Banks and mutual fund market: partners in growth

April 01, 2024 | 09:37
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In recent years, a strong transformation has been witnessed with commercial banks in developing wealth management and investment advisory services. Le Hoai An, a banking consultant and trainer at Integrated Financial Solutions, talked to VIR’s Nhue Man about the mutual fund market in Vietnam.

How do you view the development prospects of the mutual fund market in the coming time?

Banks and mutual fund market: partners in growth
Le Hoai An, a banking consultant and trainer at Integrated Financial Solutions

The mutual fund market in Vietnam is poised for significant growth, especially as investors increasingly understand the value of long-term investments and diversifying their investment portfolios. Statistics show that Vietnam currently has about 105 mutual funds, more than double compared to 2020. With the rapid growth of investment funds and market expansion, we are witnessing positive changes.

However, to achieve a breakthrough and seize market upgrade opportunities, there needs to be stronger participation from major market makers and government support measures such as improving financial infrastructure and enhancing public financial education. A developed mutual fund market will benefit investors and contribute to the economy’s stability and sustainable development.

Only about 0.25 per cent of the Vietnamese population holds mutual fund accounts. What is the most crucial factor that could create a breakthrough in the market’s development?

The most critical factor for a real breakthrough in Vietnam’s mutual fund market is enhancing the public’s investment knowledge and awareness, where the role of commercial banks come into play. There must be cooperation between banks, financial institutions, and the government to deploy robust financial education programmes, helping the public understand the benefits and risks of investing in mutual funds. Moreover, developing financial infrastructure and IT will facilitate access and efficient investment management, encouraging broad participation in the mutual fund market.

Can you elaborate more on the role of commercial banks in developing the mutual fund market?

Commercial banks play a pivotal role in the development of the mutual fund market in Vietnam. With their extensive customer networks and brand trust, banks can act as a bridge between investors and the mutual fund market.

Banks introduce mutual fund products to customers and provide advisory services, helping them understand these products and make informed decisions. To do this, banks need to invest heavily in staff training and IT system development, enhancing advisory capabilities and portfolio management for clients.

Additionally, banks must also establish a process for evaluating and selecting high-quality mutual fund products, ensuring safety and meeting diverse customer needs. A deep understanding of individual financial profiles allows bank staff to propose suitable investment solutions, thereby increasing trust and customer satisfaction.

The lack of skills and in-depth knowledge about the stock market and other investment products is a significant barrier. Customers com ing to commercial banks often think of it as a safer investment channel, rather than one involving risky investments like fund management. Bank employees are also not fully equipped with knowledge about investment products to explain to customers the nature and differences of various financial tools.

More importantly, bank staff lack the skills in planning and asset management needed to provide comprehensive financial solutions to customers, utilising a diverse range of mutual fund products, from equity funds, bond funds, and money market funds to balanced funds. This necessitates banks to invest in key activities to create a new workforce that meets these needs, especially for the segments of affluent and high-net-worth customers.

How have commercial banks transformed recently?

Banks like BIDV, MB Bank, and Techcombank have intensified efforts to develop complex financial products and services, such as wealth management, to meet the increasing customer demands. Strategic partnerships with top fund management companies have enabled banks to extend their capacity to offer high-quality investment advice.

Through investments in technology and staff training, banks have significantly improved their analytical capabilities and understanding of customer needs, thus providing a tailored investment solution and adding value for their clients. This not only enhances banks’ reputation and market position but also contributes to the development of the mutual fund market in Vietnam.

This growth demonstrates that focusing on wealth management not only enhances banks’ relationships with their customers but also opens new opportunities in the development of financial products and services, with mutual fund products on the market benefiting the most.

The asset management sector has many development opportunities, thanks to the stronger conditions in Vietnam’s financial market, especially during the current major restructuring phase, including the stock, corporate bond, and real estate sectors.

The role of financial advisors becomes more crucial than ever in building a sustainable investment portfolio to achieve clients’ financial goals. This development not only strengthens the advisory role but also helps to solidify the trust and satisfaction of customers towards banks.

The market is starting to recognise the role of long-term investment and understand the appropriate expected returns for different asset classes. Each asset class, based on a different risk level, will have a different expected return. A deep understanding of the characteristics of each asset class can aid long-term investment activities and harmonise with financial laws. This shift in perception has spurred interest in integrating various asset classes into a client’s investment portfolio.

The focus on long-term investment and diversification of investment portfolios indicates that the market and consumers are becoming more mature, facilitating the development of asset management services in general and wealth management for wealthy families in particular.

What specifically is the role of a wealth management advisor in a bank?

A wealth management advisor at a bank acts as a consulting expert, assisting clients in comprehensive financial planning and management. They help clients identify long-term investment goals, select appropriate asset classes, and build a diversified investment portfolio to maximise returns and minimise risks. Through thorough analysis of clients’ financial profiles and needs, advisors can recommend suitable investment solutions, ranging from equity and bond funds to money market and balanced funds.

Importantly, they also play a crucial role in financial education, deepening clients’ market understanding and risk management. Wealth management advisors are not just consultants but partners in clients’ investment journeys, contributing to their long-term financial success and stability.

In a nutshell, wealth management service help banks move from purely selling products to becoming customer’s partners taking care of their financial concerns. By that way, mutual funds products could have huge potential for sustainable growth.

Growth prospects fuel mutual fund appeal despite inflation pressures Growth prospects fuel mutual fund appeal despite inflation pressures

Low inflation and low interest rate environments are typically good times to invest in mutual funds, but what about when inflation and interest rates start to go up? The answer is simple: invest in mutual funds.

By Nhue Man

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