Banks, insurers, and asset managers in Asia–Pacific could soon be faced with a partial transition of new wealth flows to the tune of $700 billion of personal financial assets (PFA) to WealthTechs as customers look to digital platforms to help manage their increasing wealth. With the number of WealthTech companies in the region rapidly growing to meet this burgeoning demand—and customer preferences shifting—financial institutions may need to reassess their digital wealth management offerings.
This assessment of the digital wealth phenomenon builds on our 2023 report, WealthTech in Asia–Pacific: The next frontier in financial innovation, in which we looked at the significant opportunities offered to WealthTechs by the growing affluence in Asia–Pacific. With technical advancements allowing for more innovative platforms and new tools increasing accessibility, personalization, and affordability, the region is becoming an important player in the global wealth management arena—boosted by its growing wealth and economies.
Challenges to digital wealth management remain and include data security and privacy concerns; the reliability of technology platforms; the need to offer modular coverage across both digital and human touchpoints; the need for customers to be better informed about investments; and, last but not least, how pricing of wealth offerings and solutions has become very competitive—but this industry in Asia–Pacific is growing undeterred.
In this article, we focus in particular on the role of banks and WealthTechs in meeting the demand. As customers—particularly those in the affluent and high-net-worth individual (HNWI) segments—become more comfortable with digital wealth platforms, we ask if traditional banks are prepared for this transition and how they can retain their customer books.
The article draws on our latest proprietary research on evolving customer behavior in the financial planning space, including the adoption of various channels for wealth management engagement and potential preferences for digital wealth management service providers, particularly in relation to customer life cycle stage needs. These findings are supplemented with insights from our recent conversations with leading banks and WealthTechs across the region, asking what they think about the digital wealth opportunity and how they are responding to the growing trend toward digital wealth management solutions.
The state of the market
Although Asia–Pacific is still an underpenetrated wealth management region compared to regions such as Europe and the United States, digital wealth as a market is rapidly growing and provides significant opportunities for WealthTechs, banks, insurers, and asset managers.
The Asia–Pacific PFA wealth management market is on the verge of a profound technological transformation and, in 2028, is estimated to be around $84 trillion. The anticipated $700 billion in new flows of PFA that could transition to digital wealth platforms within the next four years is predicted to happen at a faster rate than previously expected.
The voice of the customer
In our survey, we looked at PFA shifts across different customer segments and found that the mass, affluent, and HNWI segments are primarily driving this trend. The ultra-high-net-worth individual (UHNWI) segment still has high engagement with in-person relationship managers (RMs), with comparatively limited digital wealth adoption to date (Exhibit 1).
The survey uncovered a variety of customer preferences related to wealth management.
Customer segmentation: Over 75 percent of the new industry PFA shift is projected to come from the rapidly expanding mass, affluent, and HNWI segments as customers become wealthier, more comfortable with technology, and more willing to test various wealth management solutions and channels.
Digital adoption: Of the respondents, 80 percent expressed a clear preference for leveraging digital solutions, citing benefits such as cost-effectiveness (59 percent of customers), greater transparency and control (61 percent), and personalized investment strategies (57 percent).
Willingness to pay: Half of the survey respondents said they were willing to pay 10 to 20 percent of the fees charged by traditional providers for advisory services through WealthTechs, leading to significant “price arbitrage” and the inherent questions on “price to value.” Most of these respondents were within the mass and affluent segments and younger than age 45. About 20 percent of respondents regarded digital platform services as equivalent to traditional bank offerings—while seeing WealthTechs as a low-cost and trusted alternative (Exhibit 2).
Automation versus human: Approximately 80 percent of respondents said they trust digital wealth platforms, reflecting comfort in technology for investment advisory services. Nonetheless, of these respondents, 45 percent reported they still prefer some form of human assistance for complex decisions—a need that various WealthTechs have identified, offering hybrid support as a result.
