Singapore financial advisory market booming
30 October 2013
Category: News, Asia, Global, Singapore
By Asia Asset Management
Singapore’s financial advisory market appears to be in an incredibly strong state with 82% of advisers citing growth over the last few years compared to 60.7% in other countries surveyed for the 2013 Natixis Global Asset Management Advisor Survey, released on October 29. As a reflection of this trend, Singapore advisers say that they spend an enormous 42.5 hours a month on average seeking out new clients compared to an average of 15.9 hours by advisers in other countries.
According to the survey, the top three factors in investment decision-making for Singapore financial advisers are volatility, risk and income. When asked what they consider to be their primary strengths, more advisers in Singapore than in other countries cited: understanding client risk appetite, explaining investment concepts to clients, observing and understanding general investment market conditions and retirement planning.
Eighty-seven percent of Singapore advisers said they are confident that their clients’ portfolios can withstand a market correction, although less, 74.7%, are confident that their clients’ portfolios can tolerate a rise in interest rates.
Despite this positive sentiment, investment challenges and concerns still linger. According to the survey, only 26% of Singapore advisers are ‘very confident’ their clients’ current investments can take advantage of a bull market recovery (versus 36.2% for other countries), and they said they would find it difficult to balance client asset growth objectives against protection of principal (56% versus 33.7% for other countries), with 54% saying that they would struggle to protect client portfolios from dramatic swings in value (versus 47.4% for other countries).
Singapore advisers were polarised about their ability to offer clients uncorrelated returns to broader global markets with 37.3% claiming this would not be difficult to achieve and 50% claiming it would be.
Respondents in Singapore said that it was difficult to construct portfolios that can reduce risk and enhance returns simultaneously, and 69% said there is need for more education in this space.
“Recent market buoyancy and increasing demand for professional advice are not a guarantee of future success,” says Madeline Ho, head of wholesale fund distribution for Asia Pacific, Natixis Global Asset Management. “Financial advisers continue to face numerous challenges and it is imperative that the asset management industry provide relevant solutions to meet these challenges.”
“This research underscores our philosophy of building more durable portfolios that can stand up to the challenges of today’s modern markets,” says Ms. Ho. “Advisers are focused on risk, volatility and income. We make risk the primary consideration for asset allocation in order to help minimise the impact of extreme market movements. We focus on improved diversification through smarter use of traditional asset classes and exposure to uncorrelated investments and techniques to help investors reach their goals in up and down markets.”
Singapore advisors are ahead of the global move away from traditional portfolio construction techniques. Fifty-six percent of Singapore financial advisers question the traditional 60/40 asset allocation split between equities and fixed incomes, compared to 39.6% for other countries, and are divided on the view that longer holding periods decrease the likelihood of a negative annualised return.
“But the role of traditional assets in investors’ portfolios is still relevant,” says Ms. Ho. “The key is to pursue smarter strategies when navigating today’s complex and volatile markets. Focus on smart beta, and improve risk-adjusted equity returns through a disciplined and repeatable investment process. For fixed income, focus on strategies that can weather rises in interest rates and inflation, and use a multi-sector income approach and sub-category funds for better potential returns from various sources.”
Alternative investments are becoming popular in Singapore. Seventy-three percent of financial advisers say they discuss alternative investments with their clients and 58% of their clients have a good understanding of alternative investment strategies, a much greater proportion compared with 34% for other countries. Despite the level of client understanding, 50% of financial advisers consider that a lack of supporting information and products often being too complex are key obstacles for them to either communicate or understand alternative investment strategies better.
Fifty-five percent of Singapore financial advisers said it would not be difficult to accommodate draw-downs for clients in retirement while keeping portfolios growing to transfer wealth compared to 36.7% for other countries. The confidence is due in part to advisers citing retirement planning as their main strength.
However, the toughest challenge Singapore financial advisers are confronted with in the retirement space is the ability to offer clients sufficient income with 50% describing it as difficult compared to 46% by their international peers.