Private banking took shape in China,
nearly in the year 2000 when Royal Bank of Scotland and Bank of China jointly
introduced private banking services. More than 4 decades of strong growth in
the Chinese economy has led to rise in private wealth to great extent. This has
created a humungous market in terms of private wealth management as the number
of high net worth individuals is on the rise. With capital market getting
mature and private wealth increasing at an increasing pace, private banking in
china has grown significantly.
According to the study, ‘WEALTH
IN CHINA: HNW INVESTORS 2018’, the recent years have witnessed new
trends in the Chinese economy that are shifting the landscape of the private
banking environment. The private wealth is on the rise; however the quality
returns on assets have come under pressure. This has resulted in huge wealth
seeking scare high quality assets that has caused a shift in the expectation of
both banks and individuals. The demands and requirements of HNW clients across
china have changed. They have diverse demands on not only look forward for
wealth preservation but also succession planning. The competition within
private wealth management has intensified which has resulted in a more robust
and enhanced banking mechanism. This well help banks to over step the
boundaries set by cross border banking and come up with new business plans.
Chinese HNWs are still expanding their
business. They prefer to reinvest their wealth in their own enterprise rather
than preserving it. This preference is proven by the fact that returns on
financial instruments issued by institutions have been relatively lower as
compared to return on business and real estate.
The three prime reasons that HNWs do not
prefer to have their wealth managed by financial institutions are:-
·
The first generation entrepreneurs rely on their
own ability to make financial decisions and prefer to decide their own wealth
appropriation into different assets.
·
Capital markets in China are still immature and
have lacked high degree of efficiency.
·
The Chinese HNWs prefer to maintain
confidentiality when it comes to financial matters. The wealth managers are
unable to provide this confidentiality since they lack specialized teams.
The
competition dynamics in the private wealth management business are being disrupted
as new players enter the market. Majority percentage of high net worth
individuals are currently not being served by any wealth management business.
This implies that new companies entering the space do not have to gather their
market share from existing companies but rather have the opportunity to gather
it directly from clients that are not being served. Third party wealth managers, trusts, banks all
these are adding vitality in the industry. However, commercial banks tend to
possess an advantage over the other business models due to established business
and existing clientele.
The
various wealth management products include property investment, capital
markets, bank wealth management products, overseas investment, life insurance
and other domestic investment products. This share is led by property
investment due to their inclination towards real estate investments.
There are various wealth management
products being floated into the market by the big four. However the real
potential of the market has not been tapped into as majority of the wealth is
stored in form of cash only. This makes Chinese wealth management industry
lucrative and as more companies enter this space, it will become more dynamic
and fast paced.
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Ken Research
Ankur Gupta, Head Marketing & Communications
Sales@kenresearch.com
+91-9015378249
Ken Research
Ankur Gupta, Head Marketing & Communications
Sales@kenresearch.com
+91-9015378249
