How wealth banking needs have changed beyond Covid-19 | Wealth Banking Trends 2021
The Covid-19 pandemic continues to dominate headlines, from rising infection rates to vaccine take up rates, disappointing economic numbers and further job losses. As markets continue to be volatile and uncertainty ensues, what is happening in the wealth banking sector?
In this edition of Beyond Covid-19, ZUU online Singapore speaks with Lim Kok Boon, Head of Maybank Premier at Maybank Singapore. Lim looks after the Maybank Premier segment that caters to clients with an AUM of between S$300,000 to S$1.3 million. Maybank Premier has grown more than four-fold over the last five years.
What were some wealth banking strategies that worked in 2020?
One of the strategies that worked well was the balanced portfolio approach. This means having an investment portfolio or holdings with both equities that carry a higher risk exposure, as well as income-producing bonds that carry a lower risk. Using this approach, customers were able to better cushion themselves against a volatile financial market. Historical data showed that time and time again, investing in a period of crisis always pays off in the longer term although the natural human tendency is to take a risk off approach and hold on to cash.
Investors who had the risk appetite to leverage as well as a suitable time horizon took advantage of the low borrowing rates to invest further into unit trusts, as the potential payout from the investment is greater than the cost of borrowing.
The other strategy that worked for more sophisticated investors was using a variety of structured products to take tactical bets or views as attractive valuations emerged.
What were some strategies that did not work in 2020?
One strategy that did not work in 2020 was to stay completely in cash or cash out as interest rates trended lower. Investors who sold off in panic as the markets declined would have suffered permanent losses as a result.
Financial markets always discount prices ahead of actual events or news, therefore the headline news we read today are normally considered old news to savvy market investors. The presence of leverage also often pushes markets to extreme levels when there is a change in market sentiment and direction. This is inevitable as borrowing rates stay low and even more leverage is introduced into the financial markets.
An important reminder for our clients is to review their own portfolio regularly, especially during times of distress and great uncertainty. This is to avoid missing the chance to switch into a more attractive asset class that would have reaped better returns in the medium to long term, and also to help investors avoid hanging on to poorer investment positions. Proactivity is key when markets are in turmoil.
What advice would you give to wealth banking customers in light of what happened in 2020?
We are of the view that it is of critical importance that clients review their wealth portfolio regularly to ensure it is still in line with their risk appetite, time horizon and objectives. Customers with greater risk appetite and financial ability should explore taking leverage as interest rates are likely to stay low for a prolonged period to buy into bonds and unit trusts to increase their investment returns.
Reviewing their own protection and retirement plans is also highly encouraged as insurance costs are generally lower when one is young and health issues tend to set in with age. Maybank Premier offers a comprehensive range of insurance solutions to cater to different budgets, needs and objectives.
Lastly, financial markets are in a buoyant state so be careful of taking excessive risks. Maybe you can consider leaving the herd behind by taking some profits!
How can Maybank help customers in their changing wealth banking needs today?
Maybank has a comprehensive suite of products with competitive offerings to meet our customer’s needs. Be it for investing or protection, we are able to assist our customers in making the right choices. Our customer segmentation also allows us to tailor the right solutions and services for each customer.
We always advise clients how they invest their money for retirement is dependent on their end goals, time horizon and risk appetite. Customers should also set aside enough emergency funds to last them for three to six months on average. These factors must be taken into account before taking the next step of allocating money for investing, because some products will not work well if the time horizon is not long enough, or the products may be too risky even though they provide a higher return.
Generally, if a customer’s time horizon is medium to long term and there is sufficient ability to undertake potential loss exposure, buying into equities will be suitable. Otherwise, one should opt for less risky investment instruments such as structured deposits or fixed-income products from quality names. A combination of equity and fixed income assets in a portfolio is often sensible to balance out risks.