Involving a 28 trillion market, whose cheese has been moved by the fund fee reduction?
The implementation of fee reduction reform in the public fund market with a scale of 28 trillion yuan shows the determination and direction of the regulator to promote inclusive finance. The impact of the largest fee reduction reform in the history of the industry on all participants in the fund industry chain and their practitioners has gradually emerged
Text: Huang Huiling, Zhou Nan, Xi, Shi Jiaxiang
Editor|Yang Xiuhong, Lu Ling
At half past four in the morning, the city has not woken up, and Xiaoou (pseudonym) has already gone out. She works for a large fund company in Shanghai, and on her recent business trips, she always chooses the earliest plane. The reason is simple, because it is cheap.
"Two hours is a lot worse. Xiaoou said that after the fund fee was reduced, various companies began to advocate "saving if you can". Printing materials can be printed on both sides without single-sided printing, sending express delivery, if you can take ordinary express delivery, you don't need to go to SF Express, and even the water in the conference room has been secretly changed from 550ml to 300ml bottles or more affordable paper cups.
"Our company has begun to lay off employees, and some positions that do not need to be set up will be withdrawn", "There is more work assigned, but the salary is impossible to rise", "I don't know if there is a year-end bonus", "It is also dangerous for fund managers to have poor performance"... Unconsciously, the impact of fund fee reduction on the industry is gradually emerging.
At the beginning of July 2023, the China Securities Regulatory Commission (CSRC) issued a work plan for the rate reform of the public fund industry, which laid out the stages and related measures of the fund fee reduction reform in detail, and started the first phase of the fund fee rate reform. A number of leading fund companies have successively issued announcements on reducing the management fees and custody fees of active equity funds, and the reform of public fund rates that has been brewing for many years has begun. The reform of transaction commissions, subscription fees, redemption fees, sales service fees and other rates has been gradually carried out, involving fund companies, securities firms, banks, third-party sales agencies, buy-side investment advisors, etc.
On December 8, the China Securities Regulatory Commission (CSRC) issued the "Provisions on Strengthening the Administration of Securities Transactions of Publicly Offered Securities Investment Funds" (hereinafter referred to as the "Regulations") for public comment, officially starting the second phase of fund rate reform.
The contents of the "Provisions" mainly include: reasonably reducing the securities transaction commission rate of public funds, continuously improving the securities transaction commission distribution system, strengthening the supervision of the securities transaction commission distribution behavior of public funds, and further optimizing the rate disclosure mechanism of the public fund industry.
It is estimated that the first phase of fund fee reduction will save about 14 billion yuan of investor expenses per year, the second phase of commission reduction is expected to save 6.2 billion yuan per year, and the two-stage fee reduction reform will save investors more than 20 billion yuan.
This round of the largest fee reduction in the history of the industry is also quite meaningful from the point of view. Coinciding with the 25th anniversary of the birth of China's fund industry, the fund has surpassed bank wealth management and has become the leader of the asset management industry.
After 25 years of development, the fund has become one of the most important investment and wealth management channels for the Chinese people. As early as the end of 2021, there were more than 720 million fund investors in China, ranking first in the world. One in every two Chinese has bought a fund. The size of China's public funds has also increased 13-fold in the past decade, from 2 trillion yuan to 28 trillion yuan.
At the same time, the problem of "the fund earns money and the people do not make money" has evolved into "neither the people nor the fund make money, only the fund company and the channel make money".
Zhou Yingbo, who previously served as a public fund manager, had a management scale of more than 50 billion yuan. He observed that in the fund industry chain, it is not easy to convert fund performance into investor income, and the dollar earned by the fund manager is only five cents or even less when passed on to investors due to various reasons.
Some industry veterans told Caijing that the three-year fund bull market has caused the rapid growth of the fund scale, but the consequences of the mismatch between scale and ability have gradually emerged.
In the eyes of industry insiders, this fee reduction reform has multiple signal significance.
CITIC Securities believes that "the fee reform will affect the profitability of the industrial chain in the short term, and in the long term, it will be forced to make up for the shortcomings of investment consulting and accelerate the transformation to asset allocation." Asset management and wealth can only make a difference if they follow the trend. ”
"The implementation of fee reduction at this time has brought difficulties to practitioners, but it has also brought a positive impact to the industry. It reflects the determination and direction of the regulator to promote financial inclusion. Now is just the beginning, not the end. The general manager of a fund company told Caijing.
