Prepare for Cross-boundary Wealth Management Connect 2.0! A number of brokerages shot

China Fund News reporter Cao Wenjing

Securities firms are actively preparing for the "Cross-boundary Wealth Management Connect 2.0".

The reporter learned from the industry that at present, a number of brokerages, including Guotai Junan, Industrial Bank, GF, Wanlian, Guosen, CICC Wealth, etc., have applied for the "Cross-border Wealth Management Connect 2.0" business qualification, among them, many brokerages have submitted materials and are waiting for approval. There are also some small and medium-sized brokerages doing market research, such as Great Wall Securities, Century Securities, etc.

Major securities firms are busy preparing for the "Cross-boundary Wealth Management Connect 2.0"

The reporter learned from many sources that many brokerages are currently busy preparing for the cross-border wealth management connect business. Some brokerages have completed the submission of application materials, some brokerages are steadily advancing the pilot application, and some brokerages are actively investigating and preparing.

"It is currently in the application stage for pilot eligibility." Guotai Junan Securities told reporters that securities companies participating in the pilot cross-border wealth management connect need to do a good job in system construction, account design, system construction, product list and other preparations, and also need to prepare for docking with Hong Kong and Macao cooperative brokerages. In terms of system construction, securities companies need to establish internal control systems, operating procedures, business cooperation agreements with Hong Kong and Macao cooperative institutions and other text system agreements for the development of "cross-boundary wealth management connect" business. In terms of account design, there should be technical conditions to ensure closed-loop remittance and closed management of funds; In terms of system construction, securities companies not only need to complete internal system transformation, but also need to do a good job of system docking with cooperative institutions and regulators to ensure that they have the human and material resources such as professionals, business systems, and management information systems required to engage in the "Cross-boundary Wealth Management Connect" business.

"The application for the cross-boundary wealth management connect pilot business is progressing steadily." Guosen Securities said that securities companies should first improve the relevant business systems according to the implementation rules of the business pilot to ensure the realization of closed-loop remittance and closed management of "cross-border wealth management connect" funds, as well as the control of cross-border capital flow quotas. Secondly, securities firms should cooperate with overseas cooperative securities firms to provide qualified investors with relevant services such as business access, account opening, binding of investors and remittance accounts, fund remittance, and cross-border wealth management transactions under the Southbound and Northbound Schemes. At the same time, it has done a good job of docking with overseas cooperative securities firms in the RMB Cross-border Receipt and Payment Information Management System (RCPMIS) to realize the submission of filing information, position information and other data. Finally, it is necessary to complete the test and evaluation of the readiness of the business system under the guidance of the regulatory authorities, and submit the corresponding test and evaluation report.

GF Securities also said that it is still in the application stage. The reporter noted that the company revised the "Rules for the Administration of Securities Custody Business", "Regulations on the Management of GF Tong Account Business", "Guidelines for the Operation of Securities Inquiry Business", "Guidelines for the Standardized Business Operation of Unqualified Accounts" and other systems last year, and actively explored and promoted innovative businesses such as cross-border wealth management connect.

Industrial Securities said that the company has completed the submission of application materials and is actively making relevant preparations.

The person in charge of the relevant business of Wanlian Securities said that the company has set up a special working group for the cross-border wealth management connect project and is actively preparing for the declaration of the business.

"The cross-border wealth management connect business is very important to the development of wealth management business and cross-border business of brokers, especially brokerages with Hong Kong branches, and they are looking forward to seizing this opportunity." A small and medium-sized brokerage firm in North China said that the company is also interested in the cross-border wealth management connect business and is currently actively organizing research to understand the situation.

A person from a brokerage firm in Shenzhen said that the company has been actively following up on the expansion, and the company is currently applying for pilot qualifications and waiting for regulatory approval. Due to the complexity of various preparations, it is still unclear when the service will finally be launched.

At the beginning of March this year, Gao Juan, chairman of the Hong Kong Securities Association, revealed that 10 securities firms have submitted applications to the Hong Kong Securities and Futures Commission for the operation of the "Cross-boundary Wealth Management Connect 2.0", of which most of them may be Chinese-funded brokers.

Luo Zuanhui, an analyst at Shenwan Hongyuan Research Securities, said that brokerages have accelerated their entry into new businesses. Considering the current lineage of products that can be invested in the WMC, the WMC contributes incremental funds to the A-share market, and the addition of securities firms as pilot institutions will also benefit the development of its wealth management business.

