China’s private banks are in a market that has begun to mature. Even though the country’s economic growth is slowing, global experts who service Chinese financial institutions believe the nation’s private wealth industry will continue to expand.
“The Chinese high net-worth/ultra-high net-worth market will continue to grow, consistent with Chinese economic growth and global Chinese capital allocation,” says Kevin Barr, an executive vice-president at SEI, a US-based fund management solutions services provider. “Investors are no longer dependent on domestic Chinese growth for wealth accumulation but are increasingly generating wealth outside of China.”
In China, UHNW individuals (people with at least $20 million in investable assets) have total assets estimated at $3.7 trillion, putting the country in second place after the US with $8 trillion, according to a recent report by Boston Consulting Group.
China’s HNW investors, or those with investable assets of more than $1 million, will be a big driver of China’s asset management market, alongside the rising mass-affluent [with assets worth $100,000 to $1 million], says Kenneth Tam, a Hong Kong-based senior officer with Casey Quirk, a research subsidiary of Deloitte Consulting.
“This is broadly in line with trends across the world as retail investors (including HNW individuals) increasingly supersede institutional investors as the source of organic growth in the industry,” he adds.
China’s economic reforms during the past 40 years resulted in the rapid creation of wealth and led the Communist Party to recognize and strengthen private property rights and to recognize the right of wealth transfer from one generation to the next. That new wealth has created exciting opportunities for the financial sector.
China first enacted a national trust law in 2001, leading to rapid growth in commercial trust companies and the establishment of family private trusts. This trend has coincided with the rise of family offices to manage and transfer wealth from one generation to the next.
The concern now is whether or not China will introduce inheritance tax, which could have a big impact on the transfer of wealth.
“The government has been talking about an inheritance or estate tax, and there’s been a lot of press or media about the subject, but so far it hasn’t happened,” says Hubert Tse, a partner with Boss & Young, one of Shanghai’s largest law firms.
“China is still getting wealthy at this moment – imagine if inheritance taxes came, even more wealthy money will try to leave China,” says Tse, who advises both global and Chinese corporate clients, including some of China’s big private conglomerates. “That may be part of the consideration why the government hasn’t imposed it yet.
“China has minted a lot of wealth in the past 30 years,” he adds. “Many UHNW individuals are interested in moving wealth overseas. Some are immigrating, many are sending children to top institutions of higher learning globally. Many simply want to diversify investments globally because it’s a smart thing to do.”
The private bankers who offer the best services that cater to what the UHNW desire the most will be the ones who will win the biggest market share in future.
Overall best state-owned private bank:
China Construction Bank Private Banking
|Liu Jianzhong, China Construction Bank|
China Construction Bank’s private bank leads the field among state-owned banks in helping high net-worth clients with the most comprehensive services. It has a team of 1,800 wealth management consultants and account managers dedicated to serving clients through more than 300 wealth management centres spread across China, and centres in Hong Kong, Macau and Singapore. At the end of 2018, CCB served 127,000 wealthy clients, with a total of Rmb1.35 trillion ($200 billion) in assets under management, the largest among the nation’s top five largest state-owned banks.
Led by Liu Jianzhong, the general manager in charge of wealth management and private banking, the bank has enhanced transparency in China’s private banking market by working with global research firms to come up with a number of landmark studies on the wealth management market in 2017 and 2018.
CCB’s online app for private bank clients has proved popular. The app helps the bank to keep in close touch with its elite clients, who use the app not only for investments but for a range of exclusive features, including interacting with private account managers, receiving special invitations to events, consultancy services and participating in private health programmes and travel services.
Among the special services offered are information and advice about how to set up family trusts. The bank last year set up private bank family advisory offices at its headquarters in Beijing and in branch offices in Shanghai and Shenzhen, as well as in Guangdong and Shandong.
CCB also offers a tailor-made health programme, which clients can use to access medical consultations by phone, specialists trained in traditional Chinese medicine treatments and trained medical attendants who can provide medical services in private homes. The benefit was used nearly 30,000 times last year.
