Product Code: FS0304CI
The Chinese private banking industry is difficult to penetrate, but wealth managers that are aware of the local makeup of the high-net-worth (HNW) market will find it to be highly profitable. Chinese HNW investors have mainly sourced their wealth from earned income and entrepreneurship. While the largest chunk of HNW wealth is held via discretionary mandates, demand for robo-advice is forecast to rise.
The average portfolio is heavily invested in property, but local market volatility will drive demand for alternatives. Chinese HNW clients also show strong demand for auxiliary services, particularly holistic financial planning, with demand for all planning services also set to increase. As a result, a multi-service proposition is critical in China.
This report sizes the opportunity that the Chinese wealth market offers and analyzes the investing preferences, service requirements, and portfolio allocations of Chinese HNW investors. The report is based on our proprietary Global Wealth Managers Survey.
- Expats constitute 17% of the local HNW population. They represent an attractive target market thanks to their more complex service requirements.
- Offering robo-advice is a must. 92% of industry participants note strong demand for such services, while a noteworthy 96% expect demand to rise over the next year.
- Chinese HNW asset allocation has become more diverse. The proportion of cash holdings has fallen to 16%, while equities have risen to 27%.
- Real estate investment demand will soften slightly, but the rise of authentic real estate investment trusts (REITs) will be a game-changer.
Reasons to buy
- Develop and enhance your client targeting strategies using our data on HNW profiles and sources of wealth.
- Enhance your marketing strategies and capture new clients using insights from our data on HNW investors' asset management style preferences.
- Tailor your investment product portfolio to match the current and future demand for different asset classes among HNW individuals.
- Develop your service proposition to match the demand expressed by Chinese HNW investors and react proactively to forecast changes in demand.
Table of Contents
1. EXECUTIVE SUMMARY
- 1.1. A comprehensive service proposition is critical to success in China
- 1.2. Key findings
- 1.3. Critical success factors
2. SIZING AND FORECASTING THE CHINESE WEALTH MARKET
- 2.1. Affluent individuals in China account for 3.8% of the total adult population
- 2.1.1. Of China's affluent individuals, 3.5% can be considered HNW
- 2.2. Affluent individuals hold 86.7% of liquid assets in China
- 2.2.1. Chinese HNW individuals held $5,456.21bn in liquid assets in 2018
- 3.1. Policy changes to retirement age present unique opportunities
- 3.1.1. While still small in number, female HNW investors represent a lucrative target segment
- 3.1.2. Entrepreneurial income is a small but growing source of HNW wealth
- 3.1.3. Services are a growing source of wealth for HNW individuals
4. HNW EXPATS
- 4.1. The HNW expat market presents opportunities for wealth managers
- 4.1.1. The US is a large and growing source of HNW expats
- 4.1.2. On the flipside, Chinese HNW investors seeking opportunities abroad are an equally attractive target segment
- 4.1.3. Business startup drives expatriation
5. HNW INVESTMENT STYLE PREFERENCES
- 5.1. Limited average number of wealth managers per HNW client
- 5.1.1. Chinese HNW investors work with an average of 2.5 professional wealth managers
- 5.1.2. HNW individuals expect above-average returns from wealth managers
- 5.2. Discretionary mandates dominate, but offering a wide range of investment mandates is critical
- 5.2.1. HNW individuals prefer discretionary mandates
- 5.2.2. HNW individuals have the highest demand for discretionary management styles
- 5.2.3. HNW individuals' demand for all asset management styles increases, but discretionary mandates will maintain pole position
- 5.2.4. Digital services drive HNW demand for self-directed asset management
6. HNW ASSET ALLOCATION
- 6.1. Property is still an integral part of the typical Chinese HNW portfolio
- 6.1.1. Half of onshore HNW wealth is held via equity and property investments
- 6.1.2. HNW individuals prefer to invest directly in equities and property
- 6.2. HNW individuals in China expect to increase demand for most asset classes
- 6.2.1. Demand for all but property is expected to rise
- 6.2.2. HNW individuals demand capital growth and risk reduction, calling for a diversified investment approach
7. HNW OFFSHORE INVESTMENT PREFERENCES
- 7.1. The proportion of total managed funds in offshore holdings is low
- 7.1.1. 27.3% of Chinese HNW wealth is booked abroad
- 7.1.2. Offshore holdings present a better range of investments
- 7.2. Offshore property and equity investments are of great appeal to Chinese HNW investors, while the US is the preferred booking center
- 7.2.1. Almost half of HNW wealth is booked in the US
- 7.2.2. Equities dominate HNW individuals' offshore portfolios
8. HNW PRODUCT DEMAND AND PROVISION
- 8.1. Wealth managers' service offerings are meeting HNW demand
- 8.1.1. HNW investors show moderate-to-strong demand for all planning services
- 8.1.2. HNW products and services are expected to grow
- 9.1. Abbreviations and acronyms
- 9.2. Methodology
- 9.2.1. GlobalData's 2019 Global Wealth Managers Survey
- 9.2.2. Level of agreement calculation
- 9.2.3. Service level of demand score
- 9.2.4. Forecast level of demand calculation
- 9.3. Secondary sources
- 9.4. Further reading
List of Figures
- Figure 1: China's HNW individuals represent 0.14% of adult population
- Figure 2: The strongest growth is projected for HNW individuals in the $10m+ asset band
- Figure 3: HNW individuals are predominately older males
- Figure 4: The majority of HNW individuals derive their wealth from earned income
- Figure 5: The materials, telecommunications, and manufacturing industries remain the primary sources of wealth
- Figure 6: Expats represent an unusually high proportion of HNW individuals in China
- Figure 7: Expatriation is primarily driven by business startup
- Figure 8: HNW clients in China engage with fewer wealth managers
- Figure 9: HNW engage with a wealth manager on the expectation of higher returns
- Figure 10: Discretionary mandates are the most sought-after portfolio component
- Figure 11: HNW investors show the highest level of demand for discretionary asset management
- Figure 12: Demand for discretionary asset management shows the greatest projected increase
- Figure 13: Digital investment tools are negatively impacting demand for wealth management services
- Figure 14: HNW individuals prefer equities followed by property in a broad asset allocation
- Figure 15: Popular asset allocations: Direct equity and direct property investments
- Figure 16: HNW individuals are expected to increase their demand for equities
- Figure 17: Diversification and capital appreciation are strong drivers of HNW demand for asset allocation
- Figure 18: Chinese HNW individuals have a lower proportion of offshore holdings
- Figure 19: Demand for offshore holdings is driven by a better range of investments and returns
- Figure 20: The US is by far the most popular destination for HNW offshore bookings
- Figure 21: Equities and property form the most popular offshore asset classes
- Figure 22: Demand for financial advice is highest among HNW individuals
- Figure 23: Tax planning underlies the greatest growth opportunity in the HNW market