As private banks look to raise the minimum requirement for assets under management from their clients, the insurance industry is getting ready to tap those that don’t qualify.
‘With changes around regulations and technology affecting private banks, risk and compliance costs have gone up,’ Ian Kloss, Singapore CEO of Old Mutual International told Citywire Asia. ‘As a result, they are looking for clients with higher and higher thresholds.’
J.P. Morgan Private Bank increased its minimum threshold to $10 million in 2016. Standard Chartered Private Bank followed suit recently to up the client account requirement to $5 million from $2 million.
‘That works very well for us because we don’t differentiate within HNWIs. We distribute through a combination of private banks and independent financial advisers, who have private clients, who in turn may have several banking relationships or may not yet qualify for one.
‘They’re not traditional UHNW clients but they are affluent in their own right and they might have a number of properties in multiple jurisdictions. They have a complicated portfolio that they need assistance with, they need to know how their product works in multiple jurisdictions, and whether the advisor is going to give them a suitable recommendation.
‘So they want flexibility, transparency and tax efficiency – and we can tap that growth market.’
Old Mutual International Singapore conducts life assurance business. It offers a range of single premium, whole of life, investment linked insurance products, which include a variety of fee structures.
While it has traditionally targeted the internationally mobile UK expat community, it is growing its outreach to the HNW market in the city-state through licenced insurance brokers, which often work with private banks.
Declining ULI demand
In terms of insurance products, Kloss, who was recently appointed Singapore CEO, believes the universal life market in Singapore is saturated and less attractive as rates rise.
‘Universal Life (UL) is largely one of the products dominating the market. But I think with the expected increase in interest rates, and some of the alternative needs that VUL can address, some of the rationale for using UL will reduce.’
Old Mutual International is tapping the trend by offering variable universe life policy options, as these products can meet needs in ways that traditional UL cannot.
‘It gives flexibility around being able to manage the assets within and dial up or dial down the insurance as and when needed.’
Another trend Old Mutual International is keeping pace with is the rise of the millennial HNWI.
‘We are continuing to invest a lot of resources into our online platform called Wealth Interactive. Our millennial clients really like for its transparency, easy-access and client engaging features.’
But millennials also don’t like paying high fees, so what does that mean for his pricing strategy?
‘I have seen the squeeze on margins but that’s nothing new for us. We are priced very well for the value our solution provides and I don’t see the need to cut costs to acquire market share.’