For example, Samuel Rhee, cofounder and chairman of Endowus, a Singapore-based WealthTech provider, told us that, despite the growing inclination toward a digital experience, customers still appreciate personal interaction: “There is a need for digital wealth platforms to be both fully digital and fully human, as clients can switch seamlessly between the digital and human experience. This offers a hyperpersonalized experience that caters to the needs of different clients at different times. With just 15 client advisors, we can serve hundreds of thousands of clients in helping manage their financial planning backed up by the seamless digital user experience—whether it be for onboarding or more complex investment decisions.” He added, “The access we’re bridging with best-in-class products, catered solutions, and modular operating models has enabled Endowus to expand its scope from retail to serving HNWIs, single-family offices, and institutions, and even venture into the B2B space.”
Risks within digital: Despite customers’ willingness to shift to digital for financial services, the transition can come with challenges. Data security and privacy emerged as the top concerns for around 70 percent of respondents, while about 60 percent voiced apprehension about the reliability of technology. These lingering concerns could affect the transition of new PFA wealth flows to WealthTech, and digital wealth management platforms will need to prioritize robust security measures to ensure their services are consistently dependable and secure.
WealthTechs lead the charge with technology-driven solutions, though banks are catching up
From our conversations with both WealthTechs and banks, we learned how the transfer of new wealth flows to digital wealth management platforms could benefit both groups—and how collaboration could help unlock this potential further.
WealthTechs are eyeing growth opportunities while breaking into new customer segments
WealthTechs are recognizing the opportunity arising from new PFA wealth flows moving into digital wealth management. Particularly optimistic about the growth potential within the mass and affluent segments in Asia–Pacific, their numbers are increasing fast as they become more aggressive in gaining customers.
WealthTechs are further breaking ground by expanding into the HNWI segments, traditionally serviced by banks, as these customers start adopting digital wealth platforms and welcome low-touch, digitally driven solutions to manage their portfolios. This move is allowing WealthTechs to serve a broader spectrum of clients and transition from retail to institutional wealth management.
Michele Ferrario, cofounder and CEO of StashAway, described the company’s strategy: “The core opportunity is to keep building market share with the 30- to 45-year-old professionals, who mainly are mass affluent and affluent.” He further explained how Stashaway has also created an offering to serve HNWI customers: “We have launched StashAway Reserve to serve our growing HNWI customer base, offering access to private credit, private equity, venture capital, and angel investing, in addition to our core offering.”
Furthermore, in light of customer preferences, many WealthTech companies are readying themselves for the new wealth flows through strong advisory algorithms to personalize asset allocation recommendations and asset rebalancing based on customers’ investment profiles (such as goals and risk), low advisory costs as a result of the limited human interaction required, and full transparency on asset holding and control over the invested portfolio (for example, unlimited withdrawals or transfers and free exit fees).
As WealthTechs grow, however, they may face the challenge of finding a way to sustain their business model with their current pricing strategy, and the conundrum of expanding to holistic financial planning that goes beyond investments to protection, retirement, and potentially health. This will also entail streamlining operations and optimizing the middle back-office (MBO) functions. Cost-effectiveness and personalization are the principal attractions for customers to digital wealth platforms, and greater personalization can come at a greater cost to serve.
Aside from these considerations, a fundamental concern remains. Can WealthTechs also provide the human touch that many customers still look for in their wealth management providers (and at what cost)? Increasingly, the answer is yes, as various WealthTechs have already started expanding their teams to accommodate this.
Banks are recognizing the benefits of digital wealth management
Banks, meanwhile, realize the importance of developing technological capabilities in wealth management, but have they have made meaningful progress in the digital wealth management space to retain (and attract) customers looking to invest new wealth flows in line with their target customer segments?
Patricia Quek, head, UBS Global Wealth Management Singapore and Malaysia, pointed out that using digital is now nonnegotiable: “If you don’t have it, you don’t get the business done. The space continues to evolve . . . You snooze, you lose.” She added, “You need it as a tool to defend existing assets and prevent your clients from leaving to seek other platforms that can cater to multigenerational needs.”