Fund fee reduction transmission chain
Before discussing fund fee reductions, let's do a simple science: when you buy a fund, what fees will you pay?
The first thing you come into contact with is the subscription fee and redemption fee. They are deducted before each transaction and are clearly visible. Most of this fee is charged by the fund sales channel, the subscription fee is between 0.5%-1.5%, and the redemption fee is set according to the length of the holding period, up to 1%.
This is followed by management fees and custodian fees. This fee is recorded in the Fund's basic file and is not difficult to find. The management fee is charged by the fund company, ranging from 0.5% to 1.5%, while the custody fee is charged by the custodian bank, and the active equity fund is around 0.25%.
The above are the explicit costs that are relatively easy to understand. There are also some expenses, hidden in the cost of the fund's assets, which are ultimately borne by the investor. For example, the trading commissions generated by fund companies when trading stocks and bonds, this part of the cost is paid by the fund assets to the brokerage, which also includes the cost of the brokerage research institute to provide research services.
The above fees constitute the approximate cost of buying a fund. If you buy an active equity fund through traditional channels such as a bank and hold it for just over a year, the total annual cost is at least 3.5% or more, including 1.5% subscription fee, 1.5% management fee, 0.25% custody fee, 0.25% redemption fee and trading commission.
It is these costs that are the object of this fee rate reform in the fund industry.
The first thing that attracted public attention was the hidden fee that fund investors could hardly notice - trading commissions. In this item, "Party A spends Party C's money to purchase Party B's services at a high price" is an "unspoken rule" in the industry for a long time. The services provided by brokerages include not only research services that are licensed by regulators, but also other resources that are not licensed, such as fund sales, software procurement, etc.
The second is about the reduction of management fees. Unlike the drawer agreement of trading commissions, management fee income is a business on the table. This is the focus of the first phase of fee reform, and most companies have now reduced the management fee and custody fee of active equity funds to less than 1.2% and 0.2% respectively.
Next, there will be the reform of the fund sales link, mainly including the adjustment of subscription fees, trailing commissions, sales service fees, etc. According to the previous regulatory requirements, the relevant reform measures involve rule revisions, which will be completed by the end of 2024.
At present, different channels have different discounts on fund subscription fees. Internet channels can achieve a minimum discount, while most bank channels do not discount the fund subscription fee. According to the regulatory requirements, fund sales agencies will be guided to increase discounts on the subscription fees of public funds.
The reform of the sales link also includes: further reducing the trailing commission of fund managers, and studying the upper limit of the differentiated trailing commission payment ratio for different types of fund products, standardizing the collection of service fees for public fund sales by sales agencies, and studying the implementation of a tiered downward fee model according to the period of fund holding by investors.
In addition, the disclosure requirements for rate-related information will be strengthened. In the future, the fund product key facts statement and fund annual report will more clearly show the various fees of fund products, including how much management fees are charged by fund companies, how much trailing commissions are paid, how to allocate securities trading commission expenses, etc. This part of the reform is expected to be completed by the end of 2023.
The subsequent adjustment of the subscription fee rate and the tail commission ratio will have a greater impact on the sales channels, especially the fund business of traditional sales channels such as banks and brokerages (mainly for the discount of the subscription fee), and the fund company will benefit from the reduction of the tail commission ratio, and the subsequent adjustment of the transaction commission rate will have a huge impact on the brokerage research institute.
CITIC Securities calculated the impact of the fee reduction: in terms of management fees, the management fee income of the public fund industry decreased by about 9%, the management fee of the head active equity fund companies decreased by 5%-15%, and the custody fee income of the industry decreased by 7.5%. "After the reduction of management fees, the net profit margin and ROE (return on net assets) of China's top public funds have been basically comparable to those of international top asset management institutions, and we believe that it is necessary for the healthy development of the industry for leading institutions to maintain a reasonable level of profit margin and return on capital. ”
In terms of trading commissions, it is expected that the related income of securities companies will decrease by 2%-3%. "Referring to the notice of rate reform, under the requirement that the transaction commission rate shall not exceed twice the average market commission rate level, if it is necessary to ensure that the brokerage business of the securities industry does not lose money, we estimate that the lower limit of the long-term reduction of institutional trading commissions is about 0.034%. CITIC Securities previously said.
