"Now it is not meaningful to simply focus on the management scale of each company, and it is more important to build the capacity of the underlying (investment research + technology system). An observer of the banking wealth management industry said meaningfully.
Since the establishment of ICBC Wealth Management as the first bank wealth management company in May 2019, the bank wealth management company has gone through nearly five years of development, and the industry has accumulated rich experience in investment and research capacity building, technology system construction, and sales channel expansion.
At the same time, the bank wealth management industry is facing problems such as product homogeneity, short-term products, and simplification of underlying assets, and the anxiety caused by the "incremental no increase in income" under the rate involution and the overtaking of public funds in terms of scale cannot be ignored.
Looking to the future, how can the banking and wealth management industry break through growth anxiety by improving the underlying capabilities and embrace the next five, ten, and twenty years?
The transformation has been fruitful
In 2023, "steady and low volatility" will become an important synonym for bank wealth management, and the industry will gradually increase its transformation efforts in the steady layout, which is not only reflected in the changes in product strategy and management scale, but also in product form, investment and research strategy, channel construction, system construction, etc.
This is evident in the 2023 annual reports of various banks.
On the product side, China Post Wealth Management disclosed in the annual report of the Postal Savings Bank that in 2023, the company will launch a number of innovative products in the industry for the first time, and the scale of products such as income swaps, credit risk mitigation tools, and target date indices will exceed 10 billion yuan. On the basis of the product system of "eight cores and three characteristics", IB Wealth Management has built a quantitative multi-type product line, issued low-volatility wealth management with rights such as "fixed income + preferred shares", and continued to improve the mainstream strategic product line.
In fact, multi-asset and multi-strategy have become a buzzword for bank wealth management companies. "Companies are now investing in multiple assets and strategies. Our company is also improving the construction of the strategy library, and will create different strategy products according to the development of the market, such as the product containing gold investment strategy created a while ago. An executive of a state-owned bank wealth management company told a reporter from the China Securities Journal.
The construction of the channel side is even more multifaceted, which is not only reflected in the increase in the number of sales channels, but also drives the improvement of the management scale of wealth management companies.
According to the 2023 annual report of China CITIC Bank, in 2023, CNCBI Wealth Management will continue to strengthen the construction of the direct sales system of "online publicity + offline promotion" and "institution + individual" and the construction of "12 (state-owned and joint-stock banks) + 3 (head Internet banks) + N (small and medium-sized rural commercial banks)", further improve the sales channel ecosystem, and cooperate with 127 distribution agencies by the end of 2023.
As of the end of 2023, Ping An Wealth Management has cooperated with more than 40 interbank banks to carry out agency sales business, with a balance of more than 340 billion yuan...... According to data from Ping An Bank, as of the end of 2023, the scale of Ping An Wealth Management's management exceeded the trillion yuan mark, with a product balance of 1,013.06 billion yuan, an increase of 14.2% from the end of 2022.
A number of challenges to be solved
While the bank wealth management industry is developing steadily, it is also facing the embarrassing situation of being surpassed by public funds and the industry "increasing without increasing income", which will be more prominent in 2023.
According to the data, as of the end of June 2023 and the end of December 2023, the net asset value of public funds was 27.69 trillion yuan and 27.60 trillion yuan, respectively, while the scale of the bank wealth management market in the same period was 25.34 trillion yuan and 26.80 trillion yuan, respectively. This means that bank wealth management has lost the throne of "the first brother of asset management".
It is worth mentioning that the market size of public funds is still growing rapidly this year, and as of the end of March 2024, the net asset value of public funds is 29.20 trillion yuan. According to the research and estimation of CITIC Securities, the scale of bank wealth management at the end of March 2024 decreased by about 1.2 trillion yuan month-on-month to 26.33 trillion yuan.
The overall operating performance of the industry has declined, and some companies have the dilemma of "increasing revenue without increasing income". A reporter from China Securities Journal combed through the annual reports of a number of banks and found that in 2023, the net profit of China Post Wealth Management, IB Wealth Management, Qingyin Wealth Management, Bank of China Wealth Management, and CMB Wealth Management will all decrease by more than 10% compared with 2022, and the net profit of ABC Wealth Management, CCB Wealth Management, and Chongqing Rural Commercial Wealth Management will all decrease by more than 50% compared with 2022.
In this regard, Wang Xin, chief analyst of the banking industry at Guosen Securities, analyzed: "In 2023, the scale of wealth management will increase while the business income will decline year-on-year, which will lead to a decline in the proportion of total revenue. We judge that this is related to factors such as the short-term product structure, insufficient retention of high-yield assets, and strong bargaining power of distribution banks. ”
According to the data, as of the end of 2023, the scale of closed-end products with a term of more than 1 year accounted for 67.02% of all closed-end products, a decrease of 5.58 percentage points from the beginning of the year. At the end of 2023, the scale of equity asset allocation will decline to only 0.83 trillion yuan, accounting for 2.86% of total investment assets, compared with 3.14% of total investment assets at the end of 2022.
