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| Sunday, 18 August 2002 |
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| News Business Features Editorial
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'Exciting environment for IWM in Sri Lanka'
Banks in the developed world have progressively made inroads to Investment and Wealth Management (IWM) to improve profitability as the traditional role of banks as financial intermediaries is being challenged, said Director AGAPE International, Sydney Dr Shantha Yahanpath in an interview with the Sunday Observer. "The future of banking will rest in the hands of customers and not banks. The banks will have to deliver what the customers want," he said. The attractiveness of the IWM will enhance the profitability of banks in Sri Lanka, he noted. The basic business model of banking, borrowing and lending has remained the same for centuries. Today globalisation, technological developments, deregulation and increased competition constantly challenge the profitability of banks. "IWM offers attractive opportunities without the risks and constraints of banking. For instance, the demanding capital adequacy constraints are less important to expand into this area. Moreover, with the ageing population in the developed world and in Sri Lanka, there are attractive opportunities for the fund management industry," said Dr Yahanpath. The ageing population, less reliance on children, increasing income and propensity for investments, the government's intention of involving the private sector in socio-economic factors, fiscal deficit which forces private sector pension funds, progressive reduction of State involvement in commercial entities and the utilities sector, internationalisation of financial markets, increasing awareness on the need for wealth management for retirement, less volatile investment management fees, minimal risk exposure and the use of existing assets to deliver IWM solutions favour a strong IWM industry in Sri Lanka. He said these factors coupled with prospects of peace will create an exciting environment for IWM in Sri Lanka. Opportunities for banks lie in the IWM value chain. They can either embrace the total value chain or focus on key components, outsourcing the rest, he added. Technological and social changes have affected the competitive landscape of banking financial services and investment management industries. In the future, the ability to deliver wealth management solutions will become one of the key factors in selecting and retaining a bank by a retail customer and the challenge for the bank is to reinvent and cope with the new paradigm shift. Lucrative mortgage portfolios will be things of the past. Mortgage brokers, securitisation and specialist mortgage lenders will drive the margins lower. He said that this does not mean that banks will have to become investment management companies. Banks with good distribution channels, IT platforms, quality brand names and financial resources will be able to capture profitable components of the investment management value chain and offer customer-friendly wealth management solutions. Dr Yahanpath, who is based in Sydney, is in Sri Lanka at the moment. He presented a paper at the annual conference of the Association of Professional Bankers and is also handling consultancy work for a limited number of clients. AGAPE International is a Sydney-based management and investment consultancy firm. |
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