In terms of sales, CITIC Securities believes that since fund distribution accounts for a relatively small proportion of the income of banks and brokerages, the third-party channels have the greatest impact. Based on the assumption of 20% as the average profit margin of the industry, it is expected that the upper limit of the channel rate reduction of about 20% is relatively reasonable.
For most fund holders, the annualized impact of fee reductions on investment income is less than 1%. As a result, the fund fee reduction has not sparked a large-scale discussion on a larger public platform.
Some investors believe that "it is better than losing money and not reducing the rate." More investors expressed dissatisfaction with the fund's losses. They believe that the fee cuts are a scratch in the shoe, and not enough to get them to trust the fund company again. Another investor said, "If the fund can make me money, I am willing to give a higher commission." ”
The secret contract with the broker was broken
Among the items involved in the fund fee reduction reform, brokerage trading commissions are regarded as the most unreasonable.
The irrational phenomenon that can be seen with the naked eye is that the commission paid by the fund to the brokerage is too high. When the brokerage brokerage commission for retail investors has dropped from the earliest 0.2% (thousand two) to the lowest of only 0.01% (in case), the commission paid by the fund is still implementing the standard of about 0.08% (ten thousand eight) in the early days.
In addition to the above-mentioned higher transaction rates than retail investors, there are two major factors: one is the excessively high turnover rate of some fund companies; and the other is the 13-fold growth in the scale of the public fund industry in 10 years.
Income and distribution of the whole industry chain of public funds in 2022 by business link
"Institutional seats are definitely a bit more expensive than retail investors, and there is a fee to get sell-side research services, which comes at a cost. But the gap from 10,000 to 10,000 is obviously unfair and unreasonable. Li Ping (pseudonym) has been working in the field of securities and funds for nearly 20 years, and he believes that the key factor of irrationality is that with the development of the public fund industry, the transaction volume has long been very different from the past, and sell-side research has also moved towards a deformed prosperity in the process.
"Originally, there were not many securities companies doing sell-side research, and the research department mainly provided internal investment banking services. Later there were commissions, and there were a large number of institutes. The question is, is it necessary for us to have so many researchers?" Li said.
On the one hand, there is already an overcapacity in sell-side research, and the research is seriously homogeneous, and on the other hand, the gap between the commission rate paid by fund companies and retail investors is ridiculously large. Li Ping said that this in itself has shown that things cannot continue, but there is just a lack of an opportunity.
Where are the high commissions used? Part of it goes to the institute, and part of it goes to the fund distribution.
"The general situation is five or five open, and when the A-share market is not good, the proportion of research institutes will be lower, sometimes falling below forty percent. The director of a large brokerage research institute told Caijing.
"Some companies are big and have a lot of commissions, but they don't have so many investment research services to pay, and some use the rest of the money to exchange for fund sales. Especially when seizing the market share of ETFs (exchange-traded funds), some take 60 times or 80 times in exchange. It's really too much, and it's a pipe to be done. The general manager of a small fund company told Caijing.
Although the relevant regulations prohibit fund companies from linking fund sales when selecting brokerage trading seats, the linkage between commissions and agency sales has long been common in the industry.
A person from the sales department of a brokerage told Caijing that the sales policy of replacing sales volume with commissions has always been an open sales element for them. For local branches and sales departments, if the sales volume is high enough, they can also win additional incentives.
To summarize the above phenomenon, the commission charge of sub-warehouse is high but continues for a long time, the gray method of replacing consignment resources with commission is popular, and the research homogenization is serious and still going forward... All kinds of unreasonableness constitute the absurd story of the split commission.
"Absurd stories can't go on forever. After a long time, there will be something that will eliminate it, either technology or regulation, or just a small thing that can poke it, otherwise this society will not be able to progress. Li Ping thinks.
According to the notice issued by a local securities regulatory bureau, the adjustment direction of the sub-position commission includes: reducing the commission rate to less than twice the average level, blocking the gray channel of exchanging commission for sales, and tilting the interests of some specific brokerages. After the commission rate is reduced, it will have an impact on the interests of brokers, fund industry, investors and other parties.
Caijing has learned that before the release of the consultation draft, fund companies have successively re-signed product contracts with brokers.
