant services have a higher level of demand locally
Figure: Cash management will be an enduring demand for the HNW client base
Figure: Demand for mortgages should outpace that for credit cards
Figure: Demand for Sharia-compliant services will prove to be stable over the next two years
Figure: HNW individuals in Malaysia are generally not sophisticated investors, and often shy away from risk
Figure: Private banking in Malaysia is built on personal relationships
Figure: Telephone interaction is the norm in the Malaysian private wealth management market
Figure: Neither brand nor a relationship with a wealth manager make Malaysian HNW individuals loyal clients
Figure: Malaysian HNW individuals are likely to have between three and five wealth partners
Figure: Wealth managers are best to leverage their own customer base for new wealth clients
Figure: Press advertising to support an acquisition drive is not an effective use of time or money
Figure: Conventional banks dominate the retail market for deposits
Figure: The private bank is situated within the investment bank, although other divisions assist with wealth management activities
Figure: AmBank-ANZ Get Set makes it easy to open up an Australian student account with ANZ
Figure: The AmBank World MasterCard has been heavily advertised in the major Malaysian papers
Figure: CIMB is organized both along geographic as well as functional lines
Figure: Most conventional wealth management services at CIMB have an Islamic equivalent
Figure: CIMB Preferred gives customers a taste of the private bank
Figure: CIMB has consciously tried to regionalize its offering, and its advertising backs this up
Figure: HSBC begins developing a relationship-based banking arrangement at even fairly modest wealth levels
Figure: HSBC offers clients exclusive third party products in addition to its own
Figure: The private wealth management division is a small part of the overall community financial services division
Figure: Maybank has moved to a customer-centric business model that divides its clients into five groups
Figure: Global Wealth Managers Survey 2011 geographic coverage
- Al Rajhi Bank
- Andhra Bank
- Bank of Baroda
- Bank of Nova Scotia
- CIMB Group Holdings Berhad
- HSBC Holdings plc
- Hutchison 3G UK Limited
- Indian Overseas Bank
- Jerneh Asia Berhad
- Kuwait Finance House
- Metro AG
- Schindler Holding Ltd.
- Sudzucker AG
- Sumitomo Mitsui Banking Corporation
- Unilever UK Foods Ltd.
- United Overseas Bank
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