Sentiment toward wealth management services appears to be warming in China. Out of 3,300 Chinese high-net-worth individuals (HNWIs) surveyed, 29% said they would put more money in private banks and 14% said other wealth management firms, according to the survey report.
On the flipside, HNWIs are expected to decrease the amount of wealth they or their families manage (self-managed channels).
Source: Bain & Company, China Merchants Bank
Currently, 63% of China’s domestic wealth, excluding real estate and life insurance, is managed by financial service providers. Among that group, private banking services manage around 50% of total domestic assets. The remaining wealth is self-managed or managed by friends’ operations.
In the past two years, China’s domestic private banks have been diversifying offerings and improving their service, according to the report. They are also improving asset allocation capabilities and have accumulated experience in wealth management.
Separately, a study by the Boston Consulting Group showed that China was the largest country in Asia in terms of revenues coming from private banking channels, with around $12bn in revenue pools.
The revenue pool would be larger if private banking institutions increased their penetration, since a large part of HNW household wealth is currently captured by retail and commercial banks, asset managers, securities firms and trust companies, according to BCG.
HNWI wealth and population
China’s private wealth market, which is composed of life insurance, overseas investment, bank wealth management products, capital market products, investment property and cash and deposits, reached RMB 165trn ($24.15trn) in 2016 from RMB 112trn in 2014, according to the Bain report.
The private wealth market is estimated to reach RMB 188trn at the end of this year.
There are around 1.58 million Chinese HNWIs, with total investable assets of RMB 49trn in 2016.
Geographic distribution of HNWIs has decentralised, according to survey findings. Twenty-two provinces have at least 20,000 HNWIs each and nine of those provinces have 50,000 each.
Guangdong, Shanghai, Beijing, Jiangsu and Zhejiang each have 100,000 HNWIs.
Overseas investment
The number of Chinese HNWIs investing overseas is increasing.
At least half of China’s HNWIs have overseas investments compared to just 37% in 2015, according to the survey report. It is estimated that individuals with overseas investments have nearly 25% of their assets abroad.
Hong Kong and the US remain the most popular offshore destination with around 50% of the respondents preferring both markets. Other foreign markets that they are interested for investment are Australia (24%), Canada (22%) and Singapore (21%).
In terms of asset classes, HNWIs in the next one-to-two years are expected to put more in offshore insurance, investment property and stocks, according to the survey.
Source: Bain & Company, China Merchants Bank
According to the survey, the most important factors that HNWIs consider when choosing an investment management institution to handle overseas investment are expertise (60%), trustworthy brand (53%) and customised service (32%).
The survey, in conjunction with China Merchants Bank, canvassed 3,300 Chinese HNWIs and included 100 interviews with Chinese HNWI customers and relationship managers of banks.