"The new contract stipulates a new commission rate, which is basically in accordance with regulatory requirements, that is, within twice the market average rate. A person from a brokerage research institute said.
In some new contracts, the commission ratio of sub-position is reduced from the original 8/10,000 to less than 5/10,000, and some institutions have lowered it to 4/10,000. In addition, more interviewed fund companies said that no new contracts have been signed yet, and the commission for newly opened seats is still calculated at 10,000 8.
"The main ones who cut commissions are small brokers, and large brokerages are still waiting and negotiating. Some insiders in the industry said that the bargaining power of small brokerages is relatively weak, and they have passively become the "vanguard" of the commission reform.
"Previously, the local securities regulatory bureau issued a notice requiring a reasonable reduction in commissions. But we understand that it is not a formal request, it is just asking for comments, and there is no follow-up later. Some big companies in the circle have already started to talk, we will not be so aggressive, or wait for a clear notice from the regulator. A person from a large fund company in South China said.
The new regulations clearly stipulate the reduction of brokerage commissions: the stock trading commission rate of passive equity funds managed by fund managers shall not exceed the average market stock transaction commission rate in principle, and shall not pay other expenses such as research services through trading commissions; The average market commission rate for stock trading is calculated by the Securities Association of China on a regular basis and notified to industry institutions. If the commission rate for stock trading agreed between the fund manager and the securities company is higher than that provided for in the preceding paragraph, the adjustment of the transaction commission rate shall be completed within three months.
After the fund fee reduction, another piece of the Institute's business that has been reduced or even cleared is soft commission (hereinafter referred to as "soft commission"), which means that the brokerage company purchases software such as Wind and Hang Seng System on behalf of the fund company, and the fund company pays in the form of commission.
The new regulations clearly state that the use of transaction commissions to transfer payment fees to third parties is strictly prohibited, including but not limited to fees arising from the use of external expert consultation, financial terminals, research platforms, databases, etc.
"Soft commissions used to be an important source of income for the institute, and they could earn some spreads when the market was good, but now they have also been stopped by regulators. An analyst said, "The brokerage purchasing software is mainly to make a shout, because it can be counted in the operating income, increase market share, and indirectly improve the ranking of the institute." ”
Based on the data of 2022, after the implementation of the new regulations, the total commission of public fund stock trading will drop from 18.868 billion yuan to 12.636 billion yuan, a decrease of 33%, saving investors 6.232 billion yuan per year.
Previously, industry insiders inferred that after reducing the proportion of sub-warehouse commissions, the cake will become smaller as a whole, and the distribution pattern between consignment and research will be reshuffled.
"From a regulatory point of view, it is illegal to pay for consignment, but it is permissible to pay for research services, and the consignment part should be compressed or even cut. However, some people believe that sales are just needed, and it should crowd out the part of the research institute, depending on how each company decides. An industry insider analyzed.
However, the new regulations still bring some good news to the securities research institute: according to the new regulations, fund companies are strictly prohibited from linking the selection of securities companies, the leasing of trading units, and the distribution of trading commissions with the scale of fund sales and holdings, and it is strictly forbidden to promise the trading volume and commissions of fund securities to securities companies in any form or use transaction commissions to exchange interests with securities companies, and it is strictly forbidden to use transaction commissions to transfer and pay fees to third parties.
At the same time, the regulations emphasize that "the association and the dispatched agencies will comprehensively strengthen the supervision of trading behaviors, and strictly hold accountable those who violate the rules." ”
"If the new regulations can be implemented seriously, it will indeed be good for the brokerage research institute. A director of the institute told Caijing.
For the research institute, the problem of grabbing the cake with the consignment can take a breath, but it still needs to face the bleak business under the downturn.
"Our agency sales are already relatively weak, and the impact of the commission reduction on us is similar to what we expected. Some of the core customers have basically no trading volume, and the revenue of the institute in the third quarter is very ugly. An analyst at the Institute of Small Brokerages said he had experienced three pay cuts so far this year.
"More and more institutes are going to be taken down, if not at all, to be drastically downsized, or even to stop doing sell-side research. Especially for late entrants, if they simply establish several major research businesses, it is difficult to compete with mature research institutes, and it is not a little turbulent to spend money. The former person in charge of a small and medium-sized brokerage research institute said that the road of the institute is very difficult, "if you want to enter the top ten, the investment in the brokerage is huge, at least hundreds of millions."