The bank also offers a range of free legal counselling services and wealth-transfer lectures, offering one-to-one consultations and access to a range of expertise, including legal advice on maintaining financial assets and the transfer of wealth to the next generation.
The bank has advisory and management services particularly for the elderly and for those nurturing the young, for example, providing overseas education support programmes, including help with visa applications and travel services.To improve staff training, last year CCB implemented the first phase of its in-house ‘Swiss private bank wealth consultant training programme’ on inter-generational family wealth transfer.
Overall best national private bank:
China Merchants Bank Private Banking
|Wang Jing, China Merchants Bank|
China Merchants Bank’s private bank is the one that almost every other private bank looks to. Without exception, every private banker Asiamoney interviewed said that CMB is the leader in the private banking field. For that reason, CMB wins Asiamoney’s Best National Private Bank award.
Led by Wang Jing, the general manager in charge of Private Banking, the bank began catering to high net-worth individuals in 2007, one of the first to do so in China. Since 2007, it has built up a team of 1,300 wealth managers serving 72,000 wealthy clients via its 63 private banking centres and 66 wealth management centres in locations including Hong Kong, New York, Los Angeles, Singapore, Sydney, London and Luxembourg.
So far, its clients have parked Rmb2 trillion ($300 billion) in assets with the bank, the highest assets under management among private banks in China. High net-worth clients like the bank for a number of reasons, chiefly its fast response, personal care, wide range of products and services that span the globe.
The bank launched a family office service for ultra-high net-worth individuals in 2012, one of the first to do so in China. It is available for people with a minimum of Rmb500 million in assets managed by the bank: 5,000 or so individuals fit this category at CMB.
The service provides integrated management of financial assets and liabilities for HNW families by customizing unique wealth planning solutions, including wealth preservation, risk isolation and asset allocation.
In 2013, CMB further developed the inheritance family office service, providing personalized wealth protection and inheritance plans for HNW wealthy families, as well as comprehensive financial solutions such as family trusts, wealth inheritance, tax planning, legal consultation and insurance planning. By the end of October 2018, it had signed up more than 10 customers with total combined assets under management of more than Rmb10 billion.
The bank’s family office operations have more than 100 team members in Beijing, Shanghai and Shenzhen. Of the 100, 38 staff members are aged 40 or older and have substantial experience serving wealthy clients.
CMB became the first in China to help a client set up a family wealth inheritance trust back in 2013. By the end of November 2018, the bank had helped, or was working with, 620 families in China and abroad to set up trusts, which in total have Rmb17.8 billion in assets under management.
CMB gave one example of a client who has Rmb2 billion in assets, with substantial stakes in a number of listed and privately held companies operating in the real estate, hotel, restaurant, healthcare, biopharmaceuticals and 3D printing industries. The family, the bank says, includes many children; second-generation entrepreneurs, who manage the different industries from the family office.
Overall best regional private bank:
Bank of Beijing Private Banking
The Bank of Beijing’s private bank continues to be the best regional private bank by far. Based in the capital and led by chairman Zhang Dongning, the Bank of Beijing serves 48,000 high net-worth clients who collectively have Rmb220 billion ($33 billion) in assets under management.
Of that number, two thirds are based in Beijing; they include some of the most successful entrepreneurs in the nation, such as the chairmen and chief executives of many of China’s leading technology and internet companies.
Apart from tax and estate-planning services, the bank offers HNW clients access to a network of VIP lounges in airports and high-speed train stations across China.
The bank launched its private banking services in 2011, the first among China’s city commercial banks to do so. In 2013, it launched the family trust financial advisory service. Since then, it has led city commercial banks again by becoming the first to set up real estate management family trusts and charitable trusts.
The bank works closely with one of its shareholders, Dutch financial services group ING, to come up with ideas for private banking clients. The collaboration enables the bank to offer services such as succession planning.
