"Under the pattern of double-cycle economic development, the key to China's high-quality economic development and opening up to the outside world is the upgrading of trade in services." Li Daokui, director of the Institute of Chinese Economic Thought and Practice at Tsinghua University, pointed out at a forum organized by the Trade in Services Council that the current opening up of the financial industry has exceeded expectations, in which the insurance industry and the securities industry have basically achieved full opening up to the outside world.

High-quality opening to the outside world is another major factor driving the domestic economy into a new phase. More and more foreign financial institutions are taking the opportunity of the SITC to accelerate their understanding and layout of the Chinese market, and to diversify to meet the domestic public's demand for financial services, especially for wealth management. In the future, under the influence of the accelerated process of financial opening up, the domestic wealth management industry will also change, ushering in the belonging to its "big river".

1 Financial Observatory

By Siqi

"double cycle" of wealth management inward

The sudden new crown epidemic, triggered by the global risk asset volatility. The rapidly changing market has pushed wealth management to a new level of development. This round of wealth management upgrade implies two meanings: first, the industry's own transformation and upgrading; second, the upgrade of wealth management demand. The mutual collision and intermingling of the two is an important incentive for wealth management upgrading.

From the point of view of the wealth management industry itself, the industry is facing the triple challenge of upgrading: opening up of the financial sector to the outside world, the extension of the transition period of the new regulations on capital management, and the catalytic effect of financial technology.

Although the extension of the transition period of the new regulations on capital management is beneficial to small and medium-sized financial institutions in terms of marginal easing. However, regulators are still encouraging financial institutions to "jump and pick peaches", while hedging against the impact of the epidemic, to promote early rectification and transformation of financial institutions. Especially in the strict regulation of capital pools, to prevent maturity mismatch and liquidity risk, the early realization of net worth management, breaking the rigidity of payment, etc., the transformation of domestic financial institutions are still facing considerable challenges. For wealth management organizations, it is also an opportunity to change and evolve.

In addition, "digitalization" and "intelligence" have become the new labels for the wealth management industry. Especially under the competitive pressure of foreign wealth management institutions that also value "digital" change, domestic institutions have deeper pressure and motivation.

These three challenges to the upgrading of the wealth management industry pose a significant risk of transformation, but also contain opportunities for change.

Wealth Management Upgrade Exploring New Paths

With the epidemic under control, China's macroeconomic recovery is showing clear signs. As of the end of July 2020, China's economic activity has recovered for four consecutive months, with indicators such as consumption, investment and exports showing varying degrees of recovery.

More importantly, the economic recovery has also led to the recovery of the wealth management industry. The demand side of wealth management is polarized, that is, one pole is the high net worth investors need family trust, family office, private banks and other product institutions, and the other pole is the average investor gradually use the Internet big data, artificial intelligence and other advanced technologies.

A survey shows that 80% of people affected by the epidemic lost 20% or more. This has a to deep impact on the transformation of the concept of personal wealth. It can be said that this round of wealth management demand upgrading has a double meaning: first, the diversified asset allocation upgrading; second, from focusing on the rate of return to focusing on the rate of return and risk of dual management.

In the financial basket of the general public, the most common configuration is bank deposits and real estate. Zhang Ming, director of the International Investment Research Office of the Chinese Academy of Social Sciences, suggests that in the future, the proportion of financial assets should be increased appropriately to diversify the people's financial basket, in order to better safeguard their own wealth less shrinkage, more value-added.

Asset allocation is not without professional organizations research and judgment. The "September 2020 Monthly Macroeconomic Report" released by the Office of the Chief Economist of Hengchang summarizes the outperforming broad asset classes - the three major U.S. stock indices led the way, and are the best-performing broad asset classes in the world.

From the overall performance of broad asset classes in January-August 2020, Nasdaq surpassed gold as the biggest gainer, with a cumulative rise of more than 30%, gold's rise in August was temporarily halted, but it is still the second biggest gainer this year, and crude oil's performance is still well below the beginning of the year. In addition, the market shock also triggered mood swings, many people hesitate to enter the stock market, gold market. This is mainly because the average investor has a certain lag in grasping the market and trends, and it always stays at the end of the information chain. Therefore, for individual investors, the better choice is to entrust their assets to asset management organizations that they can trust and have a good track record.

And in the face of the further implementation of the real estate long-term mechanism, the formation of the key real estate enterprise capital testing and financing management rules, clear real estate enterprises, "three red lines", once again proved that real estate expansion through high debt era has come to an end, and investors for the real estate investment in fixed gradually gave up C The first step is to make sure that you have the best possible chance of getting the best out of your investment.

With the resumption of labor and production in the United States, production and consumption are gradually recovering. The September 2020 Monthly Macroeconomic Report shows that in July 2020, manufacturing, non-manufacturing PMIs, and year-on-year retail sales growth were all better than expected as the epidemic in the U.S. was gradually brought under control.

The Federal Reserve announced a new monetary policy framework at the end of August, with a more accommodative stance on inflation and employment, and the Fed will seek to keep inflation at an average of 2% for a longer period of time.

In the face of numerous uncertainties and possible turbulence in the financial markets, Dr. Wei Li, Chief Economist at HCC, suggests that investors adopt a defensive asset allocation mindset, whereby investors allocate US dollar-denominated real estate funds, private equity, high-quality fixed income, and private equity investments that have stable cash flow returns.

Dr. Wei Li believes that ordinary investors should always adhere to the concept of long-term value investment, not blindly chasing hotspots, the main proportion of assets allocated to control risk, avoid putting all the money or even leverage into stocks, futures, such high-risk financial products.

As the pace of financial liberalization accelerates, large foreign-funded institutions are entering the domestic market to provide more diversified wealth management services to the public. The upgrading of wealth management demand will also in turn stimulate the industry's metamorphosis and evolution. Therefore, high net worth customers and the public wealth crowd, should grasp the opportunity of wealth management upgrade, in the change of the trend of insight, correct investment mentality, strict self-discipline, believe in professional institutions, the use of technology to assist, so as to do in the "big river rushing" wealth upgrade era of the wind and waves.