Panelists discussed on stage the opportunities in China’s wealth management market, customisation, and the importance of investors’ education to drive growth at SRP China 2024 conference.

China has grown to the second-largest market for wealth management in the world – and that brings the importance of customisation to meet different investors’ needs.

High-net-worth individuals, are interested in the risk and benchmarks used to measure product performance - Jiang Wu, China Merchants Wealth Asset Management

That’s according to Jiang Wu (pictured), managing director of the investment management department at China Merchants Wealth Asset Management, who shared her views during the “Wealth management in China: investor needs and solutions” panel at SRP China 2024 conference in Shanghai on 17 April.

Wu cited data from the Banking Wealth Management Registration and Custody Center, stating that the outstanding notional of derivative wealth management products doubled year-over-year to CNY40 billion (US$5.5 billion) by the end of 2023.

“We talk individually with these investors about their specific needs – for example, they may be interested in value growth; maybe they're interested in reducing volatility, or maybe some want to gain more exposure to structured products,” Wu said.

“High-net-worth individuals, are interested in the risk and benchmarks used to measure product performance. They look at risk ratings and other things to decide whether to invest,” she continued.

Wu added that institutional investors in China are more specialised and sophisticated, and they're interested in whether they're getting their money's worth.

"We talk with them about things such as their duration and risk exposure, and then we'll also provide scenario analysis for them. They have a view of the market, and we're there to help them express that view,” she said.

Alexandre Werno (above left), CEO of BNP Paribas ABC Wealth, noted the unique structure of using wealth management products in China.

“In mainland China, we're selling yield enhancement structures as part of our wealth management products offering,” Werno said. "This is a very complicated formula, and I would say that for mass retail [investors], we are not there yet... Only the [more sophisticated] investors can use [these wealth management products] to diversify their investment portfolios.”

The wealth management joint venture between BNP Paribas and ABC Wealth was launched last September after a partnership between BNP Paribas Asset Management and the Agricultural Bank of China Group was formed with the mandate "to grow the wealth management market onshore China", Werno said.

Some clients might prefer partial capital protection, and some might prefer a steady cash flow that is similar to a fixed income - Michael Chang, HSBC China

For HSBC China, which directly faces retail and private banking clients, ensuring that investors understand the products is always the first and foremost priority, said the bank’s head of capital market and FX, Michael Chang.

Chang sees structured products’ underlying assets can be designed in a way that is more "straightforward".

“Some clients might prefer partial capital protection, and some might prefer a steady cash flow that is similar to a fixed income,” he said. “Structured products should be able to [serve as a tool to] help us express our views.”

However, more diversification is still needed in the space to achieve that, according to Chang (below).

“Strategy-based indices can perform very well, depending on the situations, for example,” he said. "We can have structured products on top of that, which could be very interesting.”

Werno agreed on diversification and noted that one of the wealth management joint venture firms' competitive advantages falls under overseas allocation.

“The ability to allocate onshore and offshore diversification, reduce the volatility of the product, and reduce the price of the option to make it more attractive for investors will be quite critical,” Werno said.

“And it's very important that you continue to keep the investor's education conversation going, and clients will have to know the risk of the product,” China Merchants Wealth Asset Management’s Wu concluded.

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