According to a report published on the Investor Daily website, recent research conducted by Deloitte Access Economics found that “the wealth management industry will be worth an extra $250 billion to the Australian economy over the next 20 years, establishing it as a top five growth sector.”
Deloitte’s research identified Australia’s location next to Asia and Asia’s aging and increasingly wealthy population as key factors they believe will drive the sector’s growth. Backing up the call is data suggesting “three billion people in Asia will have joined the middle class by 2030, and by 2050 the region will account for more than half the world’s financial assets.”
It’s easy to imagine how Australia’s advanced and well regulated wealth management industry is in a prime position to capitalise on this situation and export its services into the Asian region. For investors, the problem is identifying which companies are best positioned to benefit.
Given the size of our domestic equity, bond, property and infrastructure markets, it is likely that firms best placed to service Asian clients are those with global capabilities, not just domestic focused equity managers. Likewise, the need to have a presence in Asia arguably makes larger firms with their greater resources better positioned to seize the opportunities.
Here are four companies that fit the bill of already having capabilities to take on global investment mandates, provide foreign financial services and also have the resources to increase their foothold in Asia:
- AMP (ASX: AMP) has the potential to provide insurance, financial planning and investment management services in Asia. The company already has a presence in the Asian region and recently furthered it through an alliance in China.
- BT Investment Management (ASX: BTT) is the wealth management arm of Westpac Bank (ASX: WBC). This combination provides significant scope for expansion into Asian markets.
- Commonwealth Bank (ASX: CBA), like BT, has significant wealth management capabilities thanks to its Colonial First State division. It too is well placed to provide services to the growing demand from Asia.
- Macquarie Group (ASX: MQG) is of course an Australian success story when it comes to moving into new frontiers beyond Australian shores. With a number of offices already established in Asia, Macquarie will almost certainly be part of the growth in the industry.
While identifying a potential growth theme is a great start, an investor still needs to find a way to profitably invest in the theme. The potential for the Australian wealth management industry to play a leading role in providing services to Asian clients is in itself far from a certainty. Major financial hubs of Europe and America no doubt looking for a slice of the action as well, which makes picking winners no simple task.
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Motley Fool contributor Tim McArthur owns shares in BT Investment Management and Macquarie Group.