Financial advisory firms gain traction, thanks to rising affluence and demand for wealth management

FINANCIAL advisory (FA) firms – long regarded as a marginal segment in the distribution of funds and insurance products – are coming into their own, thanks to a rising demand for wealth management services among affluent Singaporeans.

Some FA firms have surpassed the key S$1 billion threshold in terms of assets under advisory (AUA), buoyed by clients’ rising wealth levels and growing sophistication.

Banks and tied insurance agencies continue to dominate the distribution of insurance and funds. But more clients today seek comprehensive advice including access to instruments such as exchange traded funds (ETFs), stocks and bonds, as well as legacy planning – areas that insurers and banks may not be able to fulfil.

A spokewoman for the Association of Financial Advisers (Singapore), or Afas, said the FA sector is “poised for growth” as consumers look for investment diversification. In addition to an increase in retail investors, the influx of family offices has also led to a rise in accredited investors, lifting AUA growth.

She added: “We believe strongly that the FA sector is able to provide a precious commodity that other tied channels are not able to adequately provide – choice. We believe that puts us in the best position to cater for demand and growth, as evidenced by the ever-increasing share of the consumer pie over many years.”

Afas has 37 member companies and three associate members. Among them, they have over 1,970 representative (rep) advisers as members, with 57 from “tied” FA firms, which are FA arms set up by insurance companies.

As a distribution channel, FA reps have quietly squeaked past tied reps in terms of new insurance business, based on data from the Life Insurance Association (LIA). In terms of total weighted premium, FA reps’ share was 32.7 per cent in Q3 2024, compared to about 30 per cent for tied reps. In Q3 2020, FA reps’ share was 26 per cent and tied reps 35.9 per cent.

Neither LIA nor Afas tracks the FA sector’s AUA. But iFast Corporation’s results give an idea. iFast reported group AUA of S$23.6 billion as at end-September 2024, a record high. AUA for Singapore alone grew 20 per cent to S$16.8 billion.

Record growth in FA platform services

In its nine-month results, it said its B2B business, which provides platform services to FA firms, banks and institutions, achieved a record high in AUA. iFast is said to be the largest among platform service providers. The B2B business’ share of total AUA is about 70 per cent.

iFast Platform Services Singapore general manager Vincent Tong said iFast hosts close to 50 FA firms and “several thousand” reps. Its turning point for the B2B business came with the decision to expand beyond serving as a platform for unit trusts into wealth management, opening up bonds, ETFs and discretionary portfolios for FAs.

He said the outlook for AUA growth is “extremely positive” over the next five to 10 years. “Several FA firms are also licensed fund managers, and can manage customer portfolios on a discretionary basis. The FA industry is set to play a bigger role in the wealth management space, competing strongly with traditional players.”

IFast’s own wealth management B2C offering – iFast Global Markets (iGM) – has itself surpassed the S$1 billion AUA mark. It has 70 reps, each advising on around S$20 million in assets.

PhillipCapital also offers platform services, branded Fame (Financial Access Made Easy). Lisa Lee, executive director of wealth management, said assets under administration and management has doubled since 2020.

What sets the Fame platform apart is that it does not charge platform or minimum fees. This enables FAs to “tailor their fees according to the value they provide and the needs of their clients”, said Lee. “The overarching goal is to reduce barriers for advisers and clients, while promoting flexibility and accessibility in wealth management.”

She noted that FA firms are increasingly institutionalising and centralising their investment practice, through the use of model portfolios. Some have partnered PhilipCapital which has a fund management licence. “We see the FA industry sharpening its focus on serving the high net worth (HNW) segment within and outside Singapore,” she added. The firm aims to support the HNW client segment through the “right solutions”, such as access to alternative investments and family trusts.

FAs ride the waves of affluence

IPP Financial Advisory (Ippfa) is among the larger FA firms, with close to 400 reps and nearly S$2 billion in AUA. Head of fund management David Mok said growth shot up by 46 per cent during the Covid years. “Probably during the lockdown, clients may have more discretionary money and channelled them into investment. In doing so, they became more accustomed to investing... We believe that more people are now aware of the benefits of investing, and it’s likely the interest will stay and AUA will grow.”

Providend’s AUA is now about S$1.4 billion, advised by just 12 representatives. It built its reputation on a fee-only model, rebating all product commissions or trail fees, to ensure alignment of interest. Most other FA firms charge a portfolio advisory wrap fee for investments, but product commissions may not be rebated.

Providend chief executive Christopher Tan said the firm’s turning point in terms of sustained profitability came in 2016; since then the average annual growth in AUA has been about 28 per cent. “The key driver is our success in attracting HNW and ultra-HNW clients through our fee-only model, as well as our ability to deliver deep and competent wealth advice which gives clients a higher probability of success.”

He expects AUA to grow by an average of 15 to 20 per cent a year, thanks to demand for legacy planning, wealth and investment management among the affluent; and especially business owners looking for an exit.

Roy Varghese, who has a master’s degree in accounting, has focused on financial planning since around 1997. He transitioned to iFast in 2012, and became an adviser under IFast’s iGM. He advises on about S$100 million in assets spread among 60 clients. He has started to transfer his book of clients in phases, in anticipation of a post-retirement career as a coach to financial advisers.

“A succession plan is now in place… to ensure that quality of advice and scope of service is assured,” he said. His clients are affluent professionals “with high income, and who save and invest in earnest”. Some clients have retired, and their adult children have become clients as well.

Many established FA firms have been in business for about two decades. In the early days of the first FA licences around 2002/03, larger insurance firms protected their tied agency force and did not allow FA distribution.

Insurers’ FA firms muscle in

Over the years, in recognition of demand for more comprehensive advice, insurers themselves have set up FA companies distinct from their agency force. These include Great Eastern FA (Gefa), Prudential FA (PFA) and AIA FA, among others. Some insurers invested in existing FA firms; Singlife owns Professional Investment Advisory Services, and FWD has a share in Ippfa.

Insurers’ FA arms sell third-party insurance products, typically general insurance and products for HNW clients. The firms tend to focus on insurance, but they may also advise on and distribute unit trusts. Some may be able to transact on stocks, bonds and ETFs, which expands their product range far more than a tied agency.

Gefa claims to be largest FA firm in Singapore with a “strong affluent client base”. It was established in 2011 with 300 reps, and has since grown to 3,000 reps. CEO Jesslyn Tan said that Gefa provides “comprehensive financial planning and integrated wealth management solutions”, with partners who can help clients set up family offices. Business from HNW clients has seen “strong double digit growth”, she said: “Due to market sentiment and the lower interest rate environment, we expect continued growth from this segment.”

AIA Singapore chief distribution officer Alvin Fu said AIA FA has been able to capture a “significant” share of the insurance industy’s strong post-pandemic growth, and the business outlook is “optimistic”. As at September, AIA FA achieved annualised new premiums of S$200 million.

“While traditional insurance needs such as protection and medical continue to be strong drivers, the increasing affluence of Singaporean and HNW individuals is fuelling demand for sophisticated insurance solutions,” he said.

Prudential launched PFA in 2023, and has 1,000 reps. Jeff Ang, PFA chief executive, said: “The FA market is experiencing steady growth due to factors like increasing longevity, increasing wealth and wealth management needs of the growing HNW segment in Singapore There is also rising awareness that financial planning is not just for investment returns but also for long-term financial security and wealth preservation.”