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Wealth in China: HNW Investors 2018

Wealth in China: HNW Investors 2018

Summary

China’s financial services sector is evolving rapidly, providing investors with a multitude of new investment opportunities and channels. While still developing, the traditional private banking concept has already been shaken as the changing demand patterns of China’s wealthy have given rise to new business models. New entrants in the robo-space are competing alongside the country’s well-established incumbents, foreign entrants, and offshore providers.

Going forward, rapidly rising wealth levels and a growing investment universe will continue to drive HNW demand, enticing more wealth managers to tap the opportunity the Chinese wealth market provides. Players that understand the unique characteristics and changing demographics of the local investor base will be able to succeed in China’s rapidly changing private banking market.

Chinese HNW investors, who skew heavily towards entrepreneurial males across three industries, show strong demand for most forms of wealth advice and planning. A multi-service proposition underpinned by a proven ability to demonstrate returns will be key to tapping into demand. A uniquely large expat market, a burgeoning appetite for novel options such as robo-advice, and the upcoming monumental transfer of wealth between generations provides arguably the most significant growth opportunity for global wealth managers in the foreseeable future.

Wealth in China: HNW Investors 2018, report analyzes the investing preferences and portfolio allocation of Chinese HNW investors. Specifically the report -

  • Profiles the average Chinese HNW investor in terms of their demographics and explores the expat opportunity in China.
  • Analyzes which wealth management mandates are preferred among Chinese HNW investors and how demand will develop going forward.
  • Examines the allocation of Chinese HNW investors’ portfolios into different asset classes and how this is expected to develop in the future.
  • Discusses HNW investors’ propensity to invest offshore, their preferred booking centers and asset classes, as well as China’s standing as an offshore center.
  • Identifies product and service demand among Chinese HNW investors.
Scope
  • Females account for a mere 11% of Chinese HNW investors. But as they benefit more from equal rights than ever before they represent a growing target segment.
  • Expats constitute 23% of the local HNW population. They represent an attractive target market thanks to their more complex service requirements.
  • Chinese HNW asset allocation has become more diverse. The proportion of cash holdings has fallen to 19%, while fixed-income products have risen to 9%.
  • Real estate investment demand will soften slightly, but the rise of authentic real estate investment trusts (REITs) will be a game-changer.
  • Pensions/retirement and financial planning are the most sought after wealth management services, with 87and 95% of wealth managers reporting strong HNW demand.
Reasons to buy
  • Develop and enhance your client targeting strategies using our data on HNW profiles and sources of wealth.
  • Give your marketing strategies the edge required and capture new clients using insights from our data on HNW investors’ preferences for the various styles of asset management.
  • Tailor your investment product portfolio to match current and future demand for different asset classes among HNW individuals.
  • Develop your product and service proposition to match demand expressed by Chinese HNW investors and react proactively to forecasted changes in demand.


