Digitize to Modernize: Understanding the Evolution and Empowerment of Asian Retail Investors

As we move further into what has been termed the “Asian Century,” hundreds of millions of people across Asia have achieved middle-income status. Brookings Institution research shows that in 2020 the Asia-Pacific region accounted for a 54% share of the global middle class, a number that is set to increase to 65% by 2030.

As affluence across the region grows, people are looking for ways to further build and diversify their wealth – a desire that has given rise to an unprecedented wave of retail investors entering the markets. The level of competition among firms that serve the APAC retail market has risen in kind, with traditional brokerages facing considerable pressure from upstart digital-first offerings.

We wanted to take a deeper dive into this trend to see how the industry has responded. That’s why we worked with Kapronasia to conduct both primary and secondary research on this market, interviewing key decision makers from financial institutions and fintechs across the region to understand the key dynamics at play.

If traditional brokerages are to truly meet the needs of APAC retail investors, adaptation is the name of the game. Here are a few reasons why.

Demographic Dynamics

One key to understanding the evolution of APAC retail investment is to understand how the industry thinks about this market. Our research identified three general dimensions for categorizing these investors:

• Millennials/Gen Zs vs. Baby Boomers/Gen Xs
• Traders vs. Asset Allocators
• Mass Retail vs. High-Net-Worth Individuals

The APAC region sees investment activity from all these groups, but they are not equally distributed. Mature, developed economies – such as Japan, Singapore and Taiwan – typically contain retail investors who are more affluent, more passive and more risk-averse. On the other side of the coin, emerging markets like Indonesia and Malaysia are typically younger, more aspirational and eager to generate wealth at a faster pace.

But even developed economies are seeing increased activity from younger generations. At Sinopac, a Taiwan-based bank and ViewTrade client, the average retail investor age fell from 45 before 2019 to under 35 as of this year. This aligns with a worldwide spike in Millennials and Gen Zs entering the markets.

That’s not to say Millennials and Gen Zs have taken over the market – older generations still contribute the vast majority of revenues for brokerages around the region – but today’s younger investors will be the profit centers of tomorrow. If they are already active today, APAC brokers must cultivate interest among this group through targeted offerings to establish loyalty and sustainable business into the future.

Access and Choice

These demographic changes have led to shifts in market-wide demand. While equities remain the most popular asset class, younger investors are eager to branch out and access more diverse investment opportunities.

Perhaps the most pronounced example is the region’s widespread interest in crypto, which aligns with a general desire to grow their assets quickly. However, many APAC jurisdictions have placed heavy restrictions on this asset class, whether outright bans, use-case restrictions or significant capital gains taxes. Firms that can effectively navigate these regulations and offer some level of exposure to the crypto markets could be uniquely positioned to win over retail investors.

But it’s more than crypto. Particularly in developed markets, retail investors have been clamoring for more choices in terms of investment vehicles, and brokerages have responded. An executive at one Hong Kong-based brokerage said that while offerings have historically included Hong Kong equities and maybe a few other products, increased competition has spurred firms to add support for U.S. equities, IPOs, warrants and more. Short selling has also become more popular.

To recap so far: APAC retail investors are more active than ever and want more choice as to what that activity can look like. How can brokerages ensure they evolve to meet these demands, both now and in the future?

Customer-Centric Digitization

As traditional brokerages face competition from digital-first players purpose-built to serve a younger audience, they must pursue their own technological innovations to keep up. Up until three years ago, 75% of Sinopac’s revenue was being generated from its online digital platform; today that number is 80%. What’s more, approximately 95% of Sinopac clients are using their smartphones to trade. Put simply, the future of the retail market is digital.

But this modernization effort is about more than just having an app – it’s also about providing customer-centric user journeys at scale. Today’s retail investors are used to life on demand – whether for streaming, transportation, food delivery or banking – and they expect their trading platforms to deliver similarly simple and enjoyable experiences. Without a relationship manager to make clients feel seen and heard, the app must do the heavy lifting.

That means brokerages must go beyond designing a slick user interface. APAC retail investors will flock to apps that arm them with relevant, timely content while also offering a diversified range of products. Offering equities alone, even at ever-lowering commissions, only hampers growth potential. These investors also prize speed (at every step from account opening to settlement) and program trading tools (such as automatic order placing or condition trading).

Of course, building an app that checks all these boxes is easier said than done. That’s why traditional brokerages that want to serve APAC retail investors should embrace opportunities to collaborate with other players in the ecosystem to evolve fast and capture younger generations for the long haul. With the right technology and partnerships, even the most traditional of firms can deliver great retail investing experiences. Onboarding, connectivity, content and a wide array of key functions across the trade lifecycle can all be outsourced – it’s just a matter of finding the right provider.

Interested in learning more about preparing for the future of APAC retail investing? Drop us a line or download our full research report in collaboration with KapronAsia for more.

Based in Taipei, Andy manages an extremely knowledgeable team of associates serving fintech firms, banks and broker-dealers across Taiwan, Singapore, Hong Kong and rest of Asia . The team has grown under Andy’s leadership to further support their clients’ innovation. He currently serves as the Director of FIDA (The Fintech Industry Development Association), an organization he founded in early 2017. As a Certified Financial Analyst (CFA), he is also a member of The Supervisory Board and Chair of the Membership Committee of the CFA Society Taiwan, a non-profit organization to advance the investment profession by enhancing investment knowledge and encouraging high ethical and professional standards throughout Taiwan.