In this excerpt from AltFi’s Digital Wealth State of the Market Report 2021, we unpack the wealth management revolution in China, Japan, South Korea and Singapore.
This is an excerpt from AltFi’s Digital Wealth State of the Market Report 2021, which is available for free here.
Three-fifths of the world’s people live in Asia, where incomes and investments are rising. According to Cerulli Associates data, the global asset management industry ended 2020 with $115.4 trillion (£83.4 trillion) in assets under management (AUM).
Asia ex-Japan assets will grow 12.4 per cent annually over the next five years, while the US and Europe will grow 4.8 and 4.4 per cent, respectively. As the region drives global industry growth, fintech adoption is expanding.
Hurdles exist, but China’s $16 trillion (£11.6 trillion) asset management market remains the crown jewel.
Its gross savings rate is 46 per cent, 2.4 times both the US and UK. Technology is transforming those savings into productive investments, driven by both bottom-up and top-down factors. In 2020, China’s digital economy was worth almost $5.4 trillion (£3.9 trillion) and growing 9.6 per cent annually, the highest of any economy globally.
The Central Bank is developing a digital Yuan, which online and offline retailers have tested. Additionally, China is forecast to have more than one billion smartphones this year, with 5G adoption reaching 60 per cent.
Founded in 2006, Shanghai-based Hywin Wealth is embracing change. Hywin International CEO Nick Xiao said, “Being a Chinese firm, tech-savvy is part of who we are... Hywin not only invests in tech, but we keep thinking of the governance of tech, the security of tech, and the sustainability of tech.” To strengthen its architecture, the company recently partnered with IBM.
This year, Hywin also collaborated with Shanghai Jiao Tong University to hold a live streaming educational seminar, which had more than a million attendees at its peak.
Hywin is not alone in gaining marketing share. Ant Group’s Caifu Hao, a third-party financial marketplace, was launched in 2017 and already has 120m followers.
Platforms LiCaiTong and Lufax Holding have more than 200m and 46m registered users, respectively. For comparison, Betterment in the US has approximately 650,000 accountholders and UK-based Nutmeg 140,000.
According to Xiao, liquid and exchange-traded securities are in demand on mass-market platforms. “Asian clients are early adopters and tend to shop around and compare prices. Tech is very much the platform for collecting information and doing transactions,” he said. As opposed to competing directly with giants that have almost zero marginal cost, Hywin focuses on high-net-worth clients who want a mix of automated execution and tailored advice.
Xiao said any new systems need to be viewed from the clients’ perspectives and that customisation is essential. “International firms have to reconcile their global IT digital governance with the locality of China,” he said.
Cerulli Managing Director Ken Yap said, “China has the largest amount of activity given the sheer size of the market and the level of digital adoption. They are ahead in terms of using the online platform and digital tools to engage investors.” According to a survey from the Asset Management Association of China (AMAC), more than two-thirds of investors purchase funds via apps.
Foreign firms with operations in China include Aberdeen Standard Investments, Barings, BlackRock, Bridgewater Associates, Fidelity International, HSBC, Invesco, J.P. Morgan Asset Management, Mirae Asset, Morgan Stanley, Nomura, Schroders, UBS, and Vanguard.
Others are waiting on regulatory approval or using social media such as WeChat for brand building. As foreign firms enter China, Chinese firms look outward.
Xiao said, “We are deeply rooted in our very strong China onshore franchise, but we see Singapore, London, and Luxembourg as financial centres with their own unique characteristics.”
Covid-19 has spurred the implementation of remote processes. Chetan Karkhanis, Franklin Templeton Digital Advisory & Wealth Management Vice President, said…
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