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Banks aim to join China’s fund advisory scheme

The first players to join the pilot scheme include fund managers and online mutual fund distributors.

Four huge Chinese banks are planning to join the country’s mutual fund investment advisory scheme, according to mainland publication China Fund News.

These banks are Industrial and Commercial Bank of China, China Merchants Bank, China Construction Bank and Ping An Bank, the report said, citing unnamed sources.

The move comes after the China Securities Regulator Commission (CSRC) launched the pilot scheme in October to test the investment advisory business in publicly-offered mutual funds. The scheme allows managers and distributors to tailor investment options for clients based on their financial status and financial management needs, and charge fees of no more than 5% of investors’ net asset value.

The first batch of licences was given to five firms, which include E Fund Management, China Southern Asset Management, China Wealth Management (a subsidiary of China Asset Management), Harvest Wealth Management (a subsidiary of Harvest Fund Management) and Zhoung Ou Qian Gun Gun (a subsidiary of Zhong Ou Fund Management).

Later in December, three more licences were given to online mutual fund distributors, which are Ant Financial, Teng An (under Tencent) and Yingmi.

“This is a really new model in China to shift away from the traditional model, where third-party channels get more fees if they are able to sell more funds,” a Beijing-based spokesman at China Asset Management told FSA previously. He noted that China AMC’s subsidiary has officially launched its mutual fund investment advisory business in December.

“The new model is based on investors’ outstanding assets and is more in-line with the Western general practice of financial advisers,” he added.

Foreign players not yet qualified

At the moment, foreign players are not yet qualified to join the new advisory scheme.

However, Miao Hui, Singapore-based senior analyst at Cerulli Associates, recently provided different options for foreign managers who are not yet qualified to join the scheme.

“At the moment, they can definitely look for partnerships or their joint ventures to tap into this opportunity, or they can focus first on applying for a public fund management or distributor licence on their own before touching on the advisory business,” she said.

Vanguard has become the first foreign players to take on the new scheme. Just recently, it set up an investment advisory joint-venture with Ant Financial to provide investment advisory services to Chinese investors.

However, Cerulli’s Hui noted that it is Ant Financial – not the JV – that was given the investment advisory licence.

“While the licence was given to Ant Financial and the not the JV, it sets the ground for Vanguard or the JV to provide support to Ant Financial’s coming advisory business,” she said.

Part of the Mark Allen Group.