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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.
Image source: Farfar on Unsplash.
This is an excerpt from AltFi’s Digital Wealth State of the Market Report 2021, which is available free of charge here.
Three fifths of the world’s population live in Asia, where incomes and investments are increasing. According to data from Cerulli Associates, the global wealth management industry ended 2020 with $ 115.4 trillion (£ 83.4 trillion) in assets under management (AUM).
Assets in Asia ex Japan will grow 12.4 percent annually for the next five years, while the US and Europe will grow 4.8 and 4.4 percent, respectively. As the region drives global industry growth, the acceptance of fintechs is increasing.
Emerging country China
While there are hurdles, China’s $ 16 trillion (£ 11.6 trillion) wealth management market remains the crown jewel.
Its gross savings rate is 46 percent, 2.4 times that of both the US and the UK. Technology turns those savings into productive investments driven by both bottom-up and top-down factors. In 2020, China’s digital economy was valued at nearly $ 5.4 trillion (£ 3.9 trillion) and growing 9.6 percent annually, the highest value of any economy in the world.
The central bank is developing a digital yuan that online and offline traders have tested. In addition, China is expected to have more than a billion smartphones this year, with 5G adoption reaching 60 percent.
Hywin Wealth, which was founded in 2006 and is based in Shanghai, is committed to change. Nick Xiao, CEO of Hywin International, said: “As a Chinese company, tech-savvy is part of us … Hywin not only invests in technology, we also continue to think about the governance of technology, the safety of technology and the sustainability of technology. “To strengthen its architecture, the company recently partnered with IBM.
That year, Hywin also partnered with Shanghai Jiao Tong University to hold a live streaming teaching seminar that had more than a million attendees at its peak.
Hywin isn’t the only one gaining market share. Ant Group’s Caifu Hao, an external financial marketplace, was launched in 2017 and already has 120 million followers.
The LiCaiTong and Lufax Holding platforms have more than 200 million and 46 million registered users, respectively. For comparison, Betterment in the US has approximately 650,000 account holders and Nutmeg based in the UK has 140,000.
According to Xiao, liquid and exchange-traded securities are in demand on mass market platforms. “Asian customers are early adopters and tend to look around and compare prices. Tech is to a large extent the platform for gathering information and making transactions, ”he said. Rather than competing directly with giants who have almost no marginal costs, Hywin focuses on high net worth clients who want a mix of automated execution and bespoke advice.
Xiao said that all new systems must be viewed from the customer’s perspective and that customization is essential. “International companies need to align their global IT digital governance with China,” he said.
Cerulli General Manager Ken Yap said, “China is the most active given the sheer size of the market and digital adoption. They are one step ahead when it comes to using the online platform and digital tools to engage investors. ”According to a survey by the Asset Management Association of China (AMAC), more than two-thirds of investors buy funds via apps.
Foreign firms operating in China include Aberdeen Standard Investments, Barings, BlackRock, Bridgewater Associates, Fidelity International, HSBC, Invesco, JP Morgan Asset Management, Mirae Asset, Morgan Stanley, Nomura, Schroders, UBS and Vanguard.
Others are waiting for regulatory approval or using social media like WeChat to build brands. When foreign firms push into China, Chinese firms look outside.
Xiao said, “We are deeply rooted in our very strong onshore business in China, but we see Singapore, London and Luxembourg as financial centers with their own unique characteristics.”
Covid-19 has pushed the implementation of remote processes. Chetan Karkhanis, Franklin Templeton Digital Advisory & Wealth Management Vice President, said …
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