Everett Leonidas, head of Venture Investments, Asia, Citi Ventures, shared similar views: “We believe that all banks and anyone who is offering wealth services need to have some sort of digital DNA—if not already, then sooner rather than later, as wealth is borderless. There is a strong desire for retail, and even the private client list, to expand beyond traditional asset classes, particularly among millennials.”
Some banks are already seeing the benefits of taking a thoughtful approach to their digital transformation. Evy Wee, head of financial planning and advisory solutions for DBS Bank, said, “The initial approach to digital wealth was to simply place a product on a digital platform, but this has evolved to a more holistic and customer-centric approach.” She added, “Despite initial challenges, the evolution of digital wealth has led to an increase in product adoption, a decrease in client acquisition costs, and the realization of the importance of a multichannel strategy.”
Outside of the wealth management space, banks have made significant strides in enhancing digital commercial and daily banking services, such as mobile banking apps. Many banks are focusing on upgrading the client interface and streamlining or automating internal processes to make RMs more productive through AI-enabled data insights. Yet, building digital wealth management is a much more complex process that involves more than having an app or a screen through which customers can invest, and banks need to be willing to take the step. If directing attention only to building technology to grow RM productivity comes with a limited focus on customer interface and customer journeys, banks could expect some loss of existing customer base.
Pak Steven Suryana, senior executive vice president, Wealth Management, Bank Negara Indonesia (Persero) Tbk., mentioned, “We are not only investing in our RMs but also in investment specialists who assist the RMs. They also give customers a better understanding of investing and risk profiling, as well as help them find suitable products. It is important to have both a digital channel and in-branch personalized interactions; these are big differentiators.”
However, there are challenges. Vincent Chui, head of Asia–Pacific Wealth Management, Morgan Stanley, cautioned that, although the journey to digital wealth management is critical to future-proof the business, it comes with its own hurdles “from technological adaptation to regulatory compliance.” Despite these, banks—even specialized ones—are starting to incorporate digital wealth management into their services in response to client needs. For example, Chui said, “Clients in the UHNWI segment often appoint ‘professionals or gatekeepers’ to manage their wealth, many of whom are looking for ‘digital institutional-light capabilities.’”
As customers look to digital wealth platforms for cost efficiencies, banks may need to start justifying the premium they charge. Banks are aware of the pricing differential and owe it to personalized customer engagement, access to institutional-grade investment research, unique investment solutions, and an RM-led ecosystem supported by specialized product experts, particularly for the UHNWI segments. For example, an equity-structured solution on a WealthTech platform might be priced at about 40 to 50 basis points versus incumbent banks at around 110 to 120 basis points.
In full fairness, however, the pricing differential should be looked at through a customer segment lens. For instance, there is an opportunity to bridge the price differential across the mass and affluent segments to justify price-to-value with more commoditized solutions and modular coverage (digital, remote, and in-person). Bundling and wealth decumulation can also play a role in getting pricing right. Customers are looking for objective advice, while trust is critical to them as well as being provided with high-quality solutions across lifecycle stages that fit their risk profile.
The introduction of digital services could potentially lead to lower overheads and improved access, which could, in turn, influence pricing structures. Nevertheless, as digital transformation continues to shape the industry, banks may need to carefully consider how they price their services to ensure they are delivering value to customers while overcoming various obstacles, including banks’ legacy systems, RM-led operating models, and hierarchical structures that can slow down investment in (and the adoption of) digital models.
Banks see WealthTechs as complementary, not as competition
Particularly for wealth management, banks remain predominantly focused on serving HNWIs and UHNWIs, areas in which they have long-established expertise and relationships. However, they realize—and agree—that the mass and affluent segments offer huge opportunities to build the wealth continuum and that access could, in fact, be enabled by collaborating with WealthTech platforms.