According to the statistics announced by various brokerage companies, 34 of the 140 Chinese-funded securities firms have set up subsidiaries in Hong Kong, of which 13 have achieved A+H listing; At present, a number of securities firms, including GF Securities, Guosen Securities, First Capital, Great Wall Securities, CITIC Securities, China Merchants Securities, Ping An Securities, Minmetals Securities, etc., are registered in Guangdong Province and have certain geographical advantages in the Greater Bay Area.

Luo Zhuanhui pointed out that the internationalization strategy of Chinese securities companies has been effective, and domestic securities companies focusing on the layout of Hong Kong subsidiaries + wealth management business in the Greater Bay Area have a first-mover advantage. According to the Q&A on Securities Companies' Participation in the Cross-boundary Wealth Management Connect in the Guangdong-Hong Kong-Macao Greater Bay Area, "Mainland securities firms can independently select one Hong Kong and Macao securities firm as a cooperative securities firm in the initial stage of the pilot program". Luo believes that this is more convenient for mainland securities firms that have previously set up subsidiaries in Hong Kong, and mainland parent companies often join hands with subsidiaries in Hong Kong to file joint declarations.

Brokerages actively explore "differentiated" play

The Cross-boundary Wealth Management Connect (WMC) version 2.0 pilot has achieved remarkable results. According to the latest data, as of the end of the first quarter of 2024, 25 pilot banks in Shenzhen have opened a total of 49,000 "Cross-border Wealth Management Connect" accounts, with a cross-border payment amount of 12.34 billion yuan, accounting for 41.5% and 46.2% of the Guangdong-Hong Kong-Macao Greater Bay Area, respectively.

Recently, Guangzhou has also launched the "Ten Measures for Investment Advisory" to encourage mutual empowerment between investment advisory business and cross-border wealth management connect business, that is, to explore the inclusion of commercial banks and securities companies that meet the pilot conditions of cross-border wealth management connect into the scope of investment advisory business, and support investment advisory institutions to provide cross-border wealth management services to qualified investors.

"With the increase in cross-boundary wealth management connect business, there will be more intense competition between the products and services provided by the qualified banks and licensed legal persons vetted by the SFC of the two places." Wu Jinduo, chief analyst of fixed income at Great Wall Securities, believes that the differentiation of cross-border wealth management products, service professionalism, and customer stickiness of basic customer groups have become important means of competition for various institutions, and have also become an important starting point and new growth point for banks and securities to expand AUM (assets under management).

Guotai Junan Securities said that compared with banks, securities companies have comparative advantages in business development in three areas: customer group conversion, professional product selection and buy-side investment advisory. First of all, securities companies have more advantages in customer group conversion, and securities companies have accumulated high-net-worth and high-risk customers who have participated in the stock fund market for a long time, laying the foundation for the customer group transformation of the cross-border wealth management connect business.

Secondly, securities companies have more advantages in professional product selection, securities companies have the advantages of a sound investment research system and professional wealth management services, and can serve customers in the evaluation and analysis of cross-border wealth management connect products, selection and recommendation, and on-demand customized product plan design, carefully select high-quality managers and products, and provide comprehensive and professional product configuration suggestions.

Finally, securities companies have the advantage of buy-side investment advisory, and securities companies are changing from the "sell-side sales" to the "buy-side investment advisory" model, which can give full play to the advantages of high-quality investment advisory teams and provide customers with one-stop cross-border wealth management connect asset allocation services through long-term and intimate investment advisor accompaniment to meet personalized needs.

The relevant person in charge of Guosen Securities also believes that securities companies have certain advantages in carrying out related business. First, the brokerage has various advantages such as professional talents, product design, research strength, etc., and has accumulated a large number of wealth management customers with strong risk tolerance and certain investment ability; Second, securities firms have a sound compliance management system and risk management system, which can effectively monitor and manage investor identity, trading behavior, capital flow, etc., and prevent money laundering, fraud, insider trading and other illegal acts; Third, the international business layout of securities companies is mainly concentrated in Hong Kong, which can connect the domestic and foreign parent and subsidiary businesses, and rely on domestic resources and advantages to promote securities companies to accelerate the development of international business.

Guotai Junan Securities emphasized that from the experience of banks in carrying out cross-border wealth management connect business, fixed income-related products such as overseas deposits and currency funds continue to attract investors' attention. The reporter learned that Guotai Junan and Guojun International conducted special exchanges and discussions, and Guojun International combined the experience of northbound customers, selected currency funds, bond funds and hybrid funds and other products for product screening and reserves, and focused on currency funds.

Editor: Captain

Review: Chen Siyang