The Asia-Pacific region is in the process of a retail investing revolution, with rising affluence, technological advancement and innovative new business models radically lowering the barriers of entry to the financial markets. From the continent’s most important financial centers to more far-flung locales, local firms are hungry for innovative new ways to win market share and help their clients grow their assets.
This surging demand is a key reason why we at ViewTrade have brought Dividend Reinvestment Plans (DRIPs) to APAC. By introducing this simple yet powerful investment strategy to the region’s retail brokers, we are enabling these firms to deliver the power of compounding returns to their clients, putting them on a faster track to reaching their financial goals.
Here’s how it works in a nutshell. By working with a broker offering a DRIP program, retail clients can automatically reinvest cash dividends from a given investment in the same underlying stock. With our DRIPs, there are no fees or commissions involved with reinvesting these dividends, so investors can put their money back into the markets at no additional cost. This can be particularly valuable for high-net-worth individuals who are still accumulating wealth. At their best, DRIPs can create a virtuous cycle of increasing returns, with each dividend payment date initiating new opportunities for further growth.
This seemingly simple concept can have profound implications. For example, we are empowering brokers to enable DRIPs with notional investment through their clients’ monthly investment plans, so they can start as small as they want and grow their assets over time. Progress might be slow at first, but with each month’s returns reinvested to generate more earnings, the benefits can add up quickly as the years go on. For those with a long-term investment horizon, the effects might be as pronounced as retiring earlier or in greater comfort.
This aligns well with some of the key trends occurring in APAC. As part of a 2022 report produced by ViewTrade, Taiwan-based bank Sinopac reported that the average retail investor age fell from 45 before 2019 to under 35 as of last year. In other words, by entering the markets earlier, today’s retail investors are further magnifying the compounding power of DRIPs. Retail brokers that are unable to offer a DRIP program run the risk of being left behind.
As positive as DRIPs can be for the end investors, retail brokers in the region can also realize powerful benefits. DRIPs are a great way to keep and increase assets under management (AUM) – instead of parting with client dividends each month, brokers can put them right back into the market (whether on the security level or account level), easing their path to steady, sustainable growth. It lessens the importance of trying to time the market or make quick gains and enables them to focus more on building wealth over time, bringing brokers and investors into greater alignment through a straightforward, easily understandable model.
Introducing DRIPs to APAC was not an easy task – adopting a new strategy can be intimidating, especially when it comes to people’s financial futures – but with extensive education and engagement with both brokers and retail investors, we are now helping this market realize the benefits. Our expert team, cutting-edge technology and global reputation as the force that powers fintech were all key success factors.
In sum, with the potential for increased returns, the need for brokers to innovate and the shifting demographics of the APAC retail investor community, the use case for DRIPs has never been more compelling. We stand ready to help any firm in the region offer this new avenue to generating wealth.
Want to learn more? Drop us a line.