China’s wealth management sector has grown impressively in this decade and as the country’s demographic and regulatory landscape continues to change this growth looks set to continue, according to a new report from US research firm Celent.
In 2007, the market size for individual wealth management in China was over $350 billion - doubling since 2000 – and is expected to reach $700 billion in 2014.
"Factors that have accelerated the development of wealth management in China include the rapid growth of personal wealth, an ageing population, high savings rate, development of the financial markets, the opening of overseas financial markets to China, relaxed policies on mixed operation, and improved laws and regulations for the wealth management industry," said Hua Zhang, analyst with Celent’s Asia Research Group and the author of the Wealth Management in China report.
The number of affluent individuals in China is growing at a dramatic rate: at the end of 2007 the country boasted 415,000 individuals with assets exceeding $1 million, up over 20 per cent from 2006, and 6,038 UHNW individuals, with assets over $30 million.
China’s wealthy individuals now hold 22.3 per cent of wealth in the Asia Pacific region, a proportion second only to Japan, and the aggregated wealth of China’s affluent has increased 22.5 per cent from 2006 to $2.1 trillion. But while these figures are extremely encouraging, firms may find that tapping this growth is not without its problems.
"Challenges facing the wealth management industry include undifferentiated products, lack of awareness of global asset allocation, customer privacy protection, customer wealth management and risk management, and the lack of high-calibre wealth management professionals," said Mr Zhang.
In other findings, Celent reports that in China equities and real estate are the primary means of investment and that main product trends include an increased demand for guaranteed products, customised features, and increased use of packaged services.
It is also clear from the report that Chinese clients know what they want from a wealth management firm. Celent found that variety of products, the standard of telephone banking and internet services, and the professionalism of service staff were paramount to clients’ choice of institution. Conversely, the main reason that customers leave is poor service.