9 September 2016
By Manjit Singh, Asset Management and Insurance Practice Leader, PwC Malaysia and Lum Kar Hoe, Manager, PwC Malaysia
Over the last five years, the growth of Fintech has gained significant momentum globally, transforming the look and shape of the financial services industry as we know it. Implications to Malaysia’s financial services industry are far-reaching, as traditional players grapple to retool their business processes and culture in response to this new wave of disruption.
The rapid growth of millennials (one-third of the Malaysian population), who represent the next generation of investors, and their affinity for technology, is the driving force behind Fintech.
The effects are particularly felt by the asset management industry, according to local fund management industry players PwC spoke with. The industry needs to reshape its thinking and way of doing business to meet the demands of tech-savvy millennials.
Fintech companies are creating new solutions across the customer investment journey, from financial planning to investment management. The result is a highly disrupted value chain threatening to capture some of the market share from the incumbents.
A lot of Fintech companies are drawn to Asia’s rising private wealth. The Boston Consulting Group predicts that Asia-Pacific (excluding Japan) will surpass Western Europe as the second-wealthiest region in 2019, with a projected US$55 trillion in private wealth.
The Malaysian asset management industry, being the largest unit trust industry in Southeast Asia, is an attractive market for Fintech companies to target. It is ripe for transformation.
Among the key disruptors the industry faces are robo-advisors. It automates the asset allocation process and allows for a personalised user experience at a much lower cost compared to services provided by traditional asset management firms. This poses a significant threat to local players, especially considering the entry fee in Malaysia’s fund management industry, which is one of the highest in the world.
How robo advisor, Motif Investing, is reshaping asset management
For example, out of the six major internet companies in Asia, five have already entered the wealth management market. TenCent, for instance, has proposed a wealth management service through its famous App: WeChat, where existing users are now able to place their money into a money market fund.
Based on our conversations with local fund management industry players, we learned that they are already conducting studies on the integration of some of these
Capitalising on Fintech will require a fundamental shift in the way asset managers operate. Here are some of the critical areas players will need to address to successfully adapt to the new marketplace.
The next generation of investors asset management firms are targeting are different from their older peers. They require simple and automated online investment platforms, where everything is accessible through their mobile devices from market insights, wealth reporting to social investment interactions.
This requires a paradigm shift in mindset, strategy, operations and customer engagement from the part of the asset managers. As it will take a while for these changes to fully take effect, asset management players should act now. Don’t wait for something to be broken. Disrupt your own business – streamline your operations and look at new ways to engage your customers - before technology upends your business. You’ll see the results soon enough as an early adopter.
 Securities Commission Malaysia Annual Report 2015
 Chappuis Halder & Co, “Investment Advisory: The rise of the robots?”, 2015
 Information regarding investors’ personal profile, finances, education level, and banking information, can help decide the risk profile and investment objectives though the use of algorithms.