The number of high net worth families in the mainland reached 2.1 million in 2016, stated the report (in Chinese). They were defined as those with $1m or more investable assets, including offshore investments but excluding physical assets such as real estate.
Among them, 86% had assets under $5m, 12% owned $5-20m of assets and the remaining 2% had over $20m to invest. Together they owned 43% of the total investable assets among all Chinese in 2016, the report noted.
Nearly 70% of HNWIs in China have made their fortune from entrepreneurship or through investments, according to BCG’s and the bank’s poll of 1,438 HNWIs across 21 cities in China. About 55% are aged between 40 and 59, and 37% are under 40 years old.
The first generation of wealth creators have higher expectations of investment returns and a strong preference for self-directed investing, the research revealed.
“The demand for wealth management services among the majority of the HNWIs in China is weak. Instead, they tend to treat financial institutions as supermarkets for products.”
They would also allocate assets among different firms, such as banks, trusts and brokers, etc. About 60% of the surveyed HNWIs said they worked with three or more financial institutions.
Private banking divisions of Chinese commercial banks were the most popular choice, with 87% of HNWIs being their customers.
Where do Chinese HNWIs put their money?
|
Private banks under Chinese commercial banks |
87% |
|
Insurers |
47% |
|
Brokerage firms |
35% |
|
Trusts |
23% |
|
Foreign-owned private banks |
15% |
|
Third-party wealth managers |
8% |
|
Internet financial firms |
4% |
|
Foreign financial institutions |
4% |
|
Family offices |
2% |
Source: BCG and Industrial Bank poll 2017
Opportunity for private banks
Although the forecasted growth of HNWIs’ assets at 15% a year is lower than the annualized 25% growth from 2011 to 2016, their size, together with low penetration of private banks present a great opportunity for the private banking industry in China, the report said.
“Under the ‘new normal’ − lower investment returns with rising risk − HNWIs are starting to recognize the value of asset allocation advice offered by professionals at financial institutions, and at the same time they have a more rational expectations on returns,” the report noted. Already about 50% of polled HNWIs said they could accept losses of the principal.
Commenting on how they managed their wealth, 51% said they mainly listened to advice from professional institutions, 32% opted for self-directed approach, and 13% were mainly advised by family or friends. Only 4% said they had portfolios managed by institutions on a discretionary basis.
2016 was a good year for most respondents; 91% said they made a profit during the year. Nevertheless, 20% of HNWIs said they would lower the level of risk in their portfolios in 2017, while 70% said their risk profiles would remain the same.
What Chinese HNWIs expected to increase in holdings in 2017
|
Increased in 2016 |
Expected to increase in 2017 |
|
|
Banks’ wealth management products |
67% |
66% |
|
Cash and deposits |
39% |
40% |
|
Insurance |
37% |
34% |
|
Trusts |
34% |
32% |
|
Equity |
23% |
29% |
|
Fixed income products issued outside banks and trusts |
25% |
23% |
|
Gold |
19% |
19% |
|
Mutual funds |
16% |
16% |
|
Overseas assets |
12% |
13% |
|
Private equity/venture capital |
8% |
11% |
|
Private securities funds (or more commonly known as hedge funds) |
11% |
9% |
Source: BCG and Industrial Bank poll 2017
“The polled investors still place a strong trust in wealth management products offered by banks. They have also shown higher interest in equities for the first time after the stock market crash in 2015,” the report noted.
At the same time, 30% of them said they considered transferring more assets to non-banking institutions, while 18% said they had already done so, seeking higher returns with a broader variety of products, according to the poll.