Because of China’s one-child policy, which was only phased out fairly recently, most founders of Chinese businesses only have one descendant, making them particularly vulnerable to family inheritance risks. For example, one of the bank’s innovations is a systematic structuring of assets to help founders of family businesses to prevent the seizure of assets by non-core members, such as a daughter-in-law or son-in-law.
Family trusts, the bank says, help its clients to isolate and protect certain private assets, separating them from others such as a family’s corporate assets, for safekeeping down the generations. Such instruments can protect beneficiaries from the risks and disputes caused by changes such as divorce or remarriage, and help to preserve wealth for later generations. They can even be structured in such a way as to incentivize positive behaviour among the descendants, for instance, rewarding those who study harder or who are more entrepreneurial than others.
The bank has adopted an inheritance model it calls: ‘Equity trust + Supervisor + Family charter’: it advises the family to use the equity of the family business as the core of the trust asset and to set up a supervisory structure that operates under a family charter, or set of rules that guides the management of the trust.
Best private bank for inter-generational wealth transfer:
Ping An Bank Private Banking
Ping An Bank private bank’s assets under management of Rmb450 billion ($67 billion) may just be a fraction of those at national private bank leaders — but it is quickly catching up by offering a range of innovative services.
Established in 2013, Ping An’s private bank division adheres to three values contained in the motto: ‘Integrated finance, global allocation, family heritage.’ It also taps into the resources of Ping An Insurance (Group) of China, the nation’s largest insurer. This is led by chairman and chief executive Peter ‘Ma’ Mingzhe, earns $94 billion in revenue annually and has experts across its subsidiaries engaged in other financial businesses, including securities, asset management and various financial technology services.
With the backing of Ping An Group, Ping An private bank offers high net-worth clients a ‘private bank plus investment bank’ service. The private bank cooperates with the group’s securities, trust, asset management, real estate, life and other subsidiaries to provide customers with a full range of private banking services that are normally reserved for enterprises and institutional clients.
The bank aims to build a one-stop inheritance services platform that focuses on family trust planning and inheritance planning to help families achieve a smooth transition as power is handed over from one generation to the next. In addition, Ping An private bank has worked with a number of foreign partners to help wealthy clients set up trusts both onshore and offshore.
The bank has designed its ‘Ping An inheritance college’ as a one-stop child education programme that not only helps entrepreneurs to send their children abroad to study, but also to begin training them for inheriting control of the family business.
Over the year, the bank also sponsored several seminars catering to heiresses, highlighting how young women are preparing to assume control of their family’s businesses and financial assets. Last year, for instance, the bank hosted the ‘Women and power’ family heritage summit forum in conjunction with the Shenzhen Women Entrepreneurs Association. At the 2018 China Women Entrepreneurs International Summit Forum, Ping An executives released a study that included a number of case studies examining the rising importance of heiresses in China. The report, ‘Family and her strength’, was the third on inter-generational wealth transfer that Ping An private bank has published in three years.
Executives at Ping An private bank believe that outstanding women entrepreneurs should be supported and encouraged.
Best private bank for international network:
Bank of China Private Banking
There is no question that the Bank of China (BOC), led by chairman Chen Siqing, and its private banking unit have the largest global network among Chinese financial institutions.
BOC first opened private banking service centres at its Shanghai and Beijing branches in 2007, and has continued to enjoy solid growth by opening centres elsewhere. It now operates 40 private banking centres across the country, and has a further five offshore (two in Hong Kong and one each in Macau, Singapore and London).
According to the bank’s 2017 annual report, its private banking customers’ financial assets exceeded Rmb1.2 trillion ($180 billion) at the end of that year.
With 600 offshore branches and offices in 56 nations and territories, BOC has a longer history of operating overseas – and of providing wealth management services – than any other domestic bank. It has been around for a century and has had plenty of opportunities to form partnerships with international banks, strengthening its ability to serve as a financial bridge between China and the rest of the world for its high net-worth clients.
For this reason, the State Administration of Foreign Exchange – the agency that manages China’s $3.1 trillion foreign exchange reserves – continues to conduct experiments on cross-border FX transfers via BOC and sees the bank as the leader in cross-border financial services.
