The Covid-19 pandemic has had a noticeable influence on workflows and work processes. It has also had an impact on innovation in the financial services space.

Singapore bank OCBC switched its wealth management products and services online during the lockdown as more than 1,000 financial and wealth advisors shifted to digital. Since 18 April, with the lockdown still in effect, they have been conducting meetings and sales advisory – highly regulated activities - via video and screen-sharing facilities. The bank registered an increase of 45% in the sale of wealth management products in the first 10 days of launch compared to the prior 10 days, indicating a positive response from customers to non-face-to-face wealth conversations.

For its part, Vontobel, another highly active bank in Asia, announced last December it was changing the structure of the group in an effort to be more efficient and client-centric globally, with a focus on servicing investment managers. Georg von Wattenwyl, head of platform & services Asia, and CEO of Vontobel Singapore, told SRP that having the deritrade platform has been key for Vontobel to build up its profile in the region, enter the flow business and increase its footprint in a short period of time.

If there’s a region where platforms make sense, it is in Apac - Georg Von Wattenwyl, Vontobel

“Because the commoditisation of this part of the market, having the right technology and capabilities in place are a clear advantage as the Apac market, which has seen a shift towards automation over the last few years,” said von Wattenwyl. “Most of our business in Apac is done via deritrade, which suggests that our clients value the tools we offer, the automatic pricing, life cycle management etc.”

The platform business will be a key element of the bank’s offering going forward, and will allow the banks to scale its offering in different markets. “If there’s a region where platforms make sense, it is in Apac because the markets are standardised, and the products have been commoditised,” said von Wattenwyl. “There’s a limited number of product structures and the differentiating factor is in the pricing and the speed to quote.”

In the US, private equity firm Vivaris Capital announced its first structured financial product for United Cancer Centres (UCC). The Vican combines a private equity investment with investment-grade securities, and gives clients the chance to invest in scenarios with high growth and return potential while only taking the risk of an investment grade fixed-income portfolio.

The face amount will be returned regardless of the performance of the portfolio company. The investments include zero coupon notes, treasury bonds and some insurance products.

“The other half goes into risk assets which, at the early stage, are technology-based growth equity companies. They’re middle-market buyouts or their real estate development projects and have a current yield component that’s designed to pay investors about a six percent coupon after a ramp-up period,” president and founder of Vivaris, Christopher Mizer told SRP.

SRP is running a series of articles looking at the impact covid-19 has had on some key structured product markets globally.

For the US, SRP data shows that 57% of new products launched and 60% of the sales volume generated in the US market year-to-date were done between February and April 2020, primarily due to very strong sales recorded in February and the first half of March as the markets were still rallying. Another data point of note was that growth products have proven to be more resilient with sales volume falling to a far lesser extent compared to income products. The sales volume of growth products in March 2020, as reported on our news service, spiked compared to February 2020 and March 2019 by 7.71% and 48.36%, respectively.

South Korea, however, saw a significant slowdown in structured product activity with both issuance and sales decreasing for the period February to April 2020, compared to the same period last year. Excluding flow and leverage products, issuance and sales fell by 15% and 31%, respectively.

Looking at this year’s developments, the market has dropped continuously since the beginning of the year. April’s sales stagnated with a slight drop of four percent to US$4,828m, while issuance plummeted 19% to 1,469 striking products, compared to March. This level of market activity was last seen in July 2016 (US$4,752m/1,689 products).

Photograph:  Jeremy Thomas/Unsplash.