Thai wealth management growth hampered by regulations

Tue Jul 19, 2011 3:01am EDT

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* Thailand estimated to have about 50,000 Thai high net worth individuals

* Industry handicapped by product offering

By Frederik Richter

BANGKOK, July 19 (Reuters) - Wealth management services are catching on among Thailand's rich, but a narrow product offering and regulatory limitations so far prevent the industry from offering the same services that tap growing millionaire money in other Asian markets.

The number and wealth of Asian millionaires surpassed Europe last year for the first time, Merrill Lynch-Capgemini said in a report, adding that most European wealth managers plan to expand their presence in the region to make up for sluggish growth at home.

Bankers estimate there are about 50,000 high net worth individuals (HNWIs) in Thailand who are estimated to control about 40 percent of money invested in Thai capital markets.

There is scant data on wealth management in Thailand but bankers estimate the market is growing at about 15 percent per year, in line with other Asian markets. But they also say this could be even higher as the Thai market is less penetrated.

"In the mature markets like Singapore or Hong Kong there are more choices in terms of investment products but that also means we have the potential to generate more income," said Wichit Phayuhanaveechai, head of retail banking and wealth management at HSBC Thailand.

Some Thai banks have recently set up wealth management services but they mostly use these as mere distribution channels for their own mutual funds instead of offering access to a wide range of asset managers.

The industry offers few products as Thailand's capital market regulator demands that most products are capital-protected and have for example placed restrictions on short selling of stocks by mutual funds.

Thailand's central bank is cautiously watching the country's exchange rate, limiting how much can be invested abroad.

Bankers say this has recently been relaxed due to the strength of the Thai baht and Thai banks have been allowed to raise money for local funds feeding into funds offered by international partners.

But bankers still estimate that Thailand's rich hold up to 75 percent of their money in Thailand, limiting the industry's ability to sell international investment funds.

The industry is also handicapped in its product offering as the Thai capital markets regulator still applies standards meant to protect retail investors to all investors.

"In the future we hope to see separate regulations for retail investors and high net-worth individuals," said Narit Koslathip, assistant managing director for private wealth management at Phatra Securities.

Thailand lacks a developed estate legislation, which means Thailand's rich families pass on wealth from one generation to the next without the need of professional wealth management that in developed markets includes tax and accounting services.

HOTEL ROOMS

Thailand is yet to fully liberalise its financial industry and foreign banks have long been limited to just one branch.

Bankers say that established wealth managers without an office in Thailand already cater to the market from Singapore and Hong Kong, booking hotel rooms in Bangkok to market their products on the ground and meet clients, underscoring the industry's potential.

Thailand's rich have long been limited to the about 200 "old money" families that control Thailand's economy through diverse business interests and vast property ownership.

But they have now been joined by the new wealthy, especially owners of small enterprises that have emerged from Thailand's export-led economic growth over the past couple of decades.

"There are more and more affluent people in Thailand now who would have their wealth managed professionally," said David Lim, head of private banking in Southeast Asia at Julius Baer.

This year, regulators have begun to allow foreign banks to operate more than one branch and the central bank plans to further open up Thailand's financial services industry in the future.

Wealth managers also expect restrictions on their product offering to be eased. "The whole landscape might change in the coming years," said Phatra Securities' Narit. (Editing by Anshuman Daga)

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