Wealth in China: HNW Investors; Understanding HNW investors and wealth management strategies.

Wealth in China: HNW Investors; Understanding HNW investors and wealth management strategies.

Code: VF-VF0034CI | Published: Aug-2016 | Pages: 41 | Verdict Financial
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The Chinese private banking industry is hard to penetrate. However, wealth managers that are aware of the local make-up of the HNW market will find it to be highly profitable. Chinese HNW investors have mainly sourced their wealth through a mixture of entrepreneurship and earned income. While investors value professional advice, they are reluctant to relinquish control and tend to prefer advisory mandates. The average portfolio is heavily invested into cash and near cash-products and property, and this is not expected to change. Chinese HNW clients also show moderate to strong demand for auxiliary services, suggesting that a multi-service proposition is critical in China.

Key Findings
- HNW entrepreneurs will prove to be lucrative, accounting for 33.6% of the local HNW population.

- Expats also represent a noteworthy proportion of the Chinese resident HNW population, accounting for 14.1%.

- HNW investors allocate an above average and growing proportion of their wealth into cash and near-cash products.

- HNW demand is particularly pronounced for advisory asset management, but technological advancements and investors desire to manage simple investments themselves is driving demand for execution-only asset management.

- Already high demand for margin lending is forecast to increase even further, and wealth managers should ensure clients understand the risks associated with a leveraged investment strategy.

Synopsis
Verdict Financials "Wealth in China: HNW Investors" analyzes the investing preferences and portfolio allocation of Chinese HNW investors. The report is based on our proprietary Global Wealth Managers Survey.

Specifically the report:

- Profiles the average Chinese HNW investor in terms of their demographics and analyzes 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 the allocation is expected to develop in the future.

- Analyzes product and service demand among Chinese HNW investors.

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 drivers for seeking investment advice vs. self-directing.

- Tailor your investment product portfolio to match current and future demand for different asset classes among HNW individuals.

- Develop your service proposition to match the product and service demand expressed by Chinese HNW investors and react proactively to the forecasted change in demand.

Table of Contents

EXECUTIVE SUMMARY
Understanding the servicing needs of local HNW clients is critical to success in China
Key findings
Critical success factors
PROFILING CHINESE HNW INVESTORS
A significant proportion of Chinese HNW investors have sourced their wealth from real estate and manufacturing
Wealth managers in China have to understand the specific needs of HNW entrepreneurs
A significant proportion of HNW individuals have built their fortunes through real estate and manufacturing
Expats are an attractive segment in China
Expats account for 14.1% of the Chinese HNW population
A significant proportion of HNW expats in China come from the US, Australia, and Hong Kong
Uncertainty if they will return and fear of having insufficient control motivate HNW expats to invest in China
CHINESE HNW INVESTMENT STYLE PREFERENCES
Chinese HNW investors value professional advice, but are reluctant to relinquish control
The largest proportion of HNW wealth is kept in advisory mandates
Building up trust is critical to increase the share of HNW wealth kept in discretionary mandates
Chinese HNW individuals prefer to manage simple investments themselves
Looking forward, demand for investment management will increase
Execution-only mandates pose a real threat to traditional wealth managers
UNDERSTANDING ASSET ALLOCATION TRENDS AMONG HNW INDIVIDUALS IN CHINA
Chinese HNW investors allocate a quarter of their assets into cash or near-cash products
Equities constitute a below average proportion of HNW investors managed wealth
Bond investments have decreased in popularity over the past year
Cash and near-cash investments constitute an above average proportion
Property constitutes less than 18% of the typical HNW portfolio
Chinese HNW investors have strong exposure to commodities
Alternatives constitute 7% of the typical HNW portfolio
PRODUCT AND SERVICE DEMAND AMONG HNW INDIVIDUALS IN CHINA
Planning services are in high demand in Australia
Financial planning needs to be a core element of a Chinese wealth managers proposition
Demand for all auxiliary services is forecast to increase as Chinese HNW individuals are becoming more demanding
Property advice is in high demand in China
Positive lending conditions are driving demand for credit in China
HNW demand for margin lending will continue to rise
APPENDIX
Abbreviations and acronyms
Definitions
Affluent
HNW
Liquid assets
Mass affluent
Methodology
Verdict Financials 2015 Global Wealth Managers Survey
Verdict Financials 2014 Global Wealth Managers Survey
Bibliography
Further reading
About Verdict Financial
Disclaimer

List of Figures


Figure 1: Wealth managers should be prepared to cater to a broad range of demographics
Figure 2: Manufacturing and property are important drivers of wealth in China
Figure 3: Expats represent an attractive target market in China
Figure 4: A significant proportion of HNW expats in China come from the US and Australia
Figure 5: HNW expats invest locally as they are unsure if they will return to their country of origin
Figure 6: Access to more sophisticated investments through advisors is driving uptake of financial advice
Figure 7: Almost 50% of HNW wealth is kept in advisory mandates
Figure 8: Chinese HNW individuals show strong demand for advisory mandates
Figure 9: Demand for all asset management types is forecast to increase significantly
Figure 10: Chinese HNW investors prefer to manage simple investments themselves
Figure 11: HNW investors are heavily exposed to cash products
Figure 12: HNW investors prefer fund holdings as opposed to direct equity investments
Figure 13: Diversification benefits are the number one driver of equity investments
Figure 14: HNW investors allocate 16% of managed wealth to fixed income products
Figure 15: The current returns available are driving demand for fixed income products
Figure 16: A noteworthy 36% of managed HNW wealth is held in cash products
Figure 17: HNW demand for cash products will continue to rise
Figure 18: 18% of HNW wealth is allocated to property
Figure 19: Demand for real estate is set to stagnate
Figure 20: Commodities are in higher demand among Chinas rich than the wider region
Figure 21: Already strong demand for commodities is set to rise
Figure 22: 7% of managed wealth is kept in alternatives
Figure 23: Expected returns are driving HNW demand for alternatives
Figure 24: Chinese HNW individuals show strong demand for financial planning
Figure 25: Already strong HNW demand for planning services is forecast to increase
Figure 26: Chinese HNW investors show strong demand for margin lending
Figure 27: Already high demand for margin loans is forecast to increase
Alibaba
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