Wealth Management in China 2009

Introduction

The global economic crisis has had a major effect on Australia's onshore wealthy population, potentially causing them to lose faith in their wealth managers. To keep clients, wealth managers need to know what this lucrative customer wants from them, in terms of products, services and interaction.

Scope

*HNW demographic and attitudinal attributes based on our Wealth Management Market Leaders Survey 2009

*Extensive primary research from 17 wealth management companies highlights their strategies for revenue growth, acquiring and keeping clients

Highlights

Chinese HNWs are displaying defensive behavior in the face of the economic instability, and have lifted their proportion of assets held in cash and near cash from 13% in 2008 to 25% in 2009. Despite this, HNW individuals are expected to increase their exposure to stocks over the next two years.

Clients in China have less financial product knowledge compared to their Asia Pacific counterparts, which presents an opportunity for wealth managers to add some real value to their offering by providing educational services for clients.

Clients in China have less financial product knowledge compared to their Asia Pacific counterparts, which presents an opportunity for wealth managers to add some real value to their offering by providing educational services for clients.

Reasons to Purchase

*Understand the HNW population's investments by sector and geography, appetite for risk, and reasons for choosing/leaving their wealth service

*Assess the threats and opportunities for wealth managers by understanding how peers are planning to grow revenues, acquire and keep clients

