“The goal is to transform savers to investors”- The Asian Banker

"The goal is to transform savers to investors"- The Asian Banker

BDO Trust and Investments Group’s head Rafael Ayuste Jr, discussed the investment bank’s efforts to increase its retail investor base, the growth of its Personal Equity and Retirement Account (PERA) business, and its plan

  • BDO Trust holds 23.5% market share
  • Only 3% of Filipinos invest in pooled funds
  • BDO Trust scales up for asset class expansion

BDO Trust, the wealth and investment arm of BDO Unibank, continues to lead the trust and investment industry in the Philippines, managing $24 billion in assets across retail and institutional segments.

BDO Unibank, Philippines’s largest bank, has $82 billion in total assets  and serves diverse market segments, from mass retail to high-net-worth individuals (HNWIs).

BDO Trust holds 23.5% market share in AUM

BDO Trust’s total assets under management (AUM) constitutes an industry-leading 23.5% market share, as of end-December 2022, with no competitor holding more than 20% market share as of today. Between 2018 and 2021, BDO Trust grew at a compound annual growth rate of 10% year-on-year.

Since 2021, BDO Trust has further focused on BDO’s large client base, improving accessibility and simplifying user experience, while increasing BDO Unit Trust usage.

Rafael Ayuste Jr., head of trust and investment group at BDO, said: “Increasing our retail investor base will start with increasing our penetration from our own bank’s client base. We will be targeting clients with a high propensity to invest through data-driven marketing initiatives. This will be done in coordination with our branch banking partners to ensure that these clients receive proper guidance at the onset. The goal is to evolve them from being savers to becoming investors.”

Only 3% of Filipinos invest in pooled funds

According to the Bangko Sentral ng Pilipinas Financial Inclusion Survey, only 3% of Filipinos have investments in pooled funds such as unit investment trust funds (UITF) or mutual funds. In addition, public and corporate retirement funds are often insufficient to last throughout the retirement phase.

For the mass retail segment, BDO Trust provides investment products with a minimum investment amount of $20 (PHP 1,000) for peso-denominated funds and $200 for U.S. dollar-denominated funds. 

In the same segment, BDO Trust became the first accredited Personal Equity and Retirement Account (PERA) administrator in 2016, offering tax exemptions for contributions up to an annual maximum of $3,663 (PHP 200,000).

PERA is a voluntary retirement account for Filipinos, supplementing their social security system and corporate pension benefits.  It can be opened online, eliminating the need for 30-minute face-to-face discussions at the branch. BDO’s PERA business grew by 26% YOY in 2022, outpacing peers and holding 63% of all PERA accounts in the market.

While growth in the wealth retail segment has slowed down, BDO gains momentum in the mass affluent segment, with an investable AUM entry point of $100,000 (PHP5 million).

BDO is one of the few banks in the Philippines, offering a discretionary investment portfolio in peso and USD, an arrangement in which the client gives consent for the manager to buy and sell securities without obtaining their prior permission.

In anticipation of a market recovery in 2023 and beyond, BDO provides clients with a platform to convert their funds placed in short-term products, such as time deposits and money market funds, into a diversified long-term portfolio.

In 2022, banks faced challenges in asset growth due to poor performance across all asset classes and a reverse interest rate cycle, which drove clients back into time deposits. To prevent mis-selling or product push on fee-based assets, BDO Trust serves as a 100% distributor of trust products, with sales officers and branches operating on fixed salaries. 

“This allows us to uphold our fiduciary duty. We give investment advice on the needs of the clients. Most of our clients opted for money market funds since 2022, due to the interest rate environment. We reduced the fees in some of our products to support their investment objective, given the prevailing market rates,” Ayuste emphasised.

BDO provides an open banking platform to facilitate client access to time-deposit funds from other financial institutions.

BDO Trust scales up for asset class expansion

Ayuste said 2023 is a recovery year for the industry. “We are seeing more interest in long-term bonds. Clients are looking at 5- to 10-year income bonds, and we are seeing strong inflows which will help us achieve our year-end target earlier than anticipated.”

According to Joel Escala, head of business information for BDO Trust, moving forward, BDO Trust aims to transform its core system to offer a wider range of asset classes and services and prepare for an increase in volume in the coming years. “To manage the $40 billion (PHP 2 trillion) assets in the future, we need to scale up, offer more flexibility, and approach our clients with more tailored products and services,” said Escala.

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by : on 2023-07-19 08:50:00

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