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At present, China is witnessing a booming and expanding wealth management market. The securities industry and capital market are called upon to extend and strengthen their role in wealth management services. Their participation and integration in the wealth management market is both necessary and inevitable. . The newly released nine-point guideline has made this clear and put forward relevant requirements. In the wealth management market, stock exchanges are not only an experienced practitioner, but also avid learners committed to keeping pace with the times. Today, I would like to take this opportunity to share my views on this topic as follows:
Firstly, China, a major developing country, should adhere to the fundamental principle of finance serving the real economy. Wealth management co-exists with wealth creation. We should promote wealth creation and facilitate wealth formation by developing the wealth management market.
Wealth creation is the precondition for prosperous and sustainable development of the wealth management market. It is the wealth creation and accumulation over the past 30-plus years that elevated China, the most populous nation in the world, to the rank of middle income countries. Thus strong intrinsic demand was unleashed for demand for wealth management services. This, in turn, paved the way for the formation of the wealth management market. Therefore, everything came in its natural course.
China’s emergence as a middle-income country forms the basis and foundation for wealth management services. The development prospect of the market hinges on China’s economic transition and upgrading. So what shall we rely on to accomplish the economic transition and upgrading and create and accumulate more wealth in the future? The only answer is innovation, i.e. to implement an innovation-driven strategy and unleash the power of innovation to create new national wealth.
At the opening ceremony of the 17th Congress of the Chinese Academy of Sciences (CAS) and the 12th Congress of the Chinese Academy of Engineering (CAE) in Beijing on June 9, 2014, Chinese President Xi Jinping once again made insightful, system and vivid elaboration on innovation, especially the significance of scientific and technological innovation. As President Xi put it, “as a nation is full of innovative spirit,we must strengthen our power in scientific and technological innovation more than ever before, we must get the new engine of innovation running full-throttle and ensure "the abundant flow of the creative fountain.”
It should be a main line , if not all contents, of our development of the wealth management market to amass the power of wealth for innovation so as to contribute to the full speed running of “the new engine of innovation”.
From the perspective of commercial interest of the wealth management industry, we should realize that the traditional competitive advantages underpinning past rapid growth and wealth creation have become difficult to shore up the new round of large-scale wealth creation. On the other hand, “trained human resources” and other various innovation-supporting resources are accumulating and are forming new competitive advantages. Meanwhile, the enthusiasm for innovation and entrepreneurship from all walks of life is rising to unprecedented heights. In a new era like this, innovation is in a position to become the main source of national wealth creation and a bonanza of national wealth. The challenge lies in how to turn the demands for financial service into wealth management products for investors, and to realize win-for-all in the course of wealth creation.
The key goal of our accelerated reform of ChiNext is to make it more innovative and grant market access to more innovative and wealth creating enterprises. Our surveys in the past few years also revealed that some scientific and technological achievements and force have yet been fully transformed into practical innovation capability for wealth creation. Therefore, the wealth management market has a brilliant future in providing a channel for commercializing scientific and technological achievements, tapping valuable intelligence wealth and effectively combining the innovation chain, the industry chain and the finance chain in the wealth management market.
Secondly, the wealth management market should be built on a solid and broad social basis by extending downward to reach a larger population.
According to conservative estimates from a few institutions, China has 1.05 million multimillionaires who are the high-end clients of the wealth management market. It is understandable to value high net worth individuals; however, paying too much attention to them is unadvisable.
If excellent wealth management services are mainly provided to high net worth individuals while ordinary people get lower-quality services, the already acute income gap will widen further to the disadvantage of social equality. The social ground for the development of the wealth management market will also become vulnerable.
Narrow market coverage also hampers the development of wealth management market. Whether business chances for wealth management services beside high net worth individuals exist? The answer is already here. In June 2013, Yu’ebao, a money market fund launched by Alipay, attracted more than 81 million users and raised nearly RMB 500 billion in just half a year. Despite divided opinions on the new product, Yu’ebao provides plenty of food for thought for the development of the wealth management market. We realized a populous, potentially huge and avid client base and a nationwide wealth management demand. Along with urbanization and the increase of residents’ income, this client base will become even larger.
The downward extension of wealth management market for wider coverage calls for investor protection and education. In addition, there must be professional solutions to questions as how to match products with suitable investors. For the capital market, investor suitability management and risk assessment and rating are the two basic systems that must be put in place quickly. This is particularly important for a market lacking a culture of wealth management.
Thirdly, as wealth management services are to a great extent driven by active service, brokerage outlets should play a good role in this regard.
Sales department of Securities business are hindered by their previous role as a simple “conduit”. Their products were standardized, clients were homogeneous and risk was judged by regulators. As a result, securities sales department failed to bring into full play their functions. Coupled with the impact of the Internet, the 115 securities companies and existing 6,000 securities sales department face shrinking development space. Our surveys found that quite a few industry insiders are pessimistic and perplexed about the future development. With the development of wealth management market and transformation of securities companies, the value of securities sales department must be re-discovered and some new functions must be developed.
First, securities sales department are an irreplaceable window in providing value-added service or getting to know investors. It is the securities sales department that face investors directly. They are the omnibus client terminal of securities companies and at the forefront of investor service and protection. The products and services of the multi-tiered capital market are finally presented to clients by them. Moreover, it is the securities sales department that develops and identifies investors’ needs and risk tolerance. Presently, some securities companies have begun reorganizing their securities sales department and reshaping the client management functions of with clients at the center. We believe that securities sales department will play an increasingly important role in the future development of the multi-tiered capital market, as well asa key fulcrum in the downward extension of the wealth management services.
Second, serving the regional economy and social development. Both internationalization and the development of a nationwide integrated market can provide opportunities and a broad platform for wealth management. However, we will never overlook the significance of regional wealth management markets. This is more necessary and practical given the fact that China is a country with huge market capacity and distinctive regional difference. We need high-end wealth management service, but we also need grassroots wealth management practice. How the securities sales department should penetrate into regional economy and social development and promote the regional development of wealth management market will be a new topic to be considered in the future.
As we found the significance of securities business outlets, the SZSE hopes to leverage on its role as a public market platform to build “the Home of Members” as part of its efforts to accelerate industry transformation and reinforce the role of securities sales departments as a fulcrum. It now proceeds with this work in the areas of talent training, promotional materials and software and product development.
Fourthly, the wealth management market grows up in the Internet age. The Internet has brought about profound changes to many industries. The wealth management industry and the development of wealth management market also need the way of thinking of the Internet age.
The Internet experiences speedy development and so does the wealth management market. It is very hard to foretell their development in the course of combination. That is why opinions differ widely on the issues of the Internet and finance.
Despite divided opinions, there is at least one consensus: the Internet and the big data technology provide a powerful technological tool for the finance industry to make innovative development and it has become possible to satisfy diversified wealth management demands of a huge client base at a low cost.
Previously, stock exchanges mainly applied the big data technology to market surveillance. Today, we are exploring ways to bolster the development of the wealth management market with this technology.
Fifthly, the development of the wealth management market is likely to reshape the industry chain and value chain of the finance industry and thus provides more chances and room for coordination and cooperation.
In the context of wealth management, we can see more things in common rather than difference between direct and indirect finance, between securities and banking industries and between insurance and trust industries. There are more room and opportunities for coordination and cooperation between different finance segments.
As early as 2007, the SZSE started thinking about how to create an integrated trading platform and set up a finance supermarket. Looking back, we obtained some results but the overall progress was meager.
With the advent of the era of big wealth management, we are confronted with a highly complicated wealth management market. The SZSE would like to explore with all parties to create a highly efficient on-floor trading platform for the wealth management market.
