TWSE Market Insights

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As of the second quarter of 2024, the total scale of trust business in Taiwan has reached NT$16.79 trillion, and money trusts and securities trusts which securities firms may engage in account for approximately 42.6%. Banks have a market share of over 90% in the aforementioned two trust businesses, while securities firms account for less than 3.4%. Therefore, securities firms continuously and actively seek transformation, hoping to expand their wealth management business and enhance their competitiveness among financial institutions.

The Financial Supervisory Commission (hereinafter referred to as the “FSC”) opened up wealth management service to securities firms on July 27, 2005, and securities firms may provide asset allocation or financial planning services after understanding the financial situation, investment goals, and risk tolerance of high net worth customers. With the continuous changes in the economic environment and the diversification of investment needs, wealth management through trust has become an important part of asset management, complementing traditional investment consulting and asset allocation advice services. Securities firms help customers utilize assets more effectively and achieve wealth appreciation, thus achieving the goal of customer first.

After wealth management business was opened in 2005, in order to improve the convenience of customer transactions, in 2008 the FSC allowed securities firms to allocate assets for customers through the “wealth management specialized account”, and opened the trust structure wealth management business in 2009, with the scope of money trusts and securities trusts. In 2016, the FSC allowed securities firms to engage in employee benefit trust and insurance trust through trust structure, in order to enhance the adequacy of customer asset planning and continuously provide customers with more diversified products.

In 2020, overseas Taiwanese businessmen intended to repatriate their funds overseas due to the impact of the fluctuation of the international situation. For this reason, the FSC launched a new financial management scheme that securities firms which meet certain conditions may provide diversified financial services to high-asset customers with an asset size of more than NT$100 million, or an investment amount of more than NT$30 million. Three major business areas are opened: sub-brokerage (brokerage trading), wealth management (entrusted investment), and bond dealership business. The items relaxed include the review procedures for offshore structured products, issuance of offshore structured products by securities firms’ overseas reinvested subsidiaries or branches, and credit rating regulations for foreign bonds. Through the loosening of laws and regulations, more diversified financial products, multiple sales channels, and more comprehensive services can be provided to meet the investment and wealth management needs of high-asset customers to expand the scale of wealth management business in Taiwan.

The FSC has gradually relaxed relevant regulations and allowed securities firms to engage in trusts that benefit persons other than the settlor in 2021, primarily focusing on the principal benefiting the settlor and the interest benefiting persons other than the settlor, to assist customers in planning wealth and property transfers to meet their trust needs. Last year (2023), wealth management services were no longer for asset allocation purposes only, as the FSC promoted Trust 2.0 which allows securities firms to provide customer-oriented integrated trust products based on customer needs, including elder care trust and educational trusts for children, for comprehensive financial planning. The milestone events are shown in the table below.

Table 1：The milestone events

Date	Event
July 27, 2005	The “Directions for the Conduct of Wealth Management Business by Securities Firms” was formulated to establish the legal basis for securities firms to engage in wealth management business.
April 11, 2008	Securities firms were allowed to conduct asset allocation for customers through the “wealth management specialized account.”
September 28, 2009	Securities firms were allowed to engage in wealth management business through trust. Business items: money trusts and securities trusts Business types: non-discretionary individual management, non-discretionary collective management, and semi-discretionary individual management for which the principal designates the scope or method of use
December 28, 2013	It was stipulated that securities firms should establish a dedicated department for trust business at their headquarters, and certified associated employees may (concurrently) undertake wealth management services.
January 22, 2015	The business type of semi-discretionary collective management for which the principal designates the scope or method of use was opened. A securities firm conducting the type of business under semi-discretionary individual management or semi-discretionary collective management, and accepting NT$10 million or more from the customer in original trust assets, shall apply to concurrently operate a securities investment consulting enterprise that conducts discretionary investment business by means of trusts.
December 22, 2016	Employee stock ownership trust, employee benefit savings trust, and insurance trust were opened.
September 10, 2020	Investment in offshore structured products was opened for the trust assets of high-asset customers.
July 1, 2021	Securities firms were allowed to engage in the business of securities trusts that benefits persons other than the settlor, mainly in the form of “the principal benefiting the settlor, and the interest benefiting persons other than the settlor.”
November 7, 2023	Securities firms were allowed to use trust-based methods for financial planning and subsequent execution or asset allocation for customers, in order to provide various trust products under money and securities trusts, including elder care trust and educational trusts for children.
Note: Organized by the TWSE