1. EXECUTIVE SUMMARY
1.1. The maturing China wealth market offers plentiful growth potential
1.2. Key findings
1.3. Critical success factors
2. OVERVIEW
2.1. Understanding the changing demand and demographic patterns of HNW investors is critical in China’s rapidly evolving wealth market
2.2. Demographics: Targeting entrepreneurial males across three industries is key
2.3. Expats: Providers should leverage the expansive expat opportunity
2.4. Investment style preferences: The prospect of superior returns drives the uptake of advice
2.5. Asset allocations: All asset classes have strong momentum, especially bonds and commodities
2.6. Offshore preferences: A solid track record and a wide product range can entice wealth home
2.7. Wealth managers should lead with tax and pension planning
3. WEALTH MANAGERS MUST PREPARE FOR A SHIFT IN GENDER AND GENERATIONAL INFLUENCE
3.1. China’s wealth market is comparatively young, but wealth preservation strategies should be given greater attention
3.2. Women form a small but growing target segment
3.2.1. UBS leads the way in Asia, having declared female investors a key target market
3.3. Intergenerational wealth is complex but not to be underestimated
4. EXPATS ARE AN ATTRACTIVE SEGMENT, BUT UNDERSTANDING THEIR UNIQUE SERVICE REQUIREMENTS IS CRUCIAL
4.1. Offering business banking services is paramount to appeal to Chinese HNW expats
4.1.1. The large HNW expat market is underpinned by entrepreneurs and long stays
4.1.2. HNW entrepreneurs looking to migrate to China will appreciate support navigating the country’s hazy business environment
4.1.3. Family life challenges have the potential to have a negative effect on the wide expat market
4.2. Wealth managers should foster closer collaboration with their investment banking arm to grow their expat client book
5. OFFERING ROBO-ADVICE IS MANDATORY TO COMPETE IN CHINA’S WEALTH MARKET
5.1. Robo-advice is rapidly expanding amid mounting industry adoption
5.1.1. Once known as laggards, Chinese wealth managers are now embracing the opportunity automated services provide
5.2. A combination of automation and in-person will allow wealth managers to target a broader audience and free up time
5.3. An over-reliance on automated investment services has a negative effect on retention rates
6. BROAD GROWTH IS EXPECTED ACROSS INVESTMENT OPTIONS
6.1. While providing an easy sell, rising demand for commodity and bond investments calls for caution
6.1.1. HNW demand for commodity and bond investments is set to rise rapidly
6.1.2. Wealth managers need to ensure HNW investors understand the risks involved in commodity and bond investments
6.2. Wealth managers should redirect HNW demand for real estate towards REITs as volatility picks up
6.2.1. China’s residential real estate market is cooling down after years of buoyancy, curbing HNW demand for the asset class
6.2.2. The establishment of a REIT sector will allow for greater diversification while freeing up capital traditionally locked in real estate
7. CHINESE OFFSHORE HNW WEALTH IS BIG BUSINESS
7.1. The offshore proportion of China’s HNW market is above average despite increasingly strict capital controls
7.2. Property accounts for the majority of China’s offshore investments
7.2.1. Diversification benefits provide a compelling draw for real estate investments offshore
7.2.2. The US, Australia, and Canada are the top property investment locales
7.2.3. Broad disincentives may dampen appetite for offshore property
8. WEALTH MANAGERS MUST BE COMPREHENSIVE
8.1. Chinese HNW clients show strong demand for auxiliary services
8.2. Wealth managers have to address demand/supply gaps around tax planning and inheritance
8.2.1. An aging entrepreneur community calls for a greater focus on succession planning
8.2.2. Chinese investors’ significant offshore holdings will continue to support strong demand for tax planning services
9. APPENDIX
9.1. Abbreviations and acronyms
9.2. Supplementary data
9.3. Definitions
9.3.1. Affluent
9.3.2. HNW
9.3.3. Liquid assets
9.4. Methodology
9.4.1. GlobalData’s 2017 Global Wealth Managers Survey
9.4.2. GlobalData’s 2016 Global Wealth Managers Survey
9.4.3. Level of agreement calculation
9.4.4. Service level of demand score
9.4.5. Forecast level of demand calculation
9.5. Bibliography
9.6. Further reading
List of Tables
Table 1: Cash and near-cash products: importance of asset allocation drivers
Table 2: Equities: importance of asset allocation drivers
Table 3: Bonds: importance of asset allocation drivers
Table 4: Property: importance of asset allocation drivers
Table 5: Commodities: importance of asset allocation drivers
Table 6: Alternatives: importance of asset allocation drivers
List of Figures
Figure 1: Female HNW investors tend to be younger than their male counterparts
Figure 2: Expats account for almost a quarter of Chinese HNW investors
Figure 3: Demonstrating effectiveness is crucial given the factors that drive uptake of advice
Figure 4: An over-reliance on direct property limits earning potential
Figure 5: A better range and the prospect of better returns offshore are driving HNW wealth abroad
Figure 6: With the exception of philanthropy, HNW individuals exhibit strong demand for all auxiliary services
Figure 7: China’s wealth market has a comparatively younger and marginally more male-dominated profile than evident elsewhere in Asia Pacific
Figure 8: UBS targets female investors with its Unique proposition
Figure 9: Chinese wealth managers recognize the intergenerational wealth opportunity, but less so than their global peers
Figure 10: Chinese HNW expats are more likely to be longer-term residents pursuing business interests
Figure 11: Chinese HNW expats have complex demands and are lucrative from a loyalty perspective
Figure 12: Chinese wealth managers are most reliant on client referrals and contacts for HNW expat acquisition
Figure 13: Chinese wealth managers are already meeting increased demand for automated advice
Figure 14: Hiring talent represents a significant challenge in China
Figure 15: Chinese HNW demand for commodities and bonds is forecast to record the highest increase
Figure 16: Bonds appeal to more risk-averse Chinese HNW investors - a reality evident elsewhere in the world
Figure 17: The leading property investment drivers have added importance for Chinese HNW investors
Figure 18: China’s HNW investors hold a more significant offshore portfolio than elsewhere due to perceived access to a better range of investments
Figure 19: Offshore property is of great appeal to Chinese HNW investors
Figure 20: Chinese HNW investors show high levels of demand for auxiliary services

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