BOC’s product development team works with customers to tailor products to their needs and risk profiles. The investments include fixed income, structured securities and a wide array of different funds, as well as alternative investments such as private equity, gold, wine and art. BOC also cooperates with onshore and offshore partners, including well-known trust and insurance companies, to provide cross-border services and overseas investment needs.
Through its private banking service centres in London, Singapore, Macau, Hong Kong and other branches of the group, the bank is able to provide clients with a wide range of offshore investment opportunities, including large-scale certificates of deposit, life insurance, real estate investment trusts, overseas bonds, structured finance and high-yielding investment products from major markets around the world.
And through Hong Kong-based Bank of China International, the bank is able to offer trust services and help clients to set up a wide range of trusts to ensure the secure and safe offshore transfer of wealth from one generation to the next.
Best private bank for product development:
Bank of Communications Private Banking
|Mei Jinzhi, Bank of Communications|
The Bank of Communications private banking unit leads in product innovation and development by providing its 40,000 high net-worth clients with a basketful of investment products and services, some of which are particularly innovative.
The private bank regularly sends its customer relations officers on internships at the leading private banks in Switzerland and France; it also organizes an annual external training course for branch executives, and invites overseas experts to conduct training on global market investment strategies, asset allocation, macroeconomic analysis and alternative investment products.
The bank, executives say, has also been reaching out to clients with a cultural service offering, based on the premise that HNW clients already have everything they want in material terms: what they tend to lack is in the cultural domain.
A few years ago, the bank launched its ‘100 Year Bocom, golden treasures master series’, which brings together nine renowned masters of eight heritage arts such as fruit stone carvings, Yixin purple sands teapots, Suzhou embroidery, Ru porcelain, black tea, coloured glaze porcelain, imitative ancient porcelain and Wuyi rock tea. The masters are famous, so it is usually very difficult to gain an audience with them.
The bank’s private banking unit, founded in 2008, has five departments: wealth advisory, private banking products, risk compliance, family wealth and general management. Together, they oversee hundreds of specialists who offer a range of products and services, including asset management, financial management, private financial advisory, cross-border financial advisory and other value-added services.
The bank has another slogan: “6W wealth management,” which is a system to look at the different angles of wealth: wealth creation, wealth growth, wealth leverage, wealth protection, wealth succession and wealth spirit.
Every client is given a ‘1+1+1’ private banking service team, made up of an account manager, private banking consultant and wealth management expert.
Led by Mei Jinzhi, the president of private banking, the bank has a network of 65 overseas outlets linked to its primary offshore branches in Hong Kong and Macau. It launched the first overseas private discretionary investment service in China in 2008. In 2010, it launched a cross-border wealth management service, one of the first Chinese banks to do so.
Best private bank for family offices:
China Minsheng Bank Private Banking
Although family offices are fairly new in China’s private banking sector, there is no question which bank is the leader in this area: China Minsheng Bank’s private bank. It was one of the first to open family offices for ultra-high net-worth clients.
Led by chairman and executive director Qi Hong, the bank has established trusts and offices for more than 20 families and their businesses since 2014. It works closely with entrepreneurs, helping them to set up family offices with a clear firewall between the family and the family enterprises. The bank stresses the need for demarcation between the founder or founding family and the business as wealth is transferred from one generation to the next. The bank also tailors family offices to suit customers’ needs, whether helping that is with industrial expansion, managing and preserving market value, initiating mergers and acquisitions, or transferring wealth to the next generation.
The bank focuses on customers with investment assets of more than Rmb50 million ($7.5 million) or family net assets of more than Rmb500 million. These clients include first-generation entrepreneurs, second-generation heirs, newly minted millionaires who made their fortunes from stock options, public listings or the sale of assets, particularly those in the technology sector, and peak performers such as movie stars, athletes and successful artists.
