[Editor’s note: This is a guest post from Tharon Smith, Managing Director of LendIt China. Tharon is an expert in fintech in China and is also the founder of Strontium Group, a firm specializing in cross border investing.]
Wealth management in China is growing rapidly. According to China Daily, total balances of wealth management products held by banks totaled 23.5 trillion yuan ($3.6 trillion) at the end of 2015. This is an increase of 56 percent year over year. The portion held by banks accounted for 26 percent of the total 90.36 trillion yuan for wealth management products held by other financial institutions.
Peer to peer lending companies account for the majority of non-bank financial institutions in China and most have transitioned to wealth management service providers. These firms prefer to be acknowledged as wealth management institutions and have practically insisted “P2P” is a bad word in the industry. This is partially due to companies distancing themselves from the bad actors in the space such as Ezubao, but these companies truly are starting to become more than p2p lenders.
The Wealth Management Specialists of the Future
They want to be seen as capital service providers, specifically wealth management specialists for the future, utilizing technology and reflecting the values of younger generations. To cater better to the Chinese market, the inaugural Lang Di Fintech conference we are hosting later this month focuses on much more than p2p lending.
Ru Bing, Chief of Wealth Management department of Creditease in a short conversation told me that the main reasons for this shift to wealth management are the following:
- A single product such as P2P has never been a good way to attract clients.
- Good quality P2P products are rare to obtain; as P2P concept is so competitive.
- Wealthy clients have different tastes in investing.
- Clients should have different asset classes in their portfolio for optimal diversification.
- More products and cross-selling can help develop deeper relationships with clients.
As more wealth managers come online they will be challenged to develop these relationships with limited online products. Chinese internet based wealth management institutions will need to devise creative and unique investor relations activities in order to combat this challenge. Although, with respect to driving and developing deeper relationships with investors, China may have an embedded cultural advantage with norms such as “guanxi” and “saving face” that guide relationship building over the long term. How companies execute on this will indicate likelihood of success. [Read more…]