Large brokerage research institutes have long been prepared for a rainy day. "Three years ago, we were trying to carve out a second curve of revenue. The director of the above-mentioned large brokerage research institute said.
"The competitive landscape of brokerage research institutes will be further differentiated, and more economical, larger, and wider research coverage research institutes may maintain relatively stable income, and even income is expected to continue to increase, and will also concentrate more customer resources. A senior researcher believes that the future of research institutes' income-generating models needs to be diversified. In his opinion, there may be a business model for C-end customers in the future.
Fund companies reduce management fees
Some analysts believe that the purpose of the fund fee reduction is to break the dilemma of "the fund earns money and the people do not make money". Judging from the data in recent years, this problem has evolved into "the people do not make money, the fund does not make money, only the fund company and sales channels make money".
Wind data shows that the Wind Partial Equity Mixed Fund Index (885001) has been fluctuating and falling since reaching its all-time peak on February 18, 2021, during which there is also a "honeymoon period" of returns, but as of December 8, 2023, it is still down 34% from the peak. During the same period, the CSI 300 index fell 41% and the Shanghai Composite Index fell 19%.
Comparison of the performance of active equity funds against the broader market
Judging from the actual income of the people, 2020 is the best year for the people's income, and the profit of the active equity fund is as high as 1,321.1 billion yuan. But in 2021, that figure dropped to 198.6 billion yuan. Entering 2022, the income of the people will be negative, with a net loss of 1,292.4 billion yuan for the whole year, almost wiping out the profits in 2020.
For fund companies, management fee income has been rising in line with the scale in the past three years. At the end of 2019, the total size of the fund was 14.8 trillion yuan. By the end of June 2023, the total scale will almost double, reaching 27.7 trillion yuan, surpassing bank wealth management and achieving a historic leap. In terms of management fees, the total management fee income of the industry was 63.3 billion yuan at the end of 2019 and 145.9 billion yuan at the end of 2022, an increase of 1.3 times.
Some investors asked on the Internet, how many of the public funds in history have made money? "Caijing" made statistics on this, and the answer was unexpected:
As of December 9, 2023, there are 19,806 public funds in the whole market (different shares are counted separately). Among them, there are 8,026 loss-making products, accounting for more than 40%. These funds, which are still losing money, have an average age of 2.25 years.
"In recent years, too many new fund products have been issued, and the loss ratio is very high, no wonder the fund is disgusting. Some industry insiders commented.
Complaints caused by large-scale losses have spread like snowflakes to various channels. Zhang Linfeng (not his real name), a product manager at a branch of a large commercial bank, told Caijing that an important part of his current job is to deal with complaints from fund customers.
There are many complaints, and the sales of new funds are even more difficult. In order to meet KPIs (Key Performance Indicators), front-line salespeople have to buy funds out of their own pockets.
"Now the people who sell products have a lot of money, and everyone is using their own money to buy the products assessed by the company. Aya works as an account manager in the business department of a leading brokerage. She told Caijing that this year she felt a sense of powerlessness that she had never felt since she worked, and it was particularly difficult, "Some employees bought millions of yuan by themselves, and his mother didn't talk to him anymore."
At the same time, it has become difficult to force out real customer allocation funds. Aya said that some old customers who have invested several million yuan can now buy 50,000 yuan or 100,000 yuan, which is a big order, and ordinary customers can buy up to 10,000 yuan to save face. "Now I can't sell 50,000 yuan for a day of exhaustion. ”
"It's easy to get scolded for selling funds now. In 2021, you said that the low-level layout, and people believed it. In 2022, the low-level layout will continue, and people believe it. It's now in its third year, what else can you say? Isn't the three-year layout enough?" a bank wealth manager said helplessly, "The winter is too long, and the seeds are frozen to death." What do customers do to stick to long-termism?"
Another ironic fact is that almost all of the continuous record highs in the scale of public funds come from new investment by investors, rather than investment income, and the shrinkage caused by investment losses is deducted.
From the beginning of 2020 to the end of June 2023, the total net asset value of public funds increased by 12.77 trillion yuan. On the other hand, in the same period, the total amount of new funds alone reached 6.54 trillion yuan, and the number of new products was 5,251.
