When the value of his US$20 million portfolio plunged in the 2008 global financial crisis, luxury car enthusiast Gerard Tan followed a growing trend among Asia’s elite investors by turning to an independent adviser for help.
His bank had put most of his cash in volatile emerging market bonds, which were hammered by the financial turmoil.
Tan, who asked that his real name not be used, kept his money in the bank, but engaged the services of an adviser unrelated to the institution in order to staunch the losses.
Six years after the crisis, a growing number of Asia’s millionaires are turning to independent wealth advisers, who offer professional advice for a fee much like doctors and lawyers do.
Without pushing clients to buy financial assets, they offer an alternative to wealth managers working for private banks, which traditionally generate revenues on commission.
Banks put the focus on selling and this can sometimes lead to risks being overlooked in favor of revenue, according to analysts.
“My positions were restructured and portfolio risks were managed,” said Tan, a publicity-shy father of two who owns a range of high-end cars.
“I feel a lot more comfortable now about my market exposure,” said the self-made businessman, whose assets are now more than US$40 million.
An exporter of manufactured goods in his 40s, Tan had heard about independent wealth advisers being quite popular in Europe and readily agreed when approached by a friend to try a Singapore-based firm.
“The concept and acceptance of independent wealth managers is certainly on the growth trend,” said Justin Ong, Asia Pacific asset management leader at consultancy PriceWaterhouseCoopers (PwC).
This growth “is due to the demand for more transparency and also objective client service,” he said.
Most of Asia’s investing public still favor commission-based selling, but the ultra-rich and “more sophisticated families” are more open to objective advice from independents, Ong said.
He added that while Asia’s wealthy still prefer to invest in property, stocks and bonds, “passion” investments like yachts, wines or private jets are preferred by a niche segment.
Capgemini and RBC Wealth Management say the total assets of the Asia-Pacific region’s 3.68 million millionaires were US$12 trillion in 2012 and were expected to reach US$15.9 trillion by next year. That beats forecasts of US$15 trillion for North America.
More of the rich in the US and Europe take independent advice than those in Asia because family businesses in the West can date back 200 years or more, according to Mandeep Nalwa, chief executive of Singapore-based Taurus Wealth Advisors.
Independent advisers manage about 30 percent of the assets of the rich in the US and Europe, but the figure is just under 3 percent in Asia, where most family businesses are still run by their elderly founders, he added.
However, the low base also means there is room to expand for both private banks and independents as the region mints more millionaires, and founders of family businesses hand over management to their children.
The 48-year-old scion of an estimated US$4 billion Asian fortune said that patriarchs like his nearly 90-year-old father who built the business from scratch “are used to making all the final decisions,” and are not inclined to rely on advisers.