A global trend has arrived in Asia, in which brokers are pivoting toward wealth management services, or advisors from those wirehouses are launching their own wealth management firms. The “breakaway broker” phenomenon isn’t exclusive to Asia and has been happening for a while in spots around the globe, but the trend is popping up more now in the region.
“There is a race by brokers to zero commission fees in order to remain competitive. To sustain their business model and achieve further growth, many are pivoting to wealth management to provide value-added services. Typically, wealth managers charge fees as a percentage of the AUM on which they advise and administer, regardless of whether customers are buying and selling stocks and bonds,” said SS&C Regional Director in Singapore Van Nguyen.
In parallel, moving customers to advisory accounts and packaged investments at these firms is prompting successful advisors to leave shop and open their own independent registered investment advisory (RIA) firms or “hybrids” that offer both commission-based brokerage and fee-based advisory services. The reasons behind this breakaway activity include gaining more control over their client book, their shared success, and their personal careers and compensation.
“Technology is the common thread to this activity,” said Nguyen. “Advanced capabilities and lower total cost of ownership across the technology landscape means these advisors can buy the system they need and let it handle day-to-day operations, while they focus on their clients’ needs and issues to deliver customized service and advice.
“We’ve recently added a new client—one of the leading securities brokers in South East Asia—to help with their newly formed wealth management business. We deliver front-to-back wealth management capabilities—from a front-end portal to custodial integration to back-end accounting—so they can focus on giving top-notch wealth advisory services to their high-net-worth clients. It’s our first Global Wealth Platform client in Asia and paves the way for more opportunities in the fast-growing Asian wealth management sector,” he said.
Indeed, similar moves are likely ahead. Nguyen cited news of a local broker in Singapore using proprietary technology to pivot towards wealth, and the trend remains strong. In its 2020 Break Away To Independence Survey, TD Ameritrade reported that 55% of prospective breakaways were likely to move in the next 12 months, and of those who made the move to the independent RIA channel, 80% said that their quality of life is better and 72% said technology is better than expected.
But 69% worry that the transition will be too difficult, with legal/compliance issues a top concern. Nguyen highlights that with the technology solutions available today, the transition need not be too difficult, and solutions like SS&C Global Wealth Platform can assist on this front as well.
“Regulatory and compliance is absolutely critical, but it’s another area where technology can help. Utilizing technology platforms that can support the front-to-back capabilities required of a wealth manager not only supports a smooth transition but also helps to meet regulatory obligations. With a single platform to support the entire investment management process in place, our clients can quickly and easily customize their workflows to meet their operating requirements along with their compliance needs.”
“It’s important to stay on top of local regulatory developments too, and have a solution partner who has the flexibility and scale to implement changes as needed to keep up with the regulatory environment. For example, Malaysia has passed a new regulation that allows for brokers and their trading representatives to trade on a discretionary basis for certain stocks, which is encouraging growth in the wealth advisory business, but also means platforms need to make applicable adjustments” added Nguyen.
Ultimately, advisors will decide to transition to any new wealth management model based on what’s mutually best for their clients and themselves, with solution experts like SS&C at the ready to help them realize their vision and garner success. If you’re thinking of making the move yourself, contact us to discuss how we can help.
Written by James Wayne
Regional Managing Director, Asia