Among them, the growth of the scale of hybrid funds is the most typical: the scale increment is 2.38 trillion yuan, the total share of new funds in the same period reached 367 million, and the total share of new funds retained so far is 2.13 trillion. In other words, almost all of the growth in the size of hybrid funds since the beginning of 2020 has come from the issuance of new funds.
"Many seniors say, 'Scale is made, not sold.'" But in recent years, the industry has continued to roll in, and the scale has really become sold. A fund practitioner said.
Reflecting on the causes of the current situation of public funds, a fund practitioner said, "In the past, the ecology of public funds was to reward attackers, and few people praised you for doing a good job in defense, which also led to the deformation of public offerings." No one cares whether the fund company helps investors make money, only who makes it bigger. ”
"From the perspective of every fund company and channel, doing large-scale in a bull market is the right choice. Because when a bear market comes, even if you have a good conscience in a bull market, it is difficult to scale up in a bear market. On the contrary, because the people are trapped in a high position (issued in a bull market), the scale of the unconscionable is stable. Zhang Linfeng said, "In essence, bad money is driving out good money." ”
He even coined a term to describe the death of this kind of industry, called "sharing the burden of evil and karma", and "the whole industry is paying for the previous mismatch between scale and capacity".
This is not the first time that the fund industry has experienced a cyclical trough of "watching the sky to eat", but it can be called the most stressful one: internally, the collective disorientation of the industry such as over-reliance on star fund managers and over-emphasis on scale in the past needs to be reflected; for investors, it is difficult to account for the performance of a large number of green products; for the country, as the stabilizer and ballast of the capital market, public funds shoulder the heavy responsibility of "activating the capital market".
Therefore, reform of the fund industry is imperative. The fee reduction reform is one of them, and the reduction of management fees is the first step.
On the morning of July 8, 2023, a number of fund companies such as E Fund and GF announced the reduction of management fees and custody fees for some of their products, and the main products cover active equity funds with a current management fee of more than 1.2% and a small number of other varieties with higher management fees.
According to regulatory requirements, from July 10, the management fee of newly registered products of all public fund companies shall not be higher than 1.2%, and the custody fee shall not be higher than 0.2%. The downgrade is an industry-wide downgrade, and the first batch of downgraded companies are the top 20 institutions in terms of active equity fund size. For small and medium-sized fund companies and existing products that have not yet lowered their fees, they will strive to adjust them by the end of 2023.
From the perspective of fund investors, the cost of investing in active equity funds will be reduced from 1.74% (the average of management fees and custody fees) to 1.4%, a decrease of about 20%. This means that the cost will be saved by 0.34% per year, and 34 yuan per 10,000 yuan.
Fund companies rely on management fees as the core source of income. The reduction of management fees will undoubtedly have a knock-on effect on the fund industry.
From the perspective of fund companies, small and medium-sized fund companies have obviously been hit harder. "To tell you the truth, the biggest headache we have now is the pressure of fee reduction. There is an urgent need to develop other businesses and use other income to hedge against the decline in the income of active equity funds, such as special accounts. The general manager of a fund company told Caijing, "There are always more ways than difficulties, and each company will evaluate it according to its own resource endowment." ”
After the fee reduction of active equity funds, investors who are concerned about this matter are full of expectations. Wang Liang (pseudonym) believes that after the fund fee is reduced, the fund company will not be so easy to guarantee income in drought and flood. This will force them to optimize their competitiveness, and good fund managers will be able to prove their ability to do not just blindly go to scale. "Those funds and companies that are not strong enough will be eliminated, and the probability of me buying the thunder fund will be even smaller. ”
Forced sales channel reform
Having worked in the bank for many years, Zhang Linfeng feels that the fund fee reduction may bring changes to the bank's fund business. "With the reduction of trailing commissions, coupled with the decline in net worth of holdings in the current market state, the resources that can be directly mobilized by the fund business in the bank will be reduced, and the business may be marginalized. ”
"But the marginalization of the fund business will also be good for banks. Zhang Linfeng changed his words, "After marginalization, there will not be too much administrative interference." In the absence of administrative intervention, either lie flat or specialize. ”
Zhang Linfeng believes that specialization will only come after marginalization, "the customization of the market before is too big for the industry as a whole, resulting in a mismatch between scale and ability."
For the brokerage business department with high fund sales, the fee reduction also means a major adjustment of the business.
