Speaking at our recent Endowus WealthTech Conference 2023 — senior partner Joydeep Sengupta from our official Knowledge Partner, McKinsey & Company unpacked the salient insights from their latest report, WealthTech in Asia-Pacific: The next frontier in financial innovation.
When Endowus first approached McKinsey & Co to discuss their participation in the conference, we knew they would be the perfect knowledge partner to shed light on the transformative potential of WealthTech, and the opportunities that can be unlocked for customers and financial institutions by leveraging technology-driven solutions.
There is still massive undeployed potential for WealthTech companies, particularly when it comes to serving a notably untapped and underserved affluent segment that falls outside the area of focus of private banks. Traditionally, the wealth management industry has been dominated by the high-net-worth segments, but with increasing wealth within the Asia–Pacific population, the affluent segment is projected to be 34 percent of onshore PFA by 2027, at a CAGR of 8 percent from 2022 to 2027.
As Joydeep went on to share in his presentation at EWC 2023; the true power of WealthTech can be surmised as accessibility, affordability, and advice for all. These are the same three drivers that have enabled Endowus to become Asia’s leading digital wealth platform today, solving for the challenge of long-term societal liabilities of retirement adequacy through effective pension investing.
However, key obstacles remain for WealthTechs to scale effectively — high customer acquisition costs, securing funding, bolstering the financial literacy of clients, democratisation of asset classes, and navigating regulatory barriers across borders. What we have is an exciting industry with immense potential, facing significant challenges that still need to be overcome.
“In Asia, the market is fragmented rather than homogenous, unlike what you have in the US. Each market requires different regulations, different licensing, different products, and different partners to effectively execute your strategy.” – Samuel Rhee, speaking at EWC 2023
In his presentation, Joydeep further expounded on core disciplines that hold the key to unlocking WealthTech's potential to reshape the industry. These disciplines – powered by technology and analytics – promise cost reductions, scalability improvements, and wider access to financial services.
Strategic Distribution Partnerships
Creating a strategic partnership strategy for systematic customer acquisition requires careful collaboration. This means identifying potential partners, including financial and non-financial entities, that align with target customers and business goals. Evaluating partners involves considering factors like customer base, technology, and brand reputation. And these alliances, if executed well, can bring about sustained growth with systematic scale.
Endowus’ acquisition of Carret Private in Hong Kong is one such example of this partnership, allowing us to vertically integrate as a single entity, to serve the needs of broadened client segments, and to provide superior investment and advisory solutions as one of Asia’s largest independent wealth advisors across both online and offline financial players.
Reimagining Geographic Coverage & Cross-Border Integration
In our globally interconnected environment, it's essential to rethink how we approach geographical coverage. WealthTechs need to redefine their expansion strategies to include contexts of wealth flows and wealth corridors – thinking through how one can link up with advisors or insiders in those markets, to facilitate operations in those particular financial corridors. These wealth corridors can be an essential vehicle for enabling clients to invest their wealth in jurisdictions outside of where they are resident.
More personalised digital experiences, deeper customer engagement are opening up many of the whitespaces by leveraging technology.
Leveraging data-driven marketing, supported by AI-powered algorithms and data analytics, empowers WealthTechs to build robust recommendation engines for tailored, segment-specific campaigns. This detailed approach also enables WealthTechs to develop investment strategies and financial services to precisely match each customer's preferences, goals, and risk profile.
Additionally, integrating AI-driven tools like chatbots powered by natural language processing ensures seamless and personalised interactions on a larger scale. Behavioural economics adds another layer of personalisation, tailoring offerings to align with clients' decision-making habits.
These disciplines require talent and strong leadership to drive growth and innovation. WealthTechs must understand customer needs, even indirectly, to shape their offerings effectively. By combining visionary leadership with skilled execution, WealthTechs can succeed in the evolving wealth management landscape.
“At Endowus, we focus on advisory-led, digital-first, hyper-personalised solutions to try to create a comprehensive wealth platform business not beholden to a single fund or strategy, focusing instead on the holistic digital expression of advice and user experience.” – Samuel Rhee, quoted in McKinsey’s report
The WealthTech landscape in Asia-Pacific is poised for significant transformation. As highlighted by the McKinsey report and our Chairman & Co-founder, Samuel Rhee, the industry holds immense potential.
Embracing technology-driven solutions, addressing advice, access, and cost-related challenges, and solving infrastructure issues will unlock WealthTech's full potential in the region.
Endowus is at the forefront of this transformation, pioneering innovative solutions and driving change in the industry.
Get started on your wealth journey with us today.