Monday, 15 April 2024

BDO Trust aims to transform savers to investors

5 min read

By Chris Kapfer

BDO Trust and Investments Group head Rafael Ayuste Jr discussed the investment bank’s efforts to increase its retail investor base, and the growth of its personal equity and retirement account

  • BDO Trust holds 23.5% market share
  • Only 3% of Filipinos invest in pooled funds
  • Scaling 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 is one of the largest banks in the Philippines with $82 billion in total assets. It serves diverse market segments, from mass retail to high-net-worth individuals.

BDO Trust holds 23.5% market share in AUM

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

Since 2021, BDO Trust has further focused on BDO Unibank’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 Trust, 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 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 PHP 1,000 ($20) for PHP-denominated funds and $200 for USD-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 PHP 200,000 ($3,663).

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 Trust’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 Trust gains momentum in the mass affluent segment, with an investable AUM entry point of PHP 5 million ($100,000).

BDO Unibank is one of the few banks in the Philippines offering a discretionary investment portfolio in PHP 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, BDO Trust provides clients with an open-banking platform to convert their funds placed in short-term products, such as time deposits and money market funds into a diversified long-term portfolio, and facilitates client access to time-deposit funds from other financial institutions.

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. 

Ayuste explained: “This allows us to uphold our fiduciary duty. We give investment advice on the needs of the clients. Most of our clients have 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.”

Scaling up for asset-class expansion

Ayuste said that 2023 is a recovery year for the industry. He observed: “We are seeing more interest in long-term bonds. Clients are looking at five- 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, 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. He said: “To manage the PHP 2 trillion ($40 billion) assets in the future, we need to scale up, offer more flexibility, and approach our clients with more tailored products and services.”

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