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Big Growth Potential But No Easy Wins For China's Wealth Management - Celent

Tom Burroughes

28 January 2014

China’s wealth management market will reach $12 trillion of assets this year, up from $9.5 trillion two years ago but easy pickings will be hard as competition heats up with new entrants, according to a report on the sector by , the consultancy and research house.

Private banking assets reached $547 billion in 2012, up from $300 billion in 2009; that figure will rise to $993 billion in 2015. In 2012, there were 1.74 million HNW individuals in China (financial assets of $1 million or more); this group is expanding at an annual rate of 17 per cent. Some 73 per cent of these people are business owners or higher management executives.

Such growth figures, while necessarily subject to uncertainties, such as a possible sharp correction to the Chinese economy, help explain why Western as well as domestic financial institutions are battling to grab market share.

Having been monopolised by banks for years, other institutions are breaking into the space, such as trusts, securities companies, fund managers, internet banking outlets and others, the Celent report said.

Another trend, the report says, is that as the clients of wealth management companies start to be more demanding, non-financial service industries will also get involved in the wealth management space; it also predicts that “high-end” family wealth management businesses will surface.

The report, entitled Trends In China’s Wealth Management Industry, looks at trading, asset management, marketing and technology trends in the sector.

Strong demand
“Despite declining AuM at mutual fund companies, there is strong demand for wealth management systems in China,” Hua Zhang, analyst at Celent’s Asian financial services group and author of the report.

“Large numbers of new asset managers are entering the market. The rapid development and transformation of the trust industry will bring about new IT requirements. The private banking divisions of commercial banks will be made into independent entities, which will also drive demand for technology,” he said.

Among the data presented in the report was the fact that the number of trust assets rose from $321 billion in 2009 to $1,077 trillion in 2012. Celent reckons that in 2015, trust assets will rise to $1.6 trillion; some 41 per cent of high net worth individuals have declared they will increase investments in trusts, as the latter provide more diverse investments, such as property, stocks and fixed income.

The report notes that in terms of technology, the application of IT to banking and wealth management in China is still in its relative infancy, holding out the prospect of dramatic growth if recent trends endure.

In terms of holdings of different assets, the report notes that HNW individuals put 38 per cent of investable assets into equities. Fixed income investment is rising sharply.