Wealth managers turn inward

Capital controls offer new growth points for industry

As regulatory crackdowns in China hit risky investment products and capital outflows, the country’s private banks are looking to profit as they target a bigger share of growing wealth in the economy.

Wealth managers like Noah Holdings and units of China Merchants Bank and China International Capital are casting wider nets to tap affluent clients, who have so far remained outside mainstream private banking.

They are now targeting small cities, where the wealthy have traditionally relied on shadow banking investment products that promise high returns but are illiquid and opaque, according to bankers and consultants working for the wealth managers.

China’s clampdown since last year on sending capital outside the country was also opening up opportunities for domestic wealth managers in China, they said.

China’s onshore private wealth market has grown rapidly in the last few years. This year, it is set to reach $ 28 trillion, nearly three times the country’s GDP in 2016, making it the second- largest such market after the US.

But only about 10- 12 percent of China’s high net worth individuals, or those with more than 10 million yuan ($ 1.5 million) in investable assets, are served by professional wealth managers, which compares with roughly 20 percent in South Korea and 55- 60 percent in the US and Europe, according to Noah.

That proportion is likely to rise as wealth managers promote their investment advice and products more widely, and as awareness grows of how to diversify from bank deposits and property investments, the bankers said.

Founded in 2003, Noah, which has assets under management of $ 63 billion, plans to add more people to win new business in smaller cities such as Shenyang, capital of Northeast China’s Liaoning Province and Wenzhou, a coastal city in East China’s Zhejiang Province.