Wealth in Malaysia: HNW Investors 2016; Understanding HNW investors and wealth management strategies.

Summary

The Malaysian HNW sector has seen a shift from self-made wealth towards inherited assets and family ownership as former entrepreneurs pass their wealth on to new generations and family businesses focus on consolidation. Resident investors dominate the market, and the vast majority of expats have been in the country for more than three years. Within the country, investors are increasingly confident and seek more sophisticated products and services, especially within the popular equity space, with high returns and increased convenience the primary drivers for accessing wealth management advice. However, the use of planning services is still limited and notable opportunities exist in this field, especially in the areas of inheritance and pensions.

Key Findings

• Family wealth dominates the HNW sector, and earned income has lost ground against inherited assets.
• Malaysia has been negatively affected by recent economic and political problems that have impacted the net worth of many HNW individuals and reduced overall wealth.
• Advisory mandates are far preferred to discretionary, but self-directed investment is increasing in popularity as investors gain confidence.
• Fintech is changing the way investors operate, and HNWs are very interested in mobile, online, and digital applications.
• Equities and cash dominate asset allocation, although fixed income investments are growing in popularity.
• Demand for planning services is limited, but is expected to grow rapidly in the coming years.

Synopsis

Verdict Financial's "Wealth in Malaysia: HNW Investors 2016" analyzes the investing preferences and portfolio allocation of Malaysian HNW investors. The report is based on our proprietary Global Wealth Managers Survey.

Specifically the report:

• Profiles the average Malaysian HNW investor in terms of their demographics and analyzes the expat opportunity in Malaysia.
• Analyzes which wealth management mandates are preferred among Malaysian HNW investors and how demand will develop going forward.
• Examines the allocation of Malaysian HNW investors' portfolios into different asset classes and how the allocation is expected to develop in the future.
• Analyzes product and service demand among Malaysian HNW investors.

Reasons To Buy

• Develop and enhance your client targeting strategies using our data on HNW profiles and sources of wealth.
• Give your marketing strategies the edge required and capture new clients using insights from our data on HNW investors' drivers for seeking investment advice vs. self-directing.
• Tailor your investment product portfolio to match the current and future demand for different asset classes among HNW individuals.
• Develop your service proposition to match the service and product demand expressed by Malaysian HNW investors and react proactively to the forecasted change in demand.

Companies Mentioned

• Maybank
• The Hong Piow
• Affin Islamic Bank
• Bank Islam Malaysia
• Bank Muamalat Malaysia
• Maybank Islamic
• Bank Kerjasama Rakyat Malaysia
• and Bank Simpanan Nasional
• Citibank
• Standard Chartered
• HSBC Amanah
• and OCBC

Table of Contents

Executive Summary
Malaysian wealth is a family affair dominated by increasingly sophisticated and confident local residents
Key findings
Critical success factors

Profiling the Malaysian HNW Investor
Family wealth dominates the Malaysian HNW market
Malaysia has a higher proportion of inherited wealth than its regional peers
Construction and real estate are the biggest sources of wealth for Malaysian HNW investors
Malaysia is dominated by resident investors
Expat opportunities are limited
Specific initiatives, such as the MM2H investor visa program, attempt to attract overseas investors
Wealth managers planning to set up dedicated expat desks require expertise on the Greater China and India markets
Expat HNW investors seek more control over their investments

HNW Investment Style Preferences
Malaysian investors are becoming more demanding
HNW investors expect their advisors to provide better returns
Advisory mandates are the most popular form of investment
Overall demand for other forms of investment mandates is weak
Advisory asset management will remain the service of choice
All services are expected to see strong demand
Malaysian HNW investors are confident and increasingly sophisticated

Understanding Asset Allocation Trends Among Malaysian HNW Investors
Cash and equities dominate asset allocation
Malaysian investors are most comfortable with equity investment
Equities constitute an enduring component of the typical Malaysian HNW portfolio
Malaysian bond investments are growing in popularity
Cash and near-cash products constitute more than a quarter of the average portfolio
Property is a small but significant element of Malaysian HNW portfolios
Alternative investments make up a tiny proportion of HNW portfolios
Malaysians are even less interested in commodity investment than the rest of the Asia Pacific region

HNW Product and Service Demand
Compared to their peers in Asia Pacific, Malaysian HNW individuals show less interest in planning services
Inheritance planning is a surprisingly low priority
New tax changes for HNWs are likely to spur demand
Pension planning services are expected to grow significantly
A depressed property market has reduced the need for investment advice
Demand has slumped while oversupply has flooded the market
Investors are reluctant to increase their risk exposure through loans
A pessimistic outlook means low demand for loans is unlikely to improve
Providing Sharia-compliant products and services is a must in Malaysia

Appendix
Abbreviations and acronyms
Definitions
Affluent
HNW
Methodology
Verdict Financial's 2015 Global Wealth Managers Survey
Secondary sources
Further reading
About Verdict Financial
Disclaimer

List of Table

Table 1: Malaysian REITs, September 2016

List of Figures

Figure 1: Family businesses and inherited wealth dominate the Malaysian HNW sector
Figure 2: Construction and real estate are the primary sources of HNW wealth
Figure 3: Expats make up a relatively small proportion of Malaysia's HNW population
Figure 4: The Greater China region accounts for the majority of HNW expats in Malaysia
Figure 5: HNW expats living in Malaysia want to stay in control of their investments
Figure 6: Malaysian HNW clients want better returns and more sophisticated products
Figure 7: Advisory mandates are the most popular form of investment for Malaysian HNWs
Figure 8: Demand for discretionary and execution-only is much lower than for advisory mandates
Figure 9: Execution-only mandates are set to see a strong increase in demand
Figure 10: Malaysian investors are confident, sophisticated, and keen on digital banking tools
Figure 11: Standard Chartered launched video banking services in 2016
Figure 12: Equities are the most popular asset class for Malaysian HNWs
Figure 13: Fund-based strategies are largely preferred to direct investments
Figure 14: Better returns and capital appreciation are key drivers of equity investment
Figure 15: Most investors prefer direct fixed income investment, preferably in corporate bonds
Figure 16: Malaysian bond investment demand is set to rise above the regional average
Figure 17: Malaysians hold most of their cash in local currency deposits
Figure 18: Risk aversion and asset diversification are the key drivers of cash holdings
Figure 19: Property holdings are a small but significant part of HNW portfolios
Figure 20: Capital appreciation is the primary reason for property investment
Figure 21: Alternative investments are forecast to increase in popularity
Figure 22: Commodities have taken a beating over the past year
Figure 23: Malaysian HNWs are less interested in planning services than their regional peers
Figure 24: Demand for financial planning is expected to increase significantly
Figure 25: Demand for investment property advice is muted in Malaysia
Figure 26: Demand for property advice and margin loans is forecast to stagnate