KUALA LUMPUR: The local asset management industry is reaching an inflection point signalling a slowdown in future growth, according to Securities Commission Malaysia (SC) chairman Datuk Syed Zaid Albar.
“Concerns over the growth trajectory were also given impetus as industry shortcomings were increasingly raised by investors and industry players themselves,“ he said at the launch of the first joint research report by the Institute for Capital Market Research Malaysia (ICMR) and Japan’s Nomura Institute of Capital Market Research (NICMR) today.
Over the last 20 years, the asset management industry has recorded strong growth with a compound annual growth rate of 16%.
However, the country’s asset under management saw the first decline since 2008, falling 4.2% to RM743.6 billion in 2018 from RM776.2 billion in 2017. This compares with the Malaysian capital market which was valued at RM3.19 trillion as at end-April 2019.
Unit trust funds (70%) is the biggest segment within the asset management industry.
The joint report highlighted there are signs of a slowdown amidst fundamental shifts which are expected to alter the industry, which include changing demographic trends and investor preferences, the advent of digitalisation, availability of talent, as well as changes in market regulations and structure.
ICMR director Datin Azleen Osman Rani (pix) highlighted that the asset management needs a revitalisation and innovation, given the fast-changing financial and economic landscape.
“The report helps us assess the long term potential for asset management in Malaysia, and what needs to be done to ensure its sustainability towards the future,” she said.
Digitalisation within the industry is one of the issues raised by the report. In this regard, Azleen said there is a need for agents to quickly transform themselves.
“Digitalisation will see the introduction of robo-advisory that will enable the industry to leverage on technology to provide complex information in a simplistic manner to their customers.”
In the future, she said, agents will have to deal with the adoption of robo-advisory and to be able to provide even more value-added offerings than its digital competitors.
“It is well discussed in the industry for the agents to move up the value chain and provide comprehensive financial advice. Digitalisation will also see the robo-advisory linking up with other fintech offerings. The landscape will be very difficult for the agents.”
Moving forward, the issue of digitalisation also needs to be addressed by the regulators.
Azleen said from a regulatory perspective, there has been more innovation coming through robo-advisory. “For example, in Indonesia, robo-advisory has linked up with payment systems to provide microinvesting.”
Australian micro-investment app Raiz Invest is expected to make its debut in the Indonesian market in the third quarter of this year. The app will allow users to collect spare change from their debit cards and e-wallets transactions, rounding up to the nearest 5,000 rupiah (RM1.46) and once it hits a threshold of 10,000 rupiah (RM2.92) it will be automatically invested in mutual funds.
“Perhaps, this is something that regulators could consider going forward,” Azleen said.
