Digital is driving China’s wealth management market
OVER the past five years, the Internet finance boom in China has provided the foundation for the rise of digital wealth management in the country.
The percentage of wealth management products sold online in China has reached 35%, a level similar to that in the US and significantly higher than some other mature markets.
In addition, China has witnessed the emergence of large third party online wealth management platforms such as Lufax and Ant Financial. The combined Assets Under Management of these two platforms has topped US$600bil, rising at a compound annual growth rate (CAGR) of 50% over the past five years.
Inspired by the success of Internet unicorns and by their own ambitions for exponential growth, Internet finance players and investors in China are highly receptive to new technologies.
“Leading players in China are TRADE STATISTICS ON BURSA MALAYSIA (RM mil) actively leveraging technology to reinvent wealth management front-to-back across the value chain, bringing higher efficiency and client experience that is superior in some ways to what traditional wealth management models offer.
For example, supported by Ping An Group’s technology and data platforms, Lufax uses big data, machine learning, and other technologies to analyse investors’ profiles and risk appetites, and then recommend products tailored to each investor’s unique situation and preferences.
Meanwhile, China merchants bank has launched Machine Gene Investment, a big data-based mobile robo-advisory service that fuses human wealth-management practices and fund-research experience with machine-learning algorithms.
Boston Consulting Group (BCG) said a recent survey in China revealed that the affluent middle class has become the largest client segment for online wealth management products.
This pool of investors, whose income stems primarily from wages and salaries, and whose assets managed online typically account for 30% of their total investable assets, represents more than half of online clients.
Online wealth
As the wealth of this segment increases, China’s online wealth management market should expand further, said BCG.
It added that China has been a late starter in the wealth management business. More recently, regulators in China have been pushing for accelerated development of the wealth management industry, including measures to forbid implicit investment guarantees and to enforce fiduciary duty.
“This is a good outcome for the market and promises to transform the industry,” said BCG.
It is along these lines that digital technologies and tools are poised to play a larger role in enabling wealth managers and investment advisors to offer clients significant and timely market insight, investment and allocation advice.
Digital technology will also push wealth management in China toward a higher level of transparency, prompting institutions to see things more from the client’s perspective and mandating them to deliver a better customer experience across the value chain.
This, is turn, will increase the global sophistication of China’s wealth management industry.
BCG said that as China’s wealth management industry undergoes a deep transformation, it sees the market shifting toward a more advisory driven model. In this environment, players with strong capabilities in digital and in overall investment intelligence will lead the pack.
Statistics by MIDF Investment Research