Jason Moo, CEO, Bank of Singapore, emphasized, “Currently, our main focus remains providing comprehensive wealth management solutions to HNWIs with a highly bespoke, holistic and customer-centric approach. That said, there are definitely growing opportunities for the industry to tap into the affluent market with the help of WealthTech platforms. With advances in technology and access to information, customer expectations have grown significantly. Digital is no longer a differentiator, and the industry has migrated from a view of digital being ‘nice to have’ to being a ‘must have.’”
Banks tend not to view WealthTechs as direct competitors but rather as disruptors and complementary players that are expanding the overall wealth management value pool. WealthTechs are helping unlock new, previously underserved customer segments, which is enabling the overall wealth management ecosystem in Asia–Pacific to grow.
Three emerging archetypes for banks to build digital-wealth muscle
We have identified three potential archetypes that banks could follow to develop their digital-wealth muscle while expanding their customer base: partnerships or collaborations, acquisitions, and in-house digital development.
Partnerships and collaborations: WealthTech companies are beginning to collaborate with traditional financial institutions through B2B partnerships. These partnerships or collaborations are enabling traditional banks to leverage WealthTechs’ digital wealth management platforms to target specific customer segments more effectively. There is a potential for collaboration between digital wealth platforms and incumbent banks, particularly in building wealth platforms and expanding into new markets. WealthTechs could provide banks with the tools to scale their wealth management offerings more quickly.
Another critical benefit of successful partnerships relates to the recasting of the RM role. By transforming it from salespeople to advisors, banks could free up RMs to work only on value-added services and reduce their costs to serve clients. Enhancing AI-driven capabilities could further enable banks to better support RMs, while WealthTechs could expand their reach across different customer segments, such as the mass and affluent. Partnering with WealthTechs could offer further advantages for banks in terms of access to innovative technology and new talent in sought-after roles, such as designers and data scientists.
Acquisitions: While the acquisition of WealthTech start-ups may be a viable strategy for some banks, they may need to consider the strategic fit, including whether the start-up aligns with the bank’s overall strategy and its ability to offer value to customers while having a clear road map for integration. The approach might help banks with a rapid market entry or acquire proven technology to reduce the development effort and gain an existing client base to serve and grow.
In-house development: Some large banking institutions with wealth management as their core business are choosing to develop in-house digital capabilities while investing substantially in their own tech buildup (despite the challenges relating to multiple legacy systems) and, additionally, investing in WealthTechs to participate in the industry evolution. These banks may take a call to consolidate their stake at an appropriate time.
A collaborative future: Banks and WealthTechs align for growth
The convergence of banks and WealthTechs in Asia–Pacific presents a unique opportunity for collaboration. Both sectors share a mutual understanding of the wealth opportunity in the region and the critical role that technology will play in expanding the market. Working together could help unlock this potential.
Three areas stand out as considerations for a successful collaboration: accessibility, affordability, and advancement (Exhibit 3).
As banks plan to scale up their digital wealth infrastructure, they could consider the following questions:
- How can we avoid any potential cannibalization of the existing business?
- Can we embed a digital wealth play in our existing business, or does it need to be a stand-alone offering?
- How do we build innovation DNA in the organization to embark on the digital wealth journey?
- Which path should we take: build, partner, or buy?
Seizing the opportunity (and mitigating the risks) associated with the significant predicted shift of PFA in Asia–Pacific requires banks to zero in on customer expectations for digital wealth management—cost-effectiveness, transparency, and control, with the positive effect of human interaction.
Similarly, WealthTechs need to gain access to a diversified customer base at low acquisition cost, expand to holistic financial planning beyond product accessibility, set up modular distribution combining digital and human support, and scale up infrastructure with a focus on platform reliability and security.
Banks and WealthTechs could partner to benefit from this shifting landscape, leveraging each other’s strengths to foster substantial growth and innovation in the wealth management sector. The time may be right to welcome a collaborative, sustainable approach that delivers enhanced value to customers and unlocks new opportunities in the rapidly evolving market, particularly for incumbent banks.
