Published by Fund Selector Asia – 19th Dec 2018
Bank marketshare of mutual fund distribution in the region has been gradually declining.
Banks continue dominate mutual fund distribution in Asia, according to a Cerulli Associates report. Nearly 70% of the mutual fund AUM in Hong Kong is distributed by banks, while the figure in Singapore is around 60%, according to the report.
However, banks in Asia ex-Japan have gradually lost marketshare over the last few years, the report said. It has fallen to 40.7% in 2017 from 42.1% in 2016.
On the flipside, the marketshare of online platforms has increased to 14% from 10.8% during the same period, according to the report.
Another distribution channel that has been gaining business is direct agents (to 27.5% from 24%), while securities companies have lost market share (to 10% from 15.1%).
The main driver for online distribution in the region is China, especially after the online moneymarket fund Yuebao, the world’s largest moneymarket fund, was introduced in 2013, according to the report.
However, mutual fund assets distributed through online channels in China account for less than 10% of the country’s mutual fund industry, according to the report. Even if Yuebao is excluded, moneymarket funds are still the main products sold through these platforms.
Jasmine Baker, analyst at Shanghai-based consultancy firm Z-Ben Advisors, said previously that foreign managers targeting China’s retail mutual fund market should not rely too much on online channels.
“These platforms still have limitations,” she said, adding that robo-advisory services in China are in the beginning stages, and online fund platforms do not know how to properly sell management products.
The Cerulli report added that excluding those that are in China, online platforms have not made a significant impact in the rest of the region, despite the launch of several robo-advisors in Hong Kong and Singapore.
“Such alternative models of distribution are welcome, though, in breaking the dominance of banks,” the report said.
“Over the longer term, online platforms could help improve the access to financial advice for the under-served population in many of Asia’s emerging markets.”
Regulation drives distribution
Although online distribution only accounts for a small share of the fund distribution landscape in Asia, a majority of managers believe that the digitalisation of distribution will be a driver in the industry.
At least 70% of asset managers asset managers surveyed by Cerulli in China, Hong Kong (76.9%) and Singapore (76.9%) believe that digital tools will be a “major driver” in fund distribution in the next 10 years.
The sentiment is strongest in India, where 85.7% of asset managers indicated that digital distribution is a key driver, the report added.
Cerulli noted that regulation supports the long-term direction of online distribution, particularly in the development of robo-advisors in Asia.
“There is regulatory backing for adoption of fintech and the development of digital channels, as regulators increasingly strive to create alternative distribution channels with the aim of offering more product choices from different managers to investors at low cost,” the report said.
For example, in Hong Kong, the Security and Futures Commission has been working on diversifying fund distribution channels, such as issuing specific guidance on automated or robo-advice and how suitability assessments can be applied in the online environment. The new guidance will take effect in April next year.
In October, the Monetary Authority of Singapore also issued guidelines on the provision of digital advisory services, improving clarity on how existing rules apply, as well as refining licensing and business conduct requirements.
Malaysia also introduced a digital investment management framework last year. It outlines application details for firms that plan to be involved in “automated discretionary portfolio management services”.
One Singapore-based firm, Stashaway, has so far received a fund management licence under the framework and has launched in November its robo-advisory platform to Malaysian investors.
