Net profit at the Shanghai-based firm grew 19.4% from Q2 last year to $27.3m.
Q2 revenues grew 30.4% to $93.2m year-on-year, with sales of wealth management products doubling to 36.5bn yuan ($5.9bn).
Growing RMs
At the end of June, Noah had 112 offices covering 64 mainland cities.
In a conference call, management said it increased the number of relationship managers to 953 from 834 at the end of March. Top performing RMs account for roughly one-third of that number.
Kevin Lam, group president, added that the firm wanted to ensure it had enough quality relationship managers based on projections for 2016 growth.
“A lot of RMs actually go into training before they really become trained advisors. And we do not expect that to fluctuate a lot and definitely the number of RMs are not dependent on the type of products and the volume we sell. We are planning for a bit longer term.”
Lam added that the firm’s focus in wealth management is on leveraging new family office discretionary portfolio management services and “significantly enhancing the capabilities of our relationship managers”.
Compensation for relationship managers as a percent of net revenues is in the 22-25% range.
“That actually puts us at the mid- to -low end of overall RM compensation compared to our competitors,” said Ching Tao, the chief financial officer. “So we feel it’s very appropriate. We are continuing to grow the RM team, but the focus is on RM productivity meaning they are gaining greater share of [overall private wealth].”
China rollercoaster
The firm believes the current equity market volatility will help underscore the importance of longer-term investing and support the development of the wealth management industry in China.
“Currently there are many irrational elements in the market. We believe that wealth management should transition from product-driven to asset-allocation driven,” said Wang, the CEO.
“At the end of the second quarter we saw irrational activity and panic in the domestic capital market. After this baptism of fire, investors, practitioners and regulators have greater respect for the market.
“We believe that this will help the domestic asset management industry mature. The wealth management market in China will mature from individual investors buying shares to individuals buying fund products.”
In July, Noah announced its strategic cooperation with UPB, one of Europe’s largest private banks in asset managers.
