China's wealth management industry needs to go mature: researchers

China's wealth management industry remains immature even after 10 years' explosive growth and industry researchers call for more diversification of their investment portfolios.

Compared with that in developed markets, China’s wealth management industry remains immature even after 10 years’ explosive growth, said researchers during a forum today.

The past decade has seen the fastest growth of the country’s wealth accumulation. A report from the Boston Consulting Group shows that the annual compound growth rate of China’s wealth management sector stood at 20 percent from 2007 to 2017, with investable financial assets totaling 142 trillion yuan (US$22.35 trillion), said professor Rui Meng at the CEIBS Private Wealth Investment Forum 2018.

As China’s economy slows, the growth rate of wealth is projected to slow down to 12 percent per year and by 2021, the total investable financial assets of the whole society would reach 221 trillion yuan.

Rui said that China’s affluent class needs more diversification in their asset allocation portfolio, as 65 percent of the household wealth is allocated to real estate sector, and 28 percent goes to banks for wealth management. This is in sharp contrast with the United States, where 32 percent of household allocations are the stock market, followed by real estate investment (30 percent) and purchase of insurance (24 percent).

Rich people in China stay focused on the domestic market, with relatively low proportion of their investment on overseas assets, Rui added. He said that such “home bias” phenomenon may be common in every country, as people tend to invest in assets which they know and which they think they have more information about, but high-net-worth households in foreign countries generally have a quarter of their assets abroad, while that number for their Chinese counterparts is only 5 percent.

Besides, the majority of the Chinese wealthy class are reluctant to pay for professional services in terms of their wealth management. Data show that only 7 percent of people would like to pay for the financial advisory services, according to Rui.

Liu Yuhui, professor at the Department of Macroeconomics at the Institute of Economics under the Chinese Academy of Social Sciences and chief economist at TFSecurities, advised high-net-worth investors to pay more attention to China’s biotechnology sector, which he believes will see the emergence of great companies and many investment opportunities in the next five to ten years.

Talking of how to investment in the US market, Nicholas P. Sargen, senior vice president and chief economist at the Western & Southern Financial Group and lecturer at the University of Virginia Darden School of Business, said that investors should focus on US President Donald Trump’s economic policies which will have long-term effects and which will be enacted.

Special Reports