Deutsche Bank believes entry to mainland China is the key to an emerging markets wealth management strategy.
The German bank has today published its fourth annual wealth management report, entitled “Out of the pit stop – into the fast lane”, alongside management consulting firm, Oliver Wyman.
The report states that wealth managers must rethink their positioning in Latin America and Asia-Pacific, with a particular emphasis on assessing the potential opportunities in mainland China given structural changes.
“Wealth Managers must place decentralized bets on select South East Asia onshore markets to react to regulatory reforms while considering various market entry models to optimise cost of entry,” a statement from Oliver Wyman and Deutsche Bank has said.
Deutsche Bank predictions for emerging markets growth
China has been suffering from a slowdown in recent months, not helped by the escalating trade war with the US, but many experts remain particularly bullish on the country’s long-term outlook.
“The key differentiator for wealth managers will come from leveraging the APAC growth engine,” says Kinner Lakhani, head of European equity research at Deutsche Bank.
“Within this growth story we expect emerging markets net new money growth of 8% per year, more than twice that of developed markets.
“Put differently, while emerging markets represent one-third of wealth stock today, we expect them to contribute to more than half of future growth.”
Kai Upadek, Oliver Wyman’s head of wealth management, adds: “To realize above average growth, serving developed markets will not be sufficient.
“Emerging markets are the engine for growth going forward as the industry continues to face fee margin and cost pressures in developed markets.”
Adjust operating models, says Deutsche Bank
The downturn in 2018’s Q4 made for a start to 2019 clouded by uncertainty with fears of a recession looming in the short-term.
While the market’s rebound in Q1 has allayed these fears, Deutsche Bank believes this should be treated as a “last chance” to adjust operating models, reducing costs and streamlining processes for when the next major downturn does arrive.
Wealth managers should free up adviser capacity by automating and digitising processes, particularly in client onboarding and KYC/AML compliance, the report states.