The industry seeks new direction and regulator’s strategic leadership

Regulatory deceleration and obsession with profit-only mentality taking its toll on customer care and advancement.

A lack of strategic direction is hampering the growth of China’s wealth management industry, despite the space having produced a swathe of successful companies, many of whom have listed over the last ten years, according to William Xia, founder and CEO of AOW Financial Planning. 

Xia believes that there is a need for greater depth in the current business models to take practitioners away from selling products to earning commission. “Everyone is focused on making money through managing investments but not managing wealth or advising the client,” Xia said.

Xia has spent time thinking about how this industry is going to progress, what services should be provided in the future. “How we can ensure we have good management and good mangers and how should regulators focus on certain areas? I don’t really see a lot of strategic leadership here” he says.

Managing the investment is only a part of the wealth management process and the issue is that the relationship between the industry and the clients is based on investment results. 

Understanding fundamentals

Xia insists that his wealth management team work hard on understanding the fundamentals of wealth management advice and continue to develop their skills, which he maintains is vital for the survival of any company in this space in the long run. 

“How can we help clients to invest, since that is what we are supposed to do? If we talk about investment we have a lot of options to share with the client, like how a family should do allocates assets according to prescribed logic rather than just product selection. We also help with advice on combining the investment portfolio, then we provide investment portfolio management strategy. These are the steps we take to ensure we are not merely product pushing,” Xia said.

  Key to the service offering is talking about asset protection and how to maintain certain lifestyles, how to implement credit management, credit decisions and when, why and how to take on a loan.  It is about making financial decisions. 

  The Chinese government has nudged a multi-level financial system to reduce the risk of savings being parked in banks, which Xia believes has assisted the wealth management industry develop, prosper and reach the level it is at today.

Reaching maturity 

However, Xia believes the advisory industry could be more dynamic and still has a journey ahead to reach maturity. Regulatory moves can give the industry a boost in the right direction. “I think the regulators have started to do some good things, but we still foresee the need for strategic improvements ahead. This is where the industry wants to be, but we don’t see enough strategic direction at present,” Xia said.

The industry veteran said he is finding regulation to evolve slowly in all areas, which started with the de-risking of banks and is slowly touching mutual funds and private funds by highlighting who can sell various product classes. The differentiation between asset management, investment management and other parts of wealth management has still not come about, Xia opined.

There is a need for better training of entrants into China’s asset management industry to ensure the required depth of knowledge. Xia believes that more comprehensive training will not be difficult to introduce to China as young people are constantly willing to learn.

  Xia’s firm offers its own online training module, which is fee-based and consists of a number of modules to help build skills in several areas. Advice includes how to build an investment framework for the clients; how to build family protection systems for clients; how to help clients arrange wealth and asset planning; how to construct financial planning models and asset allocation models. The digital course also includes insights from experienced asset managers and legal experts who talk about estate planning among other topics. In a developing wealth management industry, Xia is serious about developing the talent required to advise clients.