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Most growth-oriented businesses talk about expanding into Asia, and many financial firms have already taken the plunge into the Pacific – or at least dipped their toes in it. In this post, we explain why asset managers are focusing more on the Far East, and we underline the massive opportunities here.

It’s a numbers game but a people business

You hear the financial services industry described as a people business, but what does that mean? Well, behind each sterile basis-point movement in an index is someone’s life savings.

Society and economics are a combination of life, death, and purchasing power. In Asia, the mix is very different from Europe and North America. In Asia, birth rates are high, people are living longer, and millions are being lifted out of poverty to become middle-income earners.

Take a look at this graphic. Between 2015 and 2050, the population of China will grow by 8%. Meanwhile, the Indian population will be up by 46%, and Indonesia’s by 40%.

Projected population growth graphicSource: United Nations, 2015 World Population Prospects (High fertility variant, 2015 – 2100), PwC.

 

In terms of life expectancy, Japan, Hong Kong SAR, and Singapore all rank in the top ten of global longevity surveys. Meanwhile, China’s National Health Commission reported that the average lifespan of its citizens has leapt from 35 years in 1949 to 77 years in 2018.

What about spending power? According to the Brookings Institute, China’s middle class (with an income of between $11 and $110 per person per day) will be responsible for 22% of global consumption by 2030. Over the same period, a staggering 65% of Asia’s population will be middle-class.

This graphic below is powerful. Consumer spending in the Asia-Pacific region is set to reach $32.9 billion by 2030. By contrast, Europe and North America are forecast to reach a relatively paltry $11.1 billion and $5.6 billion respectively.

Middle class consumer spending visualSource: Kuo/Quartz. Figures based on OECD, 2012 An emerging middle class.

Yes, this is how the world looks in 2030 – only 10 years from now.

All the percentages represent real people who want a better life than their parents and opportunities for their kids that they never had themselves. With middle class growth comes demand for all the things we buy in Europe, North America and more developed parts of Asia – smartphones, apartments, cars, clothes, insurance, better food, air conditioning in the summer, heating in the winter – and yes, financial services.

This is where the asset management industry comes in. How can we help these aspiring millions?

Are we set up for future success?

Earlier, I mentioned that a good number of companies that have already established a presence in Asia.

However, too many businesses may be overly comfortable with their known client base. It’s true there are still wealthy clients to be found in Stuttgart, Stevenage and San Francisco. But are there millions more lining up to replace today’s baby boomers? The answer is yes, but they’ll be easier to find in Shanghai or Seoul.

For those firms that have made a tentative move to Asia, it’s worth asking if their operations are a token gesture or something more meaningful. Does a staff of 20 marketers in Hong Kong – compared with 200 in London and 200 more in New York – reflect the way our world is going to look in 10 years.

Of course, it’s not quite as simple as getting on the first flight to Beijing. Doing serious planning and research is critical before committing to any overseas venture. Do firms have an appropriate line-up of funds? Is there an understanding of the local legal environment, financial regulations and customs?

These factors and many more need to be carefully assessed. But don’t take too long. The Chinese asset management sector, for example, won’t be a follower forever. They are already dipping their toes in western markets.

Playing catch up is devilishly tricky, so it’s time to increase the pace and take Asia seriously. Seriously!

For more information about how Copylab can help the financial industry to communicate its messages clearly and with confidence, please contact John Holmes, our Strategic Director, Asia & the Middle East.

Paul Lees