Vanguard and Ant Financial will jointly launch the “Help you to invest” service on 2 April, a spokesman for Ant Financial told FSA.
The service will be available on Alipay, the online payment platform of Ant Financial.
The service comes after Vanguard and Ant Financial in December set up an investment advisory joint venture which targets China’s retail market.
The venture, Xianfeng Linghang Tougu (Shanghai) Investment Consultancy was approved by the China Securities Regulator Commission (CSRC) to offer an investment advisory service to retail investors who make a minimum investment of RMB 800 ($113).
“In line with industry practices, the joint venture will charge users an investment advisory fee, which will be a 0.5% annual fee on assets under management,” the spokesman told FSA, but he declined to provide more details.
Vanguard, the world’s second largest asset management firm, holds a 49% stake in the joint venture, which aims to provide a customised service for investors based on risk preference and investment objective. The service will help investors trade mutual funds and adjust portfolio positions to achieve their investment goals.
Ant Financial is an affiliate of e-commerce giant Alibaba Group.
FSA also contacted Vanguard, but the firm declined to provide more details about the service.
Advisory business
In October last year, the CSRC launched a pilot scheme to test the mutual fund investment advisory business. The scheme allows managers and distributors to tailor investment options for clients based on their financial status and financial management needs and restricts fees to no more than 5% of investors’ net asset value, according to a previous Cerulli Associates report.
The first batch of licences was given to five firms, which include E Fund Management, China Southern Asset Management, China Wealth Management (a subsidiary of China Asset Management), Harvest Wealth Management (a subsidiary of Harvest Fund Management) and Zhoung Ou Qian Gun Gun (a subsidiary of Zhong Ou Fund Management).
Later in December, three more licences were given to online mutual fund distributors: Ant Financial, Teng An (under Tencent) and Yingmi.
Moreover, in January this year, four huge Chinese banks, including Industrial and Commercial Bank of China, China Merchants Bank, China Construction Bank and Ping An Bank planned to join the country’s mutual fund investment advisory scheme.
One of the scheme’s participants, China Wealth Management, already has 100 investment advisors working for the advisory service. The firm has also developed an app allowing investors to access ten standardised advisory portfolios from a range of fund managers, according to a recent Cerulli report.
However, given that the advisory model is new in China, it will be challenging for scheme participants to convince investors to pay for advice, the report noted.
“It would take time for the advisory scheme in China to go mainstream,” a Cerulli spokeswoman told FSA previously.
“Licensed players need to differentiate themselves to prove that the services are truly value-add. High net worth individuals could be more open to the new scheme, followed by the middle class or mass affluent who are willing to pay for knowledge, and finally, the general retail,” she added.
Nevertheless, Cerulli believes that the scheme could help create healthier competition among fund managers long-term. In addition, this should also pave the way for foreign players to participate more in the local market, especially since limits on foreign ownership of retail fund management firms are set to be removed next month.
