AIA’s MPF play: no price war — more fund choice to keep clients

This article is a rewrite of a report from July 2012.

As semi-portability arrived in November 2012 and rivals cut prices to win business, AIA’s MPF arm went the other way: no price war — more fund choice and better service to keep clients.

Why skip the price war?

Because fees are not the only consideration. The chief executive of AIA’s trust business said clients must look beyond headline fees to the fund expense ratio. Hong Kong’s average MPF expense ratio had already fallen 17% in four years to 1.74%. As MPF assets kept growing and the pie got bigger, economies of scale would naturally push fees down.

What was AIA’s plan?

Seven low-fee funds launched a year earlier, charging 0.99% of net asset value a year. With semi-portability widening client choice, price cuts alone would not retain anyone — the fund menu had to grow. The firm then ran 25 funds under five managers, and would actively seek experienced managers wherever clients wanted new offerings.

How did service fit in?

More hands, stronger back office. Headcount rose about 10% that year to 270, half in client service and IT administration — a signal of how seriously the firm took after-sales support. Keeping old clients mattered as much as winning new ones, she stressed; weak back-office support would lose them. AIA then held about 10% of Hong Kong’s MPF market and aimed to grow it on several fronts.