The Shanghai-listed brokerage firm, with Fujian provincial government as the majority shareholder, claimed it was the first Chinese broker to enter private banking business to target high-net-worth individuals (HNWIs).
Industrial Securities is the 18th largest broker in the mainland in terms of brokerage business in 2016, according to the Shanghai Stock Exchange data.
According to a report co-released by the broker and Oliver Syman, a consultant, brokerage firms in China have had a late start in high-end financial services, as they have been focusing on traditional brokerage business. Banks account for 80% of market share in the retail wealth management area, which includes HNWIs.
“However, in the past five years, brokers have been transitioning to provide wealth management business amid lower commissions [from the brokerage services],” stated the report.
HNWIs, especially entrepreneurs and professional investors, have also turned keener to have direct involvement in capital markets.
While both brokers and banks offer access to new bond issues, brokers are the only entities that can provide access to equity IPOs. Brokers can thus differentiate themselves from banks, which mainly offer cash management services, such as the popular high-yielding wealth management products, the report explained.
Brokers are particularly suited to serve financing needs of entrepreneurs, from the early stages of venture capital, private equity funds, to IPO and acquisition needs.
“While brokers want to develop private banking services, it is unrealistic to have a `one-size-fits-all’ mind-set to acquire all types of HNWIs,” the report noted.
“Brokers who have more clients from the privately-owned enterprises should target entrepreneurs at the first stage, while those who a have leading brokerage business can aim for wealthy retail clients and cultivate their needs for other wealth management services.”