Minsheng recently helped a family with more than Rmb10 billion in assets, including equity in two listed companies, to write a family charter and set up a family trust. The charter sets out procedures and helps families to avoid conflicts of interest.
Minsheng’s offering includes a range of advisory services such as inheritance management, family and corporate governance, wealth assurance and risk management, legal compliance, tax planning and family stewardship.
In 2015, Minsheng helped a Chinese billionaire to set up a family charity fund with Rmb5 billion in assets. The billionaire is a self-made success story from Fujian province who built his business empire from scratch. His charity fund is still considered a model and benchmark in China today. After the promulgation of China’s Charity Law in 2016, the bank also took the lead in helping a family to form the nation’s first charity trust.
Minsheng is also taking the lead in designing what will be China’s first family art trust, a new model of family trusts, which typically rely on equity, real estate and insurance funds as primary assets.
Best private bank for innovation in technology:
China CITIC Bank Private Banking
|Lv Tiangui, China Citic Bank|
In 2007, China Citic Bank became one of the first Chinese banks to offer private banking services. Led by LV Tiangui, general manager of private and retail banking, it outperformed other domestic national commercial banks in 2018, growing its private banking customer base and assets under management by upgrading its online and offshore support services for high net-worth clients.
At the end of 2018, the bank had 33,900 HNW clients, up 27% from the previous year. Total private bank assets under management rose 23% to Rmb495 billion ($74 billion).
Chief among Citic private bank’s product offerings is its Diamond Butler Service, which is provided to the top 5,000 wealth management clients, each with more than Rmb20 million on deposit or managed by the bank.
The bank assigns a team of three assistants to each Diamond client, offering them 24/7 assistance online and offline anywhere in the world on almost any service they need. Diamond members can access their Citic private bank support team through WeChat from anywhere in the world, for instance to arrange a VIP limousine pick-up, book a table at the nearest Michelin-starred restaurant, or buy tickets for an opera. When sick, Diamond clients can ask their Citic support team to help them check into the nearest hospital anywhere in the world.
As one of the pioneers of China’s private bank industry, Citic Bank has stuck to its goals of: ‘Preserving wealth, creating wealth, and enjoying life.’
The Diamond Butler Service has helped the bank achieve three highs: internal surveys show customer retention, activity and satisfaction rates of 87%, 84% and 99.9% respectively. The service also resulted in rapid growth in product sales to Rmb108 billion in 2018, from Rmb28 billion the previous year.
Best Private Bank for Impact Investing:
Agricultural Bank of China Private Banking
|Sun Ning, Agricultural Bank of China|
Agricultural Bank of China, led by president and chairman Zhou Mubing, has developed a large wealth management product portfolio for its high net-worth customers, and has 309 private banking and wealth management centres operating across China and a team of 2,000 professional managers.
The bank’s private banking division spent much of 2018 assisting HNW clients in setting up a range of family trusts.
Led by Sun Ning, the president of private banking, ABC helped wealthy Hong Kong businesswoman, Yu Ai, to set up a charitable trust last year that had Rmb30 million ($4.5 million) in assets, the biggest in China established so far with the assistance of a commercial bank. It was set up in collaboration with Citic Trust to help poor children born with congenital heart diseases in Guangdong province.
Charitable trusts are a relatively new concept in China, but ABC private bankers say they are increasingly in demand among first-generation entrepreneurs and second-generation heirs.
By the end of the third quarter of 2018, the bank’s private bank management assets reached Rmb1.2 trillion. The number of private banking clients rose to 102,000, an increase of more than 9,500 from the beginning of last year.
Many of the clients increasingly seek risk management strategies to help them preserve wealth across generations, forming family trusts first before forming charitable trusts.
ABC collaborates with several of the nation’s top financial trust companies in serving the trust needs of its wealthy clients. The bank has established a special marketing team that helps families design and arrange the legal structure of charitable trusts. The process also involves assisting clients in selecting public welfare institutions and trust institutions.
Such charitable trusts have the foundation of the trustee and the trust company as the dual trustee, while ABC assumes the role of custodian and financial adviser.