Episode 123: Trends in asian investing

Garett [00:00:00] How is technology helping Asia stay ahead? In this week's episode of The Big Conversation; I sit down with Sabrina Bailey, London Stock Exchange's global head of wealth, and discuss the secular trends that are driving rapid change in a wealth management industry.

Sabrina [00:00:20] What's been really interesting about the number of meetings I've had is the secular transglobally remain the same. Whether you're in APAC or any other regions, when we think about those trends, the big three are digitisation, hyper personalisation, and self-directed investors.

Sabrina [00:00:36] The big difference between APAC and some of the rest of the world is really the stage at which the wealth industry is at. I'd say it's less mature than other areas. Most of the wealth in the country's first-generation wealth, versus second and third in places like the United States and Europe.

Sabrina [00:00:53] The other critical difference is the need for local data. So when we think about investors, many investors globally have a home bias. There's a lot of information that we need in terms of APAC investors so they can fully make their investment decisions. Some similarities too, though. APAC investors are just as likely to want to interact with mobile. So 89% of investors globally, the same percentage in APAC. Use mobile app first.

Sabrina [00:01:20] What's really interesting, however, is 50% of millennials in both APAC as well as the world, say they still prefer face to face meeting at critical times, which is not something we typically hear about. We make an assumption millennials don't want to meet in person. But that, in fact, is not the case in APAC or anywhere else in the world.

Garett [00:01:38] Yes, that's fascinating. You touched on the sort of intergenerational transfer of wealth. I mean, 85%, I believe, of billionaires in Asia are still founders of their companies, so you are going to see this massive shift of wealth. And the different needs, I would say, from the previous times versus now where how do you see that?

Sabrina [00:01:55] If we look at first generation wealth, the individuals running the portfolios are very familiar with the investments they're making. They're very active in the investment portfolio. When you start to move down to the second and third generations, there are often times when those investors are actually disconnected more with the family wealth.

Sabrina [00:02:13] So we're finding that, actually, second and third generation and APAC and elsewhere will look to make their own investments via technology. It may or may not align with what the family legacy is meant to be. And so how we tie that together as an industry is going to be extremely critical, in particular here in APAC where that handoff to the next generation is coming soon.

Garett [00:02:37] And we talk about a next generation and ESG always comes up. So how do we balance ESG needs and performance and preservation of wealth?

Sabrina [00:02:45] This is really interesting. 78% of investors in Asia have said they're looking at investing in ESG over the next two years. 50% of those noted that it was due to better performance.

Sabrina [00:02:59] What the next generation of investors is looking at is, how do you balance the environmental, social and governance? And in APAC, almost 50% of investors said they equally weight all of those. But they don't want a negative performance impact. So what we're going to see in the industry is, one; better data around ESG coming from public companies.

Sabrina [00:03:19] But two; especially with investors under the age of let's call it 54 in our survey, they're looking for, directionally, will my portfolio have more or less of a positive impact on environmental, social and governance issues?

Sabrina [00:03:34] What we also find, however, is that there will be a rise of what I'll call direct investing with positive societal impacts, for example, or climate impacts. The younger generation want to see where their money is being put to work.

Garett [00:03:49] So these new wealth management industry players need to think very, very differently from before. So perhaps we can sort of, you know, talk a little bit about alternative assets. You know, it's very, very topical. Tokenise assets is key. How do we blend that into the overall portfolio of wealth management companies?

Sabrina [00:04:07] It's clarity of the information and security of the information. So stage one and wealth management industry, what we see is stage one, is really securing strong data that is high quality. That then allows the wealth managers to bring that into their customer portfolios. That being said, we're still seeing ultra-high-net-worth individuals across the globe, and our caveat where it's legal, investing directly in cryptocurrencies.

Sabrina [00:04:35] The other area we're seeing a rise is in tokenised assets; so areas like fine art. As an ultra high net worth individual, can you buy a percentage of a fine art piece by Monet? And then you have that displayed at one of your galleries once a year. Those are areas where we're going to see the innovation.

Garett [00:04:53] That's fantastic. I mean, this is a huge industry is $450 trillion worth of assets we're talking about here. Exciting to have here, Sabrina. As always, thank you very much for your insights, and hope to see you soon back in Asia.