Understanding Asia’s emerging wealth landscape

Understanding Asia’s emerging wealth landscape

Asia’s rising affluence has created a deep pool of investment potential and vastly expanded the opportunities for those financial institutions on the frontier of managing the region’s wealth flows. Total financial assets in Asia are expected to grow from USD46.8 trillion in 2020 to USD68 trillion by 2025,¹ accompanied by increasing demands for regional strategies and wealth products aligned with the trends around digitalisation and sustainability. Success will be achieved by those institutions that manage to adapt and meet the unique demands of this rising tide of wealth.

New wealth, new opportunities

The rise of the Asian middle class and a generational transfer of wealth are combining to shift the demographic of the affluent. Grasping the opportunities presented by this segment, financial institutions need to understand the sources of new wealth, shifts in the channels used to deliver wealth management solutions and the types of services in demand.

Business owners are among the most important drivers of new wealth in Asia, while demographic shifts across the region are also contributing to this trend. For example, Southeast Asia is expected to see its mass affluent demographic reach 136 million by 2030², while China’s mass affluent households are forecasted to rise from 26 million in 2018 to 162 million by 2030.³

In addition, Asia is seeing a major transfer of wealth. As the younger generation inherits family money, many of these new business owners and affluent households now include millennials and Gen Z individuals who are technologically savvy. This is driving the ongoing shift in preference towards digital channels for the delivery of wealth solutions and services.

Although the opportunities in Asia wealth are significant – given fast-growing wealth pools, dynamic intra-regional trade and a transformative USD1.9 trillion intergenerational transfer of funds⁴ - wealth managers still need to position themselves effectively to capture them. Having access to solutions that both align with their clients’ values and deliver them digitally will be key to sustained success.

Dynamic solutions

The fast-paced change in Asia’s wealth base has meant investment in the innovation needed to service these clients. Financial institutions who want to seize these opportunities are focusing on developing new, local products tailored for the Asia context. A good practice is emerging from those gathering knowledge about the evolving regulatory environment across the region and seeking out partnerships that will provide greater access to market opportunities.

HSBC has responded to these changes by seeking to connect wealth managers with the right institutional wealth products for their clients. The bank’s global connectivity and international footprint is enabling two-way opportunities, bringing Asia to the world as well as opening up regional wealth opportunities to those from abroad. This can be seen in HSBC’s International Wealth Hub in Singapore, which caters to the wealth needs of international investors and professional expats.

The growing demands around ESG and sustainable investments is also an area around which firms need to move quickly and establish their strategic position. HSBC has seen a boost in interest from younger private banking clients in investments that go beyond financial returns and deliver benefits to society and the environment.⁵

Key to capturing this interest is greater transparency on the part of financial institutions and ensuring that the impact of investments is clear to see. To this end, HSBC offers a range of funds designed to help clients find investments that are aligned with their social and environmental values.

A new paradigm in wealth servicing

At HSBC, we view the growth of Asia’s wealth landscape as a tipping point of change in the way that financial institutions service clients. There are several key areas in which financial institutions need to make adjustments to their strategies.

First, the expansion of digital channels for wealth services. The reduced cost of client retention made possible by digitalisation, paired with the evolving demographics of business owners and investors, is driving this shift. Banks are increasing their investments in digital capabilities, launching online platforms and partnering with fintech providers in response.⁶

HSBC, for example, is focused on digital wealth solutions that are both mobile-first and real-time, as well as provide a global view for clients to make decisions. These features are important for aligning with the emerging trends around Web3 and digital assets, which are promising to expand what is possible in the Asia wealth space.

Lastly, creating tailored solutions for clients in Asia is a priority. Wealth servicing is a holistic exercise that must consider the local context, regulations and regional networks. Financial institutions providing wealth management services in regional blocs such as Southeast Asia, or the cities of the Greater Bay Area (GBA), increasingly require solutions that are customised for clients with local needs.

Vast potential in Asia wealth

The Asia wealth market is rapidly developing and opening up new opportunities for wealth management providers to service their clients. Digital delivery, ESG investing and cross-boundary products are areas that are seeing heightened interest from regional wealth customers. Financial institutions must remain innovative and create offerings capable of meeting the unique needs of Asia’s evolving wealth demographics.

If you are interested to learn more about how HSBC can help you capture the opportunities flowing from Asia’s rising wealth, please speak to your HSBC Relationship Manager.