In the eyes of industry insiders, this short-term product structure is easy to bring about the instability of management scale and operating performance, and the simplification of underlying assets is even more "dangerous".
"In the past few years, the scale of bank wealth management has increased significantly, but this is only a symptom of the bond bull market. When the equity market improves significantly in the future, bank wealth management that has been focusing on fixed-income investment and research for a long time may not be able to withstand the test of the market, and the scale of customers and management may be quickly taken away by other asset management industries. A senior executive of a joint-stock wealth management company expressed concerns about the product structure and investment strategy of bank wealth management.
Strengthen the capacity building of the bottom layer
Since the establishment of bank wealth management companies, the bank wealth management industry has gradually solved systemic problems such as product netting and investor education, and completed a "rebirth". How will the industry meet the next five, ten, or twenty years?
In the view of some industry insiders, bank wealth management companies have opened the optimization of management fees and redemption models, and models such as "zero rate" and "wealth management night market" have been well received by many investors. However, these are only appearances, and the underlying capacity building based on investment research capabilities and scientific and technological capabilities is the ultimate competitiveness of wealth management companies as asset management institutions.
For the construction of investment and research capabilities, Jing Song, chairman of IB Wealth Management, said that it is necessary to "develop multi-asset mid-board and make up for equity shortcomings". In the future, banks need to establish and improve a multi-dimensional and multi-level equity investment and research system including strategies, industries and individual stocks, vigorously cultivate an excellent team of multi-asset and equity investment, carry out in-depth cooperation with various outstanding asset management peers, market research institutions and universities, flexibly use derivatives and hedging methods to manage the volatility and drawdown of weighted products, and achieve high-quality growth in multi-asset and equity investment.
Compared with other asset management sub-industries, the banking wealth management industry is characterized by a large number of practitioners and products, as well as complex maturities, which test the company's financial technology capabilities. This will also prompt banks to increase the construction of scientific and technological systems, increase the cultivation of relevant talents, and lay a solid foundation for enriching the investment and research system and product investment strategies in the later stage.
"In the past, the operation personnel of some wealth management companies were outsourced, but now they are gradually moving towards independent construction to train and recruit professional talents. A person from the operation department of a state-owned bank wealth management company said. There is also a person from a joint-stock bank wealth management company said that bank wealth management plays the role of institutional investors and product pricers in the bond market, and the company is studying the quantitative trading of bonds, of which the construction of science and technology systems will play an important role.
It is understood that at present, bank wealth management is characterized by refined management. A wealth management company said that in the investment research and trading sector, 9 new investment varieties or scenarios will be added to the investment system in 2023, the intelligent trading platform project will be launched, the efficiency of inquiry transactions will be greatly improved, and the investment research transaction management function will continue to improve. In the risk management section, the digitalization of the threshold deviation of the whole process of the product and the tracking and monitoring of the repair of broken products.
Five big articles
The Central Financial Work Conference pointed out that it is necessary to accelerate the construction of a financial power and do a good job in science and technology finance, green finance, inclusive finance, pension finance, and digital finance. In the eyes of industry insiders, as a financial component serving the real economy, bank wealth management can effectively exert force in terms of product side, investment side, asset side and even internal management.
"For science and technology finance, wealth management companies should further broaden their horizons on the basis of science and technology finance, and guide long-term funds to invest in the primary market equity of non-listed companies through private equity wealth management products. For green finance, wealth management companies should do a good job on the product side, investment strategy side and asset side at the same time, promote the creation and issuance of ESG green products, and explore the innovation of green wealth management products, investment strategies and assets. Jing Song said.
Recently, the State Council issued the "Several Opinions on Strengthening Supervision and Preventing Risks and Promoting the High-quality Development of the Capital Market", which is expected to open a larger window for wealth management companies to serve the real economy.
The relevant person in charge of CMB Wealth Management said that for bank wealth management companies, the "Opinions" means that more high-quality assets can be allocated on the product side, so as to improve the diversity of asset allocation and investment efficiency. By participating in the capital market, banks' wealth management products can better share the fruits of economic growth, improve the income level of wealth management products, and thus improve investors' wealth perception. The "Opinions" will help promote the innovation and development of banks' wealth management business. The policy encourages bank wealth management products to participate in the capital market and increase the scale of equity investment, which provides more business innovation space for the company, and can increase the design and innovation of equity and hybrid wealth management products to meet investors' demand for high-yield products.
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