Is this a feature of WHAT is expected in 2012

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Business Times - 12 Jan 2012

 

Closure of wealth manager ipac hits S'pore, HK clients

 

Unwinding of AXA unit's US$500m portfolio assets may extend into Q2

 

By GENEVIEVE CUA

 

(SINGAPORE) The closure of the wealth manager ipac Singapore and Hong Kong is expected to impact clients with combined portfolio assets of roughly US$500 million.

 

In addition to the shock of closure, clients are likely to have to redeem a substantial amount - about US$300 million - from ipac Dublin-domiciled SIS portfolios, which ipac aims to close. SIS is ipac's proprietary multi-manager series of funds.

 

However Gary Harvey, ipac Singapore's chief executive, took pains to emphasise that the process of unwinding may differ among clients, depending on their decisions. Those who wish to stay with their ipac advisers may be able to do so, as ipac aims to help those advisers to find alternative employment with other firms or institutions. ipac Singapore has a staff of 'just under 50' in Singapore.

 

'I am very conscious that in the current economic and turbulent market environment, customers will be worried about their investments when they hear the word 'closure'. We're proactively communicating to give them comfort around (the process).'

 

Seven SIS funds have an estimated asset value of roughly US$300 million. The closure of the funds is expected to take around four to five months.

 

Uncertainty had swirled around ipac for more than a year, since AXA began moves to restructure its Asia-Pacific insurance business, of which ipac was a part. AXA sold the Australian and New Zealand business to AMP last year, and retained the Asia-Pacific business.

 

While it had great confidence in its core insurance growth in the region, the financial advisory business was said to be loss making and AXA's commitment to that segment was unclear. ipac Australia has been transferred to AMP.

 

AXA announced the closure of the ipac operations in Hong Kong and Singapore on Monday. It said 'the divestiture of these fee-based financial planning businesses would be consistent with its ambition to focus on continuing the strong growth of its insurance businesses in Asia'.

 

ipac Taiwan will continue to operate as it expects synergies with a prospective life insurance licence there, said Mr Harvey. 'For Hong Kong and Singapore, we didn't see the same level of synergy...'

 

ipac's closure is a blow to the local FA space, where growth is believed to have stagnated amid a more difficult operating environment. Not only are firms grappling with sharply volatile and downtrending markets, but they also have to comply with new rules on the sale of investment products.

 

For ipac in particular, profits have been elusive since it began in 2003. In the fiscal year 2010, it reported an after-tax loss of $4.5 million. This was a slight improvement from 2008 and 2009 where losses came to $5.9 million and $5.6 million respectively.

 

Its cumulative loss as at 2010 was a staggering $33.9 million.

 

ipac had begun operations here with much fanfare. It hoped to make a success of an advice-centric model, where advisers are paid salaries rather than through product commissions. Clients are charged a portfolio advisory fee. This model is supposed to better align adviser interests with customers'.

 

But its high overheads - salaries plus a prime Raffles Place office - made the business unsustainable.

 

The firm is now seeking to redeploy its staff within AXA, or to find new jobs for them elsewhere. The total staff in Singapore and Hong Kong is 80, including support staff. 'What we aim to do is to work with advisers to find them new homes, and work with clients and advisers together to find new relationships.

 

'The key point is client wishes. We will have some clients who may say - it's OK, I have another adviser... Or, we may have people who say I'd like to move with my adviser. Subject to the adviser finding a new FA firm or bank, we would help them to move across.'

 

He added: 'We envisage the process will take time, well into the second quarter.'