Developing a wealth management answer for affluent clients

Khoo Lin Wein - Head of Private and Priority Banking, Techcombank

Vietnam is expected to become a middle-income economy by 2030. Even now, there are 5.3 million emerging affluent individuals in the country today, growing at a rate of up to 15 per cent annually.

According to global consultancy Knight Frank, Vietnam already has over 500 ultra-high-net-worth individuals with a net worth of over $30 million. In 2020, Vietnam had nearly 25,000 individuals, defined as those with a net worth of over $1 million.

The country’s wealth market is growing and ready to be served, and now is the right time to start. However, for many banks it is not easy to serve the high-end segment here.

The current licensing arrangements are that distribution of investment products can only be done by securities and asset management companies. On the flip side, banks with large networks do not have the licences.

Thus, banks that own securities companies and asset management firms are best placed to meet these challenges by launching and distributing new products.

In financial centres such as Hong Kong and Singapore, a universal banking model allows lenders to sell any investment product so banks can capitalise on their huge client network to distribute them.

The lingering pandemic has taken a serious toll on all industries, including the banking sector. Notwithstanding, the outbreak has actually benefited financial markets as central banks worldwide are on a quantitative easing mode. Loose monetary policy causes a surge of liquidity, which has pushed all asset classes to historic highs. The Vietnamese stock market, the world’s best performing market this year, is up 30 per cent.

Lockdowns have had a minimal impact on investments as these could be executed by phone and online, or via trading apps at almost zero-fee commissions.

Currently, available investment products in Vietnam are cash equities, bonds, mutual funds, and insurance investment-linked policies. In future, we hope there will be structured products, alternate investments such as hedge funds, commodities, real estate funds, crypto, and private equity available to individual investors.

As the market matures, more investors would turn to professionally managed products and demand for fund structures would increase.

At Techcombank, we will create a new Value Proposition for clients. The approach would be to do a holistic financial needs analysis, portfolio planning, and then recommend solutions to clients. We are growing our product platform, upgrading skills and training as well as creating solutions in all other areas of the bank to meet those needs.

We are developing solutions based on the customer’s objectives, liquidity needs, and risk tolerance. We will also offer some new structured products and funds within the regulatory framework.

In a survey from our strategy team, the top three reasons why wealthy customers in Vietnam invest are to increase assets, prepare for retirement, and provide for their children. These findings are similar around the world, except that most surveyed people were younger in Vietnam and prefer growth to income in their investments.

As the market grows, more financial institutions will enter the lucrative wealth management market, including foreign banks.

This can only be good for the financial industry in Vietnam as more players will provide more liquidity, depth, and breadth to financial markets. More competitors would allow more products, more parties to trade with, and the increased competition can only improve the wealth management industry in Vietnam.