China private banking debate: Managing a wealth of riches in China

By:
Elliot Wilson
Published on:

The nation’s private banking industry is blossoming, but even as it flourishes, leading players have to move fast to keep up with a changing market and an increasingly demanding and diverse client base. Euromoney gathered together a panel of private bankers, wealth managers and economists to discuss the market’s key issues in July.

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Executive summary

• China’s private banking industry is growing rapidly
• New clients are often young and confident
• Investor education is a priority 
• First and second generation clients have very  different demands
• Branding and marketing, as well as product range,  are paramount

Read more about the participants

Elliot Wilson, Euromoney How fast is the private banking industry growing and changing in China? And how can your institution ensure that you are getting a big slice of the business? 

Yin Jinqiang35

YIJ, ABC We have more than 64,000 clients, with an average level of assets under management of Rmb12 million ($1.88 million), and our client base is growing by 23% each year. Our private banking business has been experiencing rapid development in recent years, adapting to the wealth-management needs of HNWIs [high net-worth individuals], notably when it comes to wealth preservation, creation, inheritance and accumulation.

Since the establishment of Agricultural Bank of China private banking department in 2010, we have been increasing our market share by providing our clients with comprehensive asset management, financial management, financial consulting and cross-border financial services, as well as value-added services. We describe our value-added services as 'five butler services’.

Jing Wang35

JW, CMB The average and total wealth of our private banking client base is growing very quickly, presenting us with a considerable number of new and profitable opportunities. Our clients are typically natural entrepreneurs who have built their own companies, then gone about completing initial public offerings, accumulating large sums of new wealth. We kicked off our private banking business in 2007 and it has been growing by 30%-40% a year. Our client base is broad and diversified.

China Merchants Bank, which puts great emphasis on service and providing high-quality advice to clients, notably when it comes to the make-up of their wealth portfolio, is not a state-owned bank. We provide high-quality advice to our clients, notably in terms of professional advice on the make-up oftheir portfolios.

Our clients have a higher risk appetite than normal and are willing to invest more of their capital with us. We can help them in any number of additional ways, offering credit cards, loans, mortgages and financing. More Chinese HNWIs are also exporting their assets and investing their earnings overseas, so we are in turn investing heavily in our own services and infrastructure to keep pace with that demand.

Yu Jin35

 YUJ, ABC-CA According to a new report, the number of newly wealthy citizens in China is growing rapidly. In 2015, the amount of disposable wealth in the country is projected to hit Rmb129 trillion, a 16% increase over last year’s figure. The total number of HNWIs in China is set to hit 126,000 this year, while total disposable assets are set to reach Rmb33 trillion. The origin of new wealth creation has also changed. Not long ago, half of all new wealth emanated from investments in the property sector. That share has fallen this year, to 40% from 50%, while investments stemming from financial services and the capital markets has risen to 60% of all new wealth formation.

As a fund manager, there are more things we can do to develop the market. Take ABC, a large state-owned bank that has a different and larger population of wealthy clients than the likes of China Merchants Bank. ABC has a long history of working in and with the public sector and with state-owned enterprises, and there is so much wealth still emerging from this group of customers. Their risk appetite is lower than in the private sector, but it is changing. So we decided to set up a special account with ABC that helps them manage the funds of their clients. I believe there is much more that we can do to help roll out better private services to mainland clients, and we are making those changes. Before, our branches were siloed, which kept accounts separate from one another, rather than integrated into a single, centralised investment channel and network. So we built a joint venture, and began working with ABC to provide a more comprehensive portfolio of investment services. We hope to ensure greater integration and synergies, to boost IT infrastructure and to offer new services to all our clients. 

Emily Gu35

EG, UBS UBS is the largest wealth manager globally and has more than 150 years of experience in serving the world’s wealthy. Asia Pacific is contributing substantially to our global wealth management business, where we hired 200 client advisers in 2014 and will continue to hire strategically based on the needs of growth. Wealth creation in China is leading the region, and private banking is going to continue to grow, which presents great business opportunities to UBS. Excluding the Americas region, net new money in our wealth management division was SFr8.4 billion ($8.8 billion) to the second quarter of 2015, with Asia Pacific the main contributor.