Webinar: Wealth Management in China 2016 October 26th, :00 18:00 Beijing Standard Time

Transcription

1 Webinar: Wealth Management in China 2016 October 26th, :00 18:00 Beijing Standard Time The webinar will start in a few minutes. For more information and to sign-up to our monthly newsletter, please visit or send us an research@kapronasia.com.

2 Wealth Management in China 2016 Moderated by Paul Robinson Presented by Denis Suslov October 26 th, 2016 Wealth management as an investment-advisory discipline incorporates financial planning, investment portfolio management and a number of aggregated financial services. - Wikipedia 'Wealth management' in China often refers to the structured 'wealth management' products that are available to retail investors and typically have a low investment minimum

3 The retail asset universe has expanded from deposits and insurance to a variety of asset classes today: Bank deposits Treasury securities Insurance Pre Stocks Bank Wealth Management products Mutual funds (2007 rally drew new investors) The democratization of wealth management 3

4 Retail investors now have access to a wide variety of asset classes and risk-returns Return High Crowd Investing Real Estate Funds Stock Funds Futures Forex Stocks Trusts P2P Medium Gold Bank WMPs Low Insurance MMFs Low Medium High Risk Colors mark groupings by risk/return profile, Box size marks approx. total assets 4

5 HNWI investment is more diversified and sophisticated than before Assets Cash and property are less popular Bonds, trusts, grew in value, bank WMPs Investment advice Private banking barely existed 20 years ago 100% 80% 60% 40% Domestic asset allocation by HNWIs in China, 2009 to % 31% 37% 37% 31% 29% Now HNWI increasingly 20% looking for investment advice 20% 20% 19% 25% 0% 25% 18% 15% 12% 27% 36% Alternative investment Fixed income Equity Cash Source: China Merchants Bank, Bain, Kapronasia analysis 5

6 Internet & mobile is now bringing these services to wider population Ubiquitous accessibility New user groups thanks to mobile: Non-advanced computer users Users without a computer / cable internet Source: Global Times 100% 80% 60% 40% 20% 0% Smartphone penetration in China 68% 71% 71.6% 72.1% 72.6% 73.0% 57% 39% 22% 6% 11% Smartphone adoption Source: GSMA 6

7 Distribution was a key enabler of the growth of the online finance industry for retail Past Asset Management Companies Banks Consumers Today Asset Management Companies Digital Platforms Consumers 7

8 Less is more: great user experience makes all the difference in bringing WM to the masses 8

9 Bao products are fundamental to the democratization of WM Initially to pool and invest unused deposits on Alipay Unique selling points Low investment threshold Instant cash-out AUM and return rate of Yu'E Bao 1, % % % % % 4.5% 4.2% 4.2% % % 2.7% 2.5% 2.4% 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 7% 6% 5% 4% 3% 2% Assets under management Seven-day annualized return rate 9

10 How Yu e Bao s structure paved the way for other products Investor Digital Wallet Asset Manager Product Money Market 10

11 How Yu e Bao s structure paved the way for other products Investor Digital Wallet Asset Manager Product Equity Insurance Money Market Time Deposits Fixed Income 11

12 How Yu e Bao s structure paved the way for other products Investor Digital Wallet Asset Manager Product Equity Insurance Money Market Time Deposits Fixed Income 12

13 P2P and crowdinvesting create new self-directed WM opportunities for the retail investor P2P eliminates bank as a middle man Crowdinvesting eliminates VCs, angel investors as a middle man Both Transfer decision making to the investor Next complexity level above WMPs 200 Monthly P2P activity, value of transactions, RMB Billion Source: wdjz.com 13

14 PE opening up to the mass affluent Qihoo 360 was founded in 2005 IPO on the NYSE in 2011 P/E for Chinese firms dropped Taken private in 2016 through an online offering 2017 relist on a Chinese exchange? 14

15 The Future of HNWI WM Platform: private banking delivered by commercial banks => less opportunity for non-bank players Sophistication: increases, especially driven by the newly rich; demand for overseas allocation => opportunity for advanced providers Objective: wealth preservation is now more important than wealth creation => less aggressive investment style Managed by: increasingly by WM professionals => better allocation 40% 35% 30% 25% 20% 15% 10% 5% 0% HWNIs holding overseas investment 19% 33% 37% Source: China Merchants Bank, Bain 15

16 The Future of Retail WM Platform: a large portion of WM to move to mobile => larger population included Sophistication: next generation products (P2P, exchanges for exotic assets, geo diversification) becoming popular => better diversified, more profitable portfolios. But high risk from certain products Objective: wealth creation => risky products in demand Managed by: investors themselves. Robo-advisory companies are entering the market, though uptake not clear => allocation not optimal 16

17 Summary Now HWNIs HNWIs investment is more diversified and sophisticated Private banking is increasingly popular with HNWIs Retail Internet & mobile is now bringing these services to wider population Rise of the distribution platform Bao products are fundamental to the democratization of WM P2P and crowdinvesting are extending the empowerment Future HNWIs More sophistication More overseas exposure Wealth preservation not creation Retail Robo-advisors Trust issues 17

18 Webinar: Wealth Management in China Thank You For more information about the topics covered in this webinar or Kapronasia, please visit or send us an