How External Asset Manager Do Business in Singapore

financialtreat – will explain about How External Asset Managers Do Business in Singapore that you will get in the following article. let’s look at this article carefully!

Stricter regulations, changing customers, technological innovation, and complex financial markets all enhance the challenges faced by external asset manager (EAM). If the power of external asset manager (EAM) lies in their independence, this does not mean they have to do it themselves – quite the opposite.

What is EAM?

An external asset manager (EAM) involves a client who opens an account with a custodian bank, which may be a private bank, and places assets in that account. The Client authorizes and powers EAM as a third party to represent them in managing their investment portfolio and asset allocation.

At all times, assets remain in the account in the name of the client, but the EAM makes decisions about how the assets should be managed. In Singapore, there are three main types of EAM: family offices and multi-family offices are traditional models, started by the Ultra-High Net Worth (UHNW) team.

There are also EAM/multi-family offices, which can be operated by a group of Relationship Managers (RMs) who manage assets under management (AUM)’ for clients, or operated by companies specializing in areas such as asset management, brokerage insurance and private equity.

Eam Business Model

Well, after knowing what an external asset manager is, then the financial will share the business model in the external asset manager. Usually, when a high-income client opens an investment account with a bank, the bank’s in-house investment professional will manage the account.

However, with the EAM model, external parties manage investments, while banks serve accounts. The client then appoints the EAM to manage the assets with the custodian bank under a Limited Power of Attorney (LPOA) over the account. Thus, the model creates a tripartite relationship between the client, the custodian bank, and the EAM.

EAM revenue model

EAM generates revenue through retrocession, management, and performance fees. A retrocession fee is a commission that an EAM receives from a bank as an incentive to choose that bank for its clients.

They are the easiest to produce. Custodian banks also offer EAM a partial rebate of their service fee depending on the volume of trades made for the client. Some regulators require EAM to disclose retrocesses to their clients, while others may leave it to EAM to provide information voluntarily.

3 EAMs may also decide to provide a portion of their retrocession to their clients to reduce the net costs incurred by clients. Some EAMs charge a management fee for handling client portfolios. It is demanded annually, based on a discretionary mandate.

The third source of income is performance fees, which are paid by clients based on performance benchmarks pre-agreed with EAM. All three revenue models can be adopted simultaneously by EAM.

How can an External Asset Manager continue to do business in Singapore?

Given that there is often a gap of several months between the time a manager leaves the bank and the time they start working for an existing external asset management company or launching their own business in singapore, this is an increasingly difficult path to follow.

Furthermore, experts expect EAM consolidation to increase in the coming months, both in terms of business combinations and the launch of shared service platforms.

This merger, which has long been marginalized, will allow EAM to continue to run new ventures, better serve their clients, improve their performance, and prepare for the future of their business, or even its business succession.

· Focus on core business through strong partners

However, external asset managers and acquisitions are not the only options. The strong partner that EAM can rely on to focus on their core business is an undeniable asset. Experts discuss, the WealthBriefing Swiss External Asset Management Awards 2023.

Shows how much EAM is looking for a strong partner especially after two years of the global pandemic and at a time when the geopolitical landscape has changed dramatically, with significant consequences for financial markets.

For more than 30 years, service to external asset managers has been an important and strategic activity for Lombard Odier, with more than 70 employees working for EAM and multi-family offices today.

We believe that wealth managers should maintain their entrepreneurial independence and freedom, but they should not work alone. As a partner, external asset managers do not limit themselves to providing a single service.

But it offers a suite of solutions and support tailored to the needs of each EAM, so they can focus on their client relationships and management.

· Supporting transformation

EAM wants to be able to rely on a strong balance sheet of the bank. Especially during periods of turbulence or paradigm shifts, as they are currently experiencing with the requirements of the Federal Financial Services Act (FinSA) and the Federal Financial Institutions Act (FinIA).

This new regulatory landscape is a game changer for many companies, encouraging them to specialize and partner with other organizations to manage costs. As a reminder, EAM and trustees must apply for a license from FINMA by the end of 2023.

The financial market watchdog, FINMA, argues that to some extent regulation should really drive the sector in the long run. The prospect of new legislation has highlighted EAM’s status as an industry in its own right.

More than 2,000 EAMs and several hundred trustees have declared themselves in accordance with the new rules. While there will certainly be some constraints along the way, we will continue to support our clients and partners in this important transition phase for them and for the future of their business.

· Preparing for the future and the digitization process

Beyond the purely legal aspects, EAM often needs support to adapt to the digitization of work processes. This allows them to effectively manage various investments, client reporting tasks, compliance aspects, and outsource non-essential functions so that they can maximize their specialist skills. Again, experienced partners in this area can help them achieve their goals.

“Every EAM should consider which business model they want to build to ensure the continuity of their activities,” Fischer said. In terms of digitization, new solutions are increasingly neede to ensure efficient client onboarding, reporting, risk management, investment adequacy monitoring, and other functions.

These are all areas in which we continue to invest, thanks to our banking platform, which has been develope for more than 30 years, and our strategic partnerships with fintechs.

Growth Factors Of External Asset Managers In Singapore

In our survey of EAM in Singapore, we trie to assess the growth drivers the industry feels over the next five years and found that these mainly come from three sources:

The value proposition offere by EAM,
The value proposition offere by Singapore for business, and
Support from regulatory and government authorities.

(1) EAM value proposition

The main value proposition that EAM offers is a concentrate focus on building long-term relationships with high-value clients. EAM does not face short-term revenue targets or pressure to sell in-house products and is able to provide long-term client-focuse wealth advisory and investment solutions.

They benefit from developing strong relationships with clients because of the independent and professional investment advice they offer.The second value proposition comes from the gradual acceptance of the EAM model by the client. As the EAM sector matures, clients gain greater awareness and trust, and become more open to providing LPOA to EAM. Creating awareness continues to be an ongoing effort by the EAM industry.

(2) Singapore’s value proposition

Singapore is well known as a leading financial and fintech hub. The island houses leading global banks and offers leading local banks. Global asset managers such as BlackRock, Nomura, and Franklin Templeton are physically present in the city.

Therefore, investors can seek deep and extensive investment, banking and wealth management solutions in Singapore through a variety of existing financial institutions. As a fintech hub, Singapore further provides private investment opportunities to high-value investors in the start-up space. That was a little bit of a presentation about external asset manager. Hope it is useful.

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