Wealth Management Market Overview in Malaysia

• Publication date: February 2012

Malaysia's steadily developing and highly diverse wealth management segment is growing in importance as the industry matures into a high income country and as it develops one of the world's preeminent Islamic finance centers. Few other countries offer Malaysia's mix of Asian and Islamic influences in their private wealth management industry, providing an example to the world....

Malaysia's steadily developing and highly diverse wealth management segment is growing in importance as the industry matures into a high income country and as it develops one of the world's preeminent Islamic finance centers. Few other countries offer Malaysia's mix of Asian and Islamic influences in their private wealth management industry, providing an example to the world.Build your customer targeting strategy using in-depth HNW demographics and needs analysis based on annual Global Wealth Manager Survey.Assess your competition through detailed profiles of notable players, including the customer targeting, industry ing and product strategies they employ.Size your potential client base using proprietary data, presenting the number of affluent individuals by liquid asset band to 2015.The consistently strong performance by the HNW sector in the Malaysian wealth industry 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 industries.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 take over techniques that I should use to build up my client base?What products and services will have the strongest client demand going forward?

Private Banking Industry in Malaysia

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 projection to remain largely consistent with pass trends at 7.1% on average
?Real Gross Domestic Product 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 industry is predominantly in the hands of commercial banks
?The Malaysian financial services industry operates a dual system: conventional and Islamic
?Trends in Malaysian wealth favor a more prominent role for Sharia-compliant asset management
?CIMB aims to grow 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 Gross Domestic Product, Malaysia is only a small country, ranking behind even the city state of Singapore
?Malaysian inflation is below the regional average and projection 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 industry 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 projecting 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 USD 200bn in 2015
•The offshore industry of Labuan is small but growing
?The offshore Labuan industry 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 industry, 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 industry
•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 distribution bank are the most effective means of customer take over
COMPETITOR DEVELOPMENTS IN MALAYSIAN WEALTH MANAGEMENT
•Introduction
•Business models of Malaysian wealth managers
?The Malaysian wealth management industry is predominantly in the hands of commercial banks
?However, there are some notable independent wealth managers
•Competitor trends
?Significant competitor entrants and mergers and take over s have been more muted than other industry s
?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
APPENDIXSUPPLEMENTARY 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 Industries 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 Gross Domestic Product growth is expected to keep the country grow ing 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 projection to rise, increasing the attraction of Ringgit deposits and bonds
•Figure: The more stable Malaysian equities industry 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 USD 150–300,000 range
•Figure: The Malaysian HNW and ultra-high net worth sectors 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 industry 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 industry, 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 industry
•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 take over drive is not an effective use of time or money
•Figure: Conventional banks dominate the distribution industry 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

Companies mentionned
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