Competitive Private Banking Landscape and Beyond - Private Banking in China, Episode IV

In Episode III, we discussed how high net worth individuals’ (HNWI) investing behavior is becoming more risk averse due to market volatility and political uncertainty. Their risk averting behavior allows more Chinese HNWIs to look beyond the domestic market. According to Statista, over 62% of China's HNWIs invested overseas to diversify the risk of their assets in 2020 (Statista).

HNWIs in China are shifting back to banks to manage wealth, generating great opportunities for private banks to showcase a variety of financial services. In this final episode, we will go over the competitive landscape of China’s private banking sector and areas wealth managers should focus on to optimize performance and strategies.

HNWIs’ attitude towards wealth management has shifted since 2017 (see Allocation of HNWIs’ overseas financial assets among different kinds of wealth managers, 2017–2019). Many seek professional advice on asset management and onshore-offshore services given the lack of expertise in market regulation and risks. Among the most popular reasons for Chinese HNWIs to choose private banking asset management are cross-border services and risk management.

The private wealth management market in China is growing slowly. Reasons include market turmoil and black swan events like COVID-19 (See domestic wealth management channels for HNWIs, 2009-2019).

HNWIs are more inclined to think about wealth preservation and business succession. They are willing to seek professionals’ advice from well-established institutions. "New Asset Management Regulations" and other economic transformation aim to stabilize the economy and encourage growth. Regulations overseas make HNWI shun investments abroad and shift back to the domestic market in hope of capturing opportunities in China.

For private wealth managers, understanding HNWI’s mentality and demands are crucial in developing differentiated products and services. Wealth managers should focus on providing diverse options for portfolio management and risk control and deriving insights from the past to minimize risks and maximize return on investments. The emergence of fintech and big data analysis provides the capability for performance visualization and scenario simulation to better align with customer interests and portfolio optimization. For cross-border services, wealth managers should be aware of regulatory changes and product structure.

Recent events have posed challenges as well as new opportunities for the private banking sector. The increasing popularity of data-driven solutions and family trusts allows wealth managers to continue evolving their products and services. If you are interested in the future trends and insights of China's private wealth market, please subscribe to our newsletter or follow our WeChat public account.