Maybank’s Alvin Lee reveals changes in investment behaviour, wealth preservation

Globalisation is no longer the best strategy for banks if they wish to thrive in the new era of investing.

The age of cheap money is over. Likewise, investors’ priorities on where to park their wealth moving forward have also transformed in the past three years - with health and ESG as key considerations.

“The pivot from just pure profit making endeavors, to investing in something that will help to preserve the well-being of the investors and their family was quite stark,” Maybank’s Alvin Lee told Asian Banking & Finance.

The head of Group Wealth Management and Community Financial Services at Maybank was answering a question on the current state of investing and wealth management in Asia and he added, “There was a realisation that wealth was not everything, [that] health was important.” Gone were the days when globalisation was the only key strategy that banks needed to heed.

“We have entered into a multi-year period when investors have to be used to higher inflation, higher interest rates, and more protectionism amongst the different countries,” Lee said.

Here are more interesting observations on the changing priorities of investors and wealth management customers that came to light in this interview.

It’s understandable that during the pandemic and the geopolitical crisis after, some investors may have adopted a cautious approach. In 2023, does such caution continue to reign or influence investment attitudes?

If we are strictly looking at 2023, we were just coming out of the pandemic, and then we entered into the Ukraine-Russian war, so energy prices rose. Just as we thought that things were okay, we saw Silicon Valley Bank failing, and then now a bit of an issue with the Swiss private banks. We kind of moved from one problem into another.

I do think that at some point, the noise will die down, and then the longer-term mindset will kick in. Asian investors have to get used to higher inflation and higher interest rates, lower level of globalisation and global credit. Asian investors will continue to increase in savviness in investing; they’ll be increasingly international. Whether this international means going all the way to Europe or America or more international within the region, it is bound to happen. And there are certain other developments like in the National Security Law in Hong Kong that will lead some mainland Chinese to look at ways to diversify their wealth.

What are the current concerns influencing investment attitudes in 2023?

The current hot topic about how AT1 bonds have kind of eroded in value will create some anxiety in risk appetite. Some investors might then say, ‘Look, if this can happen to AT1, what about CT bonds? What about my equity?’

Definitely, we do expect the anxiety level to remain elevated. Once the dust settles, the appetite will eventually come back, just that the investors have to get used to a fairly different paradigm than before. Before the AT1 issues

Wealth management and in particular private banking is still a people business surfaced, we did see increasing interest in private markets, whether these are private equity or private bonds. This could also be driven by the fact that the rates have increased in the past when interest rates are at zero or close to zero. Anything that pays 2% to 3% was enough to entice the customers. Given a different landscape now, I think an interest in the private market could be the way forward.

What digital services or digital journeys do Asian investors now seek?

I firmly believe that wealth management and in particular private banking is still a people business. Very few of us would wake up in the morning and decide to buy a mutual fund or buy a bond, right? We still need our relationship managers to put certain ideas in front of us before we act. There aren’t enough investors who would know exactly what to do given the fact that they would have their day jobs as well. In the foreseeable future, at least, with this current generation of investors, it’s still a people business.

If you fast forward to 30 years later, when our children are in our position and they are very used to using digital means to make their own decisions and dealing with boards and online channels, then it will be a different backdrop altogether. But even today, we did notice that investors would love to communicate via digital channels. Once certain ideas are ingrained in them, they don’t mind dealing online.

What has Maybank done to meet these new needs and future-proof its services?

We are very conscious that we need to avail [ourselves of] digital capabilities. I looked at digital capabilities in the wealth management space and categorised it into three pillars. Number one, we must give customers access to the investment portfolios and balances online. Number two, over time, we must avail [ourselves of] more and more transactional capabilities. Number three, we must use digital channels to communicate, to push out ideas, and for them to reverse inquiries at the same time. So, out of these three pillars, Maybank has done one and three, and we are building the transactional capabilities.

How has the topic of sustainability changed investors’ views and strategies on where to allocate their money? There’s definitely an increased awareness for environmental and social agenda. Although, I believe Asian investors are behind the curve compared to their Western counterparts. In particular, the Europeans are a little bit more aware of ESG than Asian investors. But there’s definitely increased awareness.

I think we are at the stage where Asian investors are still looking for a certain return from the ESG solutions. A typical Asian investor would be quite prepared to forgo a small percentage of the potential return for an ESG solution, but not the entire return.

My personal view is that, over time, that desire to do more purely ESG solutions, or invest purely in ESG solutions will increase.

Has Maybank changed or pivoted its wealth management strategy over the past three years? What are your current priorities?

The younger generation will have a slightly different perspective on investing. They would be more prepared than their parents to invest in social causes or environmental causes. Engaging the younger generation is [also] quite different than engaging with their patriarchs and their matriarchs. So, over time, we will have to pivot from just relying on human beings to a more digital means.

In the short term — over the next three years — it is about ensuring that we continue to generate returns above benchmark consistently for our customers, and that’s something that we’ve achieved.

And the way we do it is not just RMs [relationship managers] propagating ideas, our investment consultants have the key objective of ensuring that their customers are profitable. So while it is safe to say that the RMs carry revenue targets, our ICs [investment consultants] carry performance targets. There are checks and balances and that’s how we ensure our customers are able to make a profit consistently.

Going forward, it is important for us to create a unique value proposition. For Maybank, there are two key strategic thrusts. Given the fact that we have got a big pool of business banking customers, we want to be wealth managers or private bank service providers for these entrepreneurs.

The other one is outside of GCC [Gulf Cooperation Council countries]. Maybank is the largest Islamic finance service provider. We want to see whether [or not] we can create an Islamic Wealth Management proposition to serve the increasingly wealthy Muslim populations in the region.

Reports by Capgemini and Oliver Wyman both note that women increasingly control more wealth, yet many firms falter at winning their mindshare. What can you say about this?

At least for Maybank, we don’t differentiate gender, we don’t differentiate ethnicity. Every customer is important.

We definitely need to profile our customers correctly, and then assign the RM with hopefully the right personality to the respective customers. Also, not having a cookie cutter investment strategy recommendation. It is really about risk appetite preferences in specific asset classes or specific geographical exposures that we then take away, and then curate an investment strategy or portfolio for our customers.

Whether it is women increasingly being more in control of wealth management for customers, or the younger people having a bigger say in the family, we know we are taking all this on board and dealing with them accordingly.

What new or revamped wealth products or services does Maybank offer to meet investors’ renewed needs?

One product that we’re proud of is our investment product that offers three share clusters. We enable customers who are in the early stage of work life to invest — that’s Class A share. And then this will then evolve into a capital appreciation play in the Class B, when they mature into middle age, right. And then over time, you will then evolve into a Class C share type, where they can accumulate and then use their investments and the profit thereof, for the retirement needs.

And it’s not just for people who are just new in the market. This product actually can be of value to clients who are already in the retirement stage. So, that product [that] was very successful is a partnership with Fullerton Asset Management exclusively.

Where is the wealth management industry headed? In your opinion, what can we expect to see in this space beyond 2023?

Competition in this space will only continue to increase. It’s safe to say that given the increase in wealth in Asia, in particular, the industry will be very competitive.

It is important for wealth management players to find an innovative way to serve customers; a different proposition than the rest of the industry. For us at Maybank, it is the entrepreneur group of customers that we want to serve very well. And Islamic wealth management is another engine that we intend to develop and grow.