"In the future, we may put more effort into selling private equity products. The quantitative trading volume of private placements is large, and if the excess performance is good, there is also back-end income. Aya told Caijing.
Some brokerages also believe that fund companies will have more incentive to expand the scale of products, in order to maintain stable income with volume premium, so fund companies may have greater demand for services in sales channels.
Qi Kai (pseudonym) is in charge of investment consulting business at a brokerage. He believes that for his own brokerage, the buyer's investment advisory is the only business that may charge an extra amount of money after the fund fee reduction, and the role of the investment advisory business is expected to change from "reserve" to regular.
Some wealth management professionals and researchers believe that the fund investment advisory business has indirectly benefited from this fee reduction reform.
Currently, the mainstream fees for buy-side advisors are between 0.1% and 0.5% a year. The good logic is that for customers, the money saved by the fee reduction can be used to purchase investment advisory services, and they do not need to spend extra money to have a better investment experience.
But the actual experience of buy-side advisors is not so rosy.
Aya, a front-line salesman, told Caijing that her brokerage has direct contact with customers by front-line personnel. But the front-line staff are exhausted with the sales task of various products every week, "I haven't managed my investment advisory customers for a long time."
Aya remembers that the promotion of investment consulting was in full swing at the beginning, and the supervision intensity was very high. "At that time, we had to promote a certain number of customers every week, and if we couldn't complete it, we had to close the 'small black house', pull a group, explain the promotion list and communication records every day, and complete the task to get out of the group. ”
"In 2022, we will sell products in the way of high incentives + strong supervision. This year, the high incentive is gone, and the strong supervision has increased. Aya said that the actions of front-line personnel completely follow the KPI, and fund investment consulting is one of the projects that accounts for a negligible proportion. Although the incentives given by the company are not bad in the medium and long term, it is not a project that will be supervised in the short term. In Aya's view, it is difficult to cultivate a long-term investment advisor with such KPI strength and short-term success.
Qi Kai has held many offline exchange meetings. After going deep into the front line, Qi Kai found that customers couldn't tell who was who in this industry. "A lot of people don't know the difference between a fund manager, a fund advisor, and an account manager. They just want to find someone to ask why the fund they bought is losing. ”
Qi Kai told his colleagues in the sales department that other consignment businesses are the stones of a glass, and investment advisors are water. "If you add a little water, you will have more stickiness with customers, and investment consulting can become your business reservoir. ”
He hopes that his colleagues can understand the value of investment advisory, but he does not want them to take out all their net worth. "It's not their problem, it's not mine. Unless the company level and the industry level can establish the sense of investor gain as a KPI, we can have an ecological niche in the industry. ”
Qi Kai said that the biggest problem at the moment is that the draft of the new regulations on investment consulting has been released, and the banner of buyer investment consulting has also been erected, but there is no grain and grass and no weapons. He hopes that the supervision will allow wealth management institutions to include the "sense of investor gain" in the assessment requirements, as it does for fund companies. "Now for the channel, there is only revenue and scale assessment, and naturally there is no motivation to be 'customer-centric'. ”
"For the problem of the people not making money, in fact, the fund company is not the main reason, the core problem is the channel. Qi Kai told Caijing, "Customers are in the hands of channels, not fund companies." Therefore, the reform of the channel side is something more important in comparison, but it has not yet begun. ”
The concept of wealth management became popular more than a decade ago. However, Qi Kai believes that the real meaning of wealth management is still after the new regulations on asset management in 2018. "The wealth management ecology in our country is still very early and primitive, and most people still do it with a sales mindset. ”
Buy-side advisors are considered to be a game-changer in the traditional fund sales landscape. And Yang Xiaolei, the manager of slow investment advisory, made an analogy: the current fund investment advisor is like a new energy vehicle in 2007.
The goal of the sea of stars is still far away, but marginalization and low income are real problems in front of us. "When we're doing the hard but right thing, we want to see it priced. Whether it's an assessment, a bonus, or a business tilt, you have to tell everyone the value of doing this. Qi Kai said.
