Managers in Asia See Banks as Key Partners in Promoting Retirement Products
October 26, 2021 — Singapore
Despite an increased reliance on digital tools, banks are still a preferred route in reaching investors with retirement solutions
Banks are seen by managers across most Asia ex-Japan markets, except Taiwan, as the most effective channel to promote retirement products to retail investors aged 60 and above, as well as to younger investors in certain markets, a Cerulli survey has shown.
While the COVID-19 pandemic has increased the reliance on digital tools to connect with and educate retail investors on the financial aspects of retirement, these channels tend to appeal mostly to a younger demographic. In Cerulli’s survey, which was conducted earlier this year, digital and social media advertising was selected as the most effective channel for promoting retirement products to investors aged between 21 and 60 years across all Asia ex-Japan markets.
Partnerships with online platforms and robo-advisors are therefore proving to be effective in targeting these younger retail investors in most markets. Due to the convenience offered, as well as low minimum commitment amounts and fees, these online channels have been steadily building their investor base. Despite managers’ opinions on the effectiveness of digital channels, Cerulli believes that it will take time to see young investors fully utilizing these to invest in retirement products, due to other priorities that they may have.
Korea and Singapore were the only markets surveyed where managers ranked partnerships with banks relatively higher in terms of effectiveness, in reaching out to investors aged between 21 and 60. This is likely because, compared to online platforms and robo-advisors, banks are viewed as better equipped with the expertise and resources to promote mutual funds in these markets.
In Korea, banks are the key distributors of the Employee Retirement Security Act (ERSA), accounting for 51.0% of corporate pension assets in 2020. Furthermore, Korean managers, especially those offering target-date funds, have strong relationships with their affiliated banks. This allows asset managers to easily leverage their affiliated banks’ reputation to garner the interest of younger investors in their retirement-related products.
Similarly, in Singapore, the top local banks—DBS, OCBC, and UOB—are widely counted upon by retail investors looking to enhance their retirement portfolios via the Central Provident Fund Investment Scheme and Supplementary Retirement Scheme. This gives banks an advantage when promoting retirement products. Furthermore, there have been exclusive mutual fund partnerships between asset managers and distributors in the country recently, with both parties collaborating to educate and provide suitable retirement product offerings.
“The importance of finding the right distributor to reach out to the mass retail segment cannot be ignored, especially those with direct contact with retail investors,” said Della Lin, senior analyst with Cerulli. “Moreover, the majority (83%) of Asia ex-Japan managers surveyed by Cerulli indicate that they regard the size of distributors’ client base as their most important consideration when partnering with them on retirement solutions.”
She added: “Constant education and campaign efforts by managers and distributors have helped to raise the awareness of the need for retirement planning. As managers and distributors gain expertise and build track records in the retirement arena, their credibility as product providers is likely to follow.”
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