 

Compared with brokerage trading business, wealth management business has sustainability and can be divided into two parts: (1) consulting in connection with asset allocation or financial planning, or services in connection with the sale of financial products, and (2) conducting financial planning and the execution or handling of asset allocation on behalf of the customer by means of a trust. The former business considers the customer’s risk tolerance to recommend asset allocation that meets the customer’s needs based on his/her financial condition, sell diversified financial products, and formulate customized investment strategies to achieve the effect of asset activation. The latter business is handled through trust, and the current business items opened are “money trusts” and “securities trusts.” By utilizing the advantages of independence, programmability, and flexibility of trusts, assets can be effectively protected from variables such as trustee bankruptcy or death, creditor claims, or legal disputes, and can be planned for retirement, asset inheritance, and taxation according to the wishes of customers. Securities firm, as trustees, can professionally allocate and manage assets based on market changes and customer needs. The businesses conducted through trust are classified according to whether the customer has decision-making power and the management style of the securities firm, as shown in the following table：

Table 2

Management style/ Decision-making power over fund utilization	The customer has the decision-making power (the principal decides on the investment target, utilization method, amount, conditions, and period)	The securities firm has the decision-making power (the principal designates the scope or method of use)
Individual management	Non-discretionary Individual Management	Semi-discretionary Individual Management
Collective management	Non-discretionary Collective Management	Semi-discretionary Collective Management

In January 2023, the scale of securities firms’ trust assets was NT$217.23 billion. There was a clear upward trend since July in the year, mainly due to a significant increase in the amount of non-discretionary individual management of money trusts investing in domestic securities (stock-type securities investment trusts), reaching a nearly two-year high in November of the same year, with the total trust assets amounting to NT$251.72 billion. As of the end of September 2024, a total of ten securities firms were engaged in wealth management business, with a total trust asset size of NT$249.73 billion. Non-discretionary individual management of money trusts had the largest proportion with an amount of NT$228.22 billion, accounting for about 91.39% of the total trust assets. Among money trusts, non-discretionary individual management of money trusts investing in domestic securities had the highest investment amount (accounting for 55.8%), followed by non-discretionary individual management of money trusts investing in foreign securities (accounting for about 32%). Among securities trusts, semi-discretionary individual management of securities trusts account for the highest proportion, with a total amount of NT$20.63 billion, accounting for approximately 8.26% of the total trust assets. The top three securities firms in terms of trust asset amount are Yuanta Securities, KGI Securities, and SinoPac Securities. The cumulative number of accounts opened at the ten securities firms continues to rise, reaching 1.61 million.

In order to expand the wealth management customer base of securities firms and increase customer willingness to open accounts, the FSC allowed new customers to open wealth management accounts online in August this year, and agreed that securities firms may accept applications from customers to change their wealth management details through electronic certificate verification. In addition, if a customer’s basic information retained at the securities firm for another business has been updated, the basic information of the customer’s wealth management account may be changed accordingly with his/her consent, for the sake of customer convenience and improvement of the efficiency and flexibility of the securities firm’s related operations.

In line with the “action and innovation” goal of Chairman Peng of the FSC, the TWSE has studied the feasibility of allowing securities firms to establish simple branches, and has reported it to the FSC. After the relevant regulations are implemented, securities firms will be encouraged to establish simple branches to increase their wealth management service points, develop customer sources, and provide more timely services. In addition, the TWSE will continuously assist securities firms in optimizing functions related to client-specific ledgers operations. By understanding customer fund sizes through account balances, securities firms can provide suitable financial products to meet customers’ asset allocation needs, thus enhancing their competitiveness.

In view of the abundant domestic funds and a considerable high-asset customer base, to attract domestic and foreign investors to invest in Taiwan, the TWSE will continue strengthening the depth and breadth of wealth management business operated by securities firms. Securities firms are able to improve their product research and development capabilities and provide comprehensive financial management solutions to cultivate high-asset customers, so as to improve customer loyalty and asset utilization efficiency. At the same time, as Taiwan will enter a super-aged society, customers can be assisted in achieving optimal asset utilization in different stages by integration of products and professional services through the multi-aspect functions of trusts such as asset protection, elderly care, and property inheritance. Securities firms’ construction of a customer-based business operation model to form a sound financial ecosystem is helpful in promoting Taiwan to become an Asian asset management center.