Robo-ad­viser sec­tor to take off in China

China Daily (Hong Kong) - - BUSINESS - By CAI XIAO caix­iao@chi­nadaily.com.cn

China will be­come the world’s largest robo-ad­viser mar­ket thanks to its grow­ing mid­dle class and the pop­u­lar­ity of the mo­bile in­ter­net, according to a re­port re­leased by Cred­itEase Corp and Bloomberg LP.

A robo-ad­viser is an on­line wealth management ser­vice that pro­vides au­to­mated, al­go­rithm-based port­fo­lio ad­vice with­out the use of hu­man fi­nan­cial plan­ners.

“With fast-paced ur­ban­iza­tion and uni­ver­sal higher education, China’s new mid­dle class is grow­ing quickly, which is a key fac­tor for China to be­come the largest robo-ad­viser mar­ket in the near fu­ture,” said Wang Fux­ing, man­ag­ing di­rec­tor at Cred­itEase Wealth Management Co Ltd and the main au­thor of the re­port.

China will have 300 mil­lion to 500 mil­lion mid­dle-class peo­ple in the next five to 10 years, said the re­port.

According to the re­port, Chi­nese new mid­dle class are those who are fa­mil­iar with the in­ter­net and good at im­prov­ing their ca­pa­bil­i­ties through dif­fer­ent high-tech prod­ucts. They are ra­tio­nal and fond of per­son­al­ized and high-qual­ity life­style and wealth management meth­ods.

Wang said the pop­u­lar­iza­tion of the mo­bile in­ter­net will also be­come an im­por­tant fac­tor be­cause robo-ad­viser prod­ucts will ben­e­fit from a solid in­ter­net in­fra­struc­ture.

The re­port said the num­ber of China’s mo­bile in­ter­net users to­taled 790 mil­lion in 2015, in­creas­ing 8.4 per­cent year-on-year. It is es­ti­mated that the num­ber will be 890 mil­lion in 2018.

The re­port was made af­ter sur­vey­ing on 5,762 new mid­dle-class re­spon­dents, aged be­tween 30 and 45 with in­vestable funds be­tween 500,000 yuan ($72,600) and 2 mil­lion yuan each in six cities, in­clud­ing Beijing, Shang­hai and Shen­zhen.

About 76 per­cent of the re­spon­dents said they hoped to re­ceive in­vest­ment rec­om­men­da­tions from robo-ad­viser prod­ucts and other dig­i­tal means. Around 62 per­cent of them said they would seek per­son­al­ized wealth management prod­ucts.

Global as­set al­lo­ca­tion, good user ex­pe­ri­ence, trans­par­ent and safe as­sets and a pro­fes­sional fi­nance and tech­nol­ogy team are of great im­por­tance for a robo-ad­viser plat­form, said Hu Jin­hui, chief tech­nol­ogy of­fi­cer of ToumiRA, a robo-ad­viser product of Cred­itEase.

In the United States, the rapid de­vel­op­ment of quan­ti­ta­tive in­vest­ing and big data tech­nol­ogy have spurred the de­vel­op­ment of robo-ad­viser prod­ucts.

Lead­ing US robo-ad­viser com­pa­nies in­clud­ing Wealth­front Inc and Bet­ter­ment Hold­ings Inc, and tra­di­tional fi­nan­cial in­sti­tu­tions such as Black­rock Inc, Gold­man Sachs Group Inc and Charles Sch­wab Corp are also en­ter­ing the mar­ket through merg­ers and ac­qui­si­tions or by set­ting up their own robo-ad­viser plat­forms.

Sep­a­rately, Cit­i­group Inc re­leased a re­port that as­sets un­der management by roboad­vis­ers in­creased to $18.7 bil­lion at the end of 2015, while in 2012 the amount un­der management was close to zero.

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