Today’s wealth managers recognize several emerging markets as attractive opportunities for business expansion. As companies employ a range of strategies to integrate these markets into their businesses, ‘BRIC’ is no longer a comprehensive acronym.
In June 2015 Citigroup announced plans to grow its wealth management business in Asia by increasing its client base to 1 million by 2020. In order to reach this goal, the company will target China, Hong Kong, India, Singapore, South Korea, and Taiwan. These emerging markets are attractive not only because they are recognized for their political stability when compared to the past, but also what they hold for the future. Looking ahead, these markets show strong growth potential through entrepreneurial ventures which will no doubt contribute to the intergenerational wealth transfer as the markets mature. Furthermore, Singapore and Hong Kong are key offshore centers offering well-developed and well-regulated financial services sectors.
Acquisition is also a viable strategy for emerging market expansion because it can minimize competition and prove less expensive than growing independently. Julius Baer is no stranger to acquisitions: in 2015 the company agreed to acquire 40% of NSC Asesores, an independent financial advisory firm in Mexico. This provided Julius Baer with entry into one of the largest wealth markets in Latin America and the ability to benefit from the country’s economic developments. Furthermore, Julius Baer completed the long-running acquisition of Merrill Lynch’s International Wealth Management (IWM) operations in 2015. Two thirds of the assets under management came from growth markets in Asia (India, Singapore), Latin America (Chile, Uruguay), and the Middle East (Bahrain, the UAE), providing the company with greater market share in these regions and stronger client orientation.
A company restructure can also help wealth managers focus on the emerging markets that best align with the firm’s long-term objectives. Credit Suisse formed an Emerging Markets Council, which seeks to increase the company’s market share, carry out corporate goals, and strengthen client business across several regions. Credit Suisse has identified countries such as Egypt, South Korea, and the UAE for their high-growth characteristics and improved potential for business opportunities.
Looking ahead, it is likely that more wealth managers will seek opportunities to expand in emerging markets through acquisitions, client base growth, or a restructure. Expansion can offer several benefits to a company’s long-term plan, but starting the process with extensive research will serve companies well in deciding which emerging markets to enter and which to avoid. For example, once-promising countries such as Brazil and India have proven to be challenging markets for reasons of local competition and regulations, and as such, several international players have exited these markets.
For wealth managers looking to realign their propositions to capture interest in emerging markets, selectivity is key. Wealth managers can benefit from additional research to identify markets that are best-suited for long-term success.
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