Those who can bow down to the game are all optimistic and determined. Yang Xiaolei said half-self-deprecating and half-serious, "Where the profits are high, there are many people who compete, and the competition pattern here is very stable." Fund investment advisors have a wide moat, and this moat comes from the fact that the business really doesn't make much money. ”
Ecological reinvention after labor pains
On the evening of April 26, 2022, the WeChat official account of the China Securities Regulatory Commission released a blockbuster tweet about the fund industry, titled "Opinions on Accelerating the High-quality Development of the Public Fund Industry". The article emphasizes the role of public funds as a "ballast stone" and "stabilizer" in the capital market, and puts forward requirements for the industry to develop with higher quality: "Promote the industry to become a practitioner of the 'great man of the country'." ”
At that time, everyone was looking forward to a bright future for the fund industry. Few people realize what kind of industry pains they need to go through if they want to become a practitioner of the "great man of the country".
Previously, the reduction of management fees has long been controversial in the industry. Some researchers believe that this is a "headache and cure" experiment, which cannot solve the core problem of fund investment, but increases the difficulty of survival of small and medium-sized institutions. Some people also believe that this is a traditional Chinese medicine-style compound therapy, which regulates the sub-health industry ecology through a multi-pronged approach.
CITIC Securities believes that under the deduction of market-oriented logic, the fee reduction of public funds is the inevitable result of "the improvement of institutional rate - the improvement of market efficiency - the decline of active excess returns - the increase of passive proportion - the price war of passive products - the reduction of active product fees". "The fee reform will affect the profitability of the industrial chain in the short term, and in the long term, it will be forced to make up for the shortcomings of investment consulting and accelerate the transformation to asset allocation. ”
"We believe that the core contradiction of China's big wealth market lies in the capital side, how to do a good job in the adaptation of customers and products and services, and the extensiveness of investment advisory licenses is more urgent. CICC research report analysis.
"The business model of asset management and wealth institutions needs to return to its origins, and the basis for its commercial sustainability lies in serving customers' property income. "CICC believes that from the perspective of the industrial chain, asset management institutions are responsible for building asset portfolios to provide customers with high-quality products, wealth institutions are the connection between customers and the financial market, providing financial solutions and services based on customer needs, and the two work together to promote the high-quality development of asset management institutions and the transformation of wealth management buy-side investment advisors.
The direct effect of the fee reduction reform on investment returns is small. Therefore, on the investor side, this fee reduction reform has not received a wider range of enthusiastic responses.
"It's not easy to translate fund performance into investor returns. When Zhou Yingbo left the public fund industry, he said, "Between the investment management of public funds and the investment behavior of funds, there are many processes such as fund investment research allocation, fund issuance, and channel sales. ”
"The huge difference between the money a fund manager makes and the investor's return doesn't disappear in a vacuum, it's been lost. You look at it as a pipe, but it can be a labyrinth of huge losses. Zhou Yingbo told Caijing.
At the fund company level, Caijing found in the process of industry visits that the impact of fund fee reductions is far more than the impact on revenue. In the midst of the changing landscape in the industry, practitioners are beginning to re-examine their work.
A person from an individual fund company who is known for active equity investment told Caijing that in recent years, their reflection has mainly focused on investment methodology. Taking macro factors as an example, in the past, when the economy was good, there were opportunities in all walks of life, and fund managers did not pay much attention to the macro, but in the future, they must pay attention to the closeness of the macro, and some industries need to be appropriately avoided.
"If you want to be a top student, you must improve your winning rate and accuracy. Where you can score, you must score, even if you earn less, you must earn it, and you can't lose points everywhere. The aforementioned person said.
There are also companies that have begun to rethink their product layout. A person from a large fund company in Shanghai believes that it is not a good thing that the current fund industry has collectively turned to ETFs after the development of active equity funds has fallen into difficulties.
In addition, the competition in the ETF industry will also be blocked with the gray channel of trading volume for sales, and the current competitive landscape will also face new changes. "All companies can compete in a market-oriented way, and this arena is no longer only for individual leading companies with large trading volumes, which is a good thing for the industry. Some industry insiders said.
With the opening of the curtain on fund fee reduction, more and more practitioners have begun to look for new ways to solve problems and reflect on the past. "Should we sell so many high-risk funds?", "What kind of products do people need?", "What is the circle of competence of fund managers?", "Should we take the direction of instrumentalization or asset allocation?", "Should the fund distribution platform have values?", "How can fintech really be good?"
The answers to these "soul torture" questions may be revealed three or five years later, and the strategic choices of each company today will also determine the industry pattern in the next three to five years.
(Caijing reporter Zhang Xinpei also contributed to this article)