Financial firms should get ready to capture opportunities in the Greater Bay Area (GBA) as investors in China have expressed considerable interest in cross-boundary wealth management products, according to a survey conducted by Bain & Company.
Fewer than 20% of GBA retail customers own cross-boundary wealth management products, according to the survey conducted to 3,000 retail customers and small and medium-sized enterprises (SMEs) in the GBA in November. Among mainland GBA retail customers who do not own Hong Kong wealth management products, 70% are interested in making such a purchase in the next three years.
Demand for cross-boundary wealth management products
Currently, there is already an infrastructure for some cross-boundary trading in stocks via the Stock Connect and bonds through the Bond Connect, as well as the distribution of funds via the Mutual Recognition of Funds, the report noted. While implementation details have not been fully announced, Bain & Company anticipates that the soon-to-launch GBA Wealth Management Connect initiative will facilitate access to additional cross-boundary wealth management products.
The opportunity in the GBA is huge, as it includes nine mainland cities, Hong Kong and Macau, with 70 million people and a total GDP of around $1.7trn, according to the report.
“Now is the time for financial services companies to take advantage of the opportunities stemming from the GBA, in order to ensure that they are primed to meet the customer demand moving forward,” Henrik Naujoks, Hong Kong-based Asia-Pacific financial services leader at Bain & Company and co-author of the report, said.
“It’s clear that customers are interested and see the value in cross-boundary products, so it’s an important time for firms who must start investing in strategic ways to ensure that they are ready to meet the moment,” he added.
The report noted that some financial institutions have already committed to invest in the GBA. Standard Chartered, for example, has spent $40m to set up a GBA centre in Guangzhou to support its retail and corporate banking business in the region.
There are “no-regrets” moves that banks and insurers can make right now, such as launching marketing campaigns to improve brand awareness. A strong brand will be critical to winning mainland customers, as word of mouth is still an important marketing tool, Lucia Ku, head of customer propositions and management at Hang Seng Bank, said in the report.
EXPOSURE TO GLOBAL MARKETS
Mainland GBA respondents indicated that they are interested in Hong Kong products that allow them to diversify their portfolio with exposure to international markets and gain access to better wealth advisory services.
Top three reasons for purchasing Hong Kong products
There is also substantial interest in Chinese investments from Hong Kong investors looking for higher potential returns, said Ryan Song, vice chairman and CEO at Hang Seng Bank (China), in the report. To address this, Hang Seng Investment Management, as well as other fund management companies, have been participating in the Hong Kong-mainland ETF cross-listing scheme since October last year.
Meanwhile, those that are not interested in Hong Kong products cite unattractive returns as a reason, and some feel that mainland options already meet their needs.
“This points to an opportunity for further product differentiation of Hong Kong
products and tailoring to mainland customer needs,” the report said.
Reasons why Hong Kong wealth management products do not interest mainland customers