Fortune Upstarts: Investment Opportunities and Challenges in Coexistence
Ye Chengkun: Homaer Financial, CEO
During the process of China’s economic globalization, the global allocation of high net-worth individuals’ assetshas become a new trend. In 2017, the economic situation both at home and abroad underwent great changes. The allocation of assets in foreign markets has continued to be quantified, and domestic policy controlshave also been continuously strengthened. All of this has enabled domestic and foreign wealth management strategies to constantly adjust. In 2018, under the trend of rising outbound investment demands and the orderly opening-up of regulatory policies, we must undergorenewed thinking and take the lead in the overall transformation of economic development’s momentum and of its development models.
From the viewpoint of wealth management, the guidelines