Helping individuals achieve financial security

Rising wealth of Chinese residents who are riding the economy's decades-long growth story, and growing awareness of retirement savings among an aging population are big factors, they said.

Marina Lui, UBS' group managing director and head of China wealth management, said the steady wealth creation in the country presents great business opportunities for UBS, one of the world's biggest wealth managers.

Lui said she is upbeat about the demand for wealth management products in China as the economy has seen per capita GDP surpassing $10,000 since 2019 and boasts a large affluent population comprising, among others, business-owners.

The COVID-19-induced market volatility has further stoked Chinese investors' demand for professional financial services and advice. "Amid the market volatility and increasing geopolitical tensions, 90 percent of Chinese investors told us in a recent survey that they need expert advice now more than ever," Lui said.

Interactions between professional wealth managers and investors are, therefore, expected to spike in the years to come while Chinese household allocations for funds will increase, she said.

A McKinsey & Company report said in December that assets under management of China's whole asset management market, which is already the world's second-largest, were worth 116 trillion yuan by the first half of 2020.

They are expected to grow by more than 9 percent per year on average from 2019 to 2025 and reach 196 trillion yuan by 2025.

So far, the wealth management industry's assets relative to the country's GDP are on a par in China, whereas in the United States, the United Kingdom and other advanced economies, they are more than 200 percent of local GDP.

At a forum in August, Zhu Shumin, then vice-chairman of the China Banking and Insurance Regulatory Commission, said the huge gap between China and other asset management markets suggests there is huge room for growth.

Policy supports, including more financial opening-up efforts, will help foreign institutions capitalize on the opportunities brought by the booming demand for asset management and wealth management products in China, experts said.

China has made creating more competent wealth management products as one of the key tasks for boosting people's income in the coming five years.

The outline of the 14th Five-Year Plan (2021-25), the country's economic and social development blueprint for the period, has pledged to leverage multiple channels to boost residents' income generated from properties and innovate more financial products that suit households' demand for wealth management.

The outline also said the country will further the opening-up measures in the financial services industry, across segments like banking, securities, insurance, fund and futures, and deepen the connectivity of domestic and overseas capital markets.

For instance, the country has expanded the investment quota allowed by the Qualified Domestic Institutional Investors, or QDII, program, which allows Chinese investors to access foreign assets.

China is also preparing to roll out a wealth management connect in the Guangdong-Hong Kong-Macao Greater Bay Area to facilitate Guangdong-based residents to buy investment products offered by banks based in Hong Kong and Macao, and vice versa.

"Such opening-up measures would create opportunities to apply our global asset allocation experience to mainland investors and increase their investment returns," said Daniel Houston, chairman, president and CEO of Principal Financial Group.

The global pension and asset manager is ready to leverage its strength in long-term investment in China, Houston said. Green finance and the emerging onshore market of publicly offered real estate investment trusts, or REITs, are attractive options that Principal is looking at.

Principal is particularly impressed by the business potential of China's multi-pillar pension system as the silver-haired segment of the population expands, and will continue to deepen its partnership with China Construction Bank on their joint venture CCB Principal Asset Management, he said.

"We commend China's commitment to growing the offerings available to help more people achieve greater financial security. Principal is well-suited to apply its global knowledge and experience to the market in order to broaden the solution set available," said Houston.

Experts said foreign giants in the Chinese asset management and wealth management markets are going to prove a game-changer, and will propel domestic players to become competitive and improve the standards of investment products in China, especially when it comes to global allocation.

"The rising participation of foreign players is like introducing the more competitive 'catfish' into the already fierce competition in China's asset management sector. We domestic players can learn from their sound systems of investment philosophy, risk control and investment process," said Wang Haoyu, managing director of Beijing-based CreditEase Wealth Management.