Wealth managers have to up their game to tap the large pot of Chinese HNW wealth that remains unmanaged. In particular, a wide range of financial products and services will be key to increasing uptake of financial advice.
The Chinese private banking sector is an attractive market to operate in. Compared to wealth hubs such as Singapore and Hong Kong it is comparably untapped, and a significant proportion of HNW wealth continues to be unmanaged. According to our 2016 Global Wealth Managers Survey, one fifth of Chinese HNW wealth is not placed with a professional wealth manager and a further 17% is held in execution-only mandates, which poses a significant opportunity for wealth managers in the country.
However, providers will have to work hard to convince local HNW investors of the benefits of professional advice. Our data shows that a large chunk of HNW wealth is locked up in property and stored in deposits for future investment opportunities. And with a portfolio resembling that of a retail investor approaching retirement age, there has been little perceived need to seek professional advice.
To entice new clients, advisors need to highlight the benefits of a well-diversified portfolio, particularly as it relates to wealth preservation. For example, the over-reliance on local property makes Chinese investors vulnerable to any property price shocks – and there is a definite possibility that prices could drop. Even advice that simply optimizes tax efficiencies and liquidity will be something investors currently lack in their portfolios.
Ultimately, it will be those wealth managers with an extensive service proposition, spanning a wide range of investment and advice products, that will be able to unlock the Chinese wealth opportunity, not just those that can pick stocks.
By Heike van den Hoevel, Senior Wealth Management Analyst