Report Highlights

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Overview 1
Catalyst 1
Summary 1
Methodology 1
Executive Summary 2
The wealth of Chinese investors suffered at the hands of the economic slowdown 2
HNWs have become more defensive, however equities still represent an important asset for the future 2
Wealth managers that can identify investment opportunities and produce returns will attract the business of HNW individuals 2
Table of Contents 3
Table of figures 4
Table of tables 5
China's wealth 6
After years of impressive growth, the wealth of Chinese investors was impacted by the global financial crisis 6
The economic slowdown undermined the Chinese labor market in 2008 6
Business conditions deteriorated in 2008, making it harder for entrepreneurs to build wealth 7
Chinese stock values crashed in 2008 as economic growth cooled off 8
In 2008, the growth in property prices cooled off after the recent boom 9
The Wealth Data in 2009 10
The Chinese HNW investor 12
Chinese HNWs have become much more defensive in 2009, however equities are expected to grow in importance in the near future 12
Cash and fixed income have become important asset classes for Chinese HNWs 12
Wealth management service implication: Proactively advise HNW clients where to invest as the markets change 14
Innovative example from the US: Pyxis mobile is providing a complete mobile communications interface to allow wealth managers to contact their clients while on the move 14
Over the next two years, equities are expected to become an increasingly important asset class for HNWs 14
Wealth management service implication: help investors position for the equities recovery while limiting risk 16
Innovative example from Australia: Macquarie has a capital protected Geared Equity Investment product 16
Chinese HNWs have less knowledge of products and are more demanding towards their wealth managers 17
HNWs have less knowledge of products and market conditions compared to other Asia Pacific clients 17
Wealth management service implication: Providers should focus on improving the education levels of their clients 19
Innovative example from China: Standard Chartered aims to educate second generation wealth holders 19
Chinese HNWs are more demanding when it comes to their wealth management service 19
Wealth management service implication: Wealth managers need to increase contact with their clients in their time of need 21
Innovative global example: Standard Chartered Private Bank plans to hire 100 new relationship managers 21
Despite the global downturn Chinese investors are looking for opportunities to make money in the current environment 21
Tax advice has emerged as a strong demand for HNWs in 2009 21
Wealth management service implication: each client is unique therefore wealth managers need to fully understand the client's needs 23
Innovative example from the US: ClientFirst Wealth Management is for the client 23
The Chinese wealth manager's view 25
Over the next 2 years, most wealth managers are planning to focus resources on property, deposits and equities 25
As the economy recovers, wealth managers will focus on developing their property funds, deposit products and direct equity investments 25
Informing clients of investment opportunities and the actual performance of investments are important qualities that HNW clients look for in a wealth manager 27
Chinese wealth managers need to ensure they are informing clients of investment opportunities 27
Chinese wealth managers see brand reputation, personal relationships and investment performance as their biggest strengths 29
Increasing face to face contact and focusing on the lending business are viewed as positive steps to increasing share of wallet 31
Incentivizing relationship managers to sell more products has emerged as an important provider attribute this year 31
Chinese wealth managers are contacting their clients at around the same frequency as their Asia Pacific counterparts 33
Chinese wealth managers contact their clients at around the same frequency as the Asia Pacific average 33
Chinese wealth managers are on par with their Asia Pacific counterparts at getting in front of their clients 35
Chinese HNW investors want to speak with their provider, they most want to know where the opportunities to invest are now 36
Appendix 38
The drivers of growth in the wealthy population 38
Income growth (combined with inflation, changes in GDP by sector, household savings rates and debt levels) 38
Investment returns (market capitalization, interest rates and bond yields) 38
The following measures are not, in themselves, drivers of wealthy population growth 38
Market capitalization 38
GDP 38
The following measures are not drivers of wealthy population growth except under very restricted circumstances 38
Primary residence value growth 38
Inheritance 39
Methodology 39
Wealth Management Market Leaders Survey 2009 39
Global Wealth Model 39
The UK sub-model 39
Global sub model (for all other countries) 39
Forecasting methodology 40
Continuous refinement to the understanding of liquid wealth distribution 40
Datamonitor's wealth numbers compared with other wealth numbers 40
Bibliography 41
Definitions 41
Asia Pacific 41
Onshore 41
Liquid Assets 41
Further reading 41
Ask the analyst 42
Datamonitor consulting 42
Disclaimer 42
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List of Tables
Table 1: What proportion of your HNWs' portfolios is allocated to the following five asset classes? 13
Table 2: HNWs' portfolio allocation now versus in 2 years' time 16
Table 3: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high) 18
Table 4: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high) 20
Table 5: What are HNWs demanding today? 23
Table 6: What product areas will your wealth management service focus most resources on over the next 2 years? 27
Table 7: What will determine HNWs' choice of wealth management service over the next two years? 29
Table 8: What are your company's biggest strengths and weaknesses today? 31
Table 9: What is the most effective means of increasing share of wallet today? 33
Table 10: On average, how often do your relationship managers speak by phone to each HNW client? 34
Table 11: On average, how often do your relationship managers speak in person to each HNW client? 36
Table 12: When speaking with clients, what do they most want to talk about today? 37
List of Figures
Figure 1: Conditions in the Chinese labor market showed first signs of weakness in 2008 7
Figure 2: The global financial crisis had a negative effect on business conditions and confidence in 2008 8
Figure 3: Chinese stocks tumbled in 2008, underperforming most other Asia Pacific markets 9
Figure 4: After a strong year in 2007 the Shanghai property market cooled off in 2008 10
Figure 5: The largest share of Chinese HNW wealth is invested in cash with this accounting for 25% of all investments 13
Figure 6: Over the next two years, Chinese HNW investors are expected to hold a higher share of the portfolio in equities 15
Figure 7: HNW investors in China have less knowledge of financial products compared to the average Asia Pacific HNW investor 18
Figure 8: Chinese HNWs want to develop personal relationships and have face to face contact with their wealth manager 20
Figure 9: In China, HNW investors' greatest demand is for tax advice 22
Figure 10: Wealth managers in China will be focusing most of their resources on property and deposit products over the next two years 26
Figure 11: HNW investors in China are most influenced by ability to identify investment opportunities in the downturn in their choice of wealth manager 28
Figure 12: The strongest performing wealth managers have a real advantage over the competition as the global financial crisis made investment returns harder to achieve 30
Figure 13: The best way for wealth managers in China to increase share of wallet is to increase face to face contact with clients 32
Figure 14: In China most wealth management relationship managers speak to clients by phone approximately once a week 34
Figure 15: Typically, wealth management relationship managers see most of their clients either once a month or once a quarter 35
Figure 16: The majority of clients in China want to speak to their wealth manager about where the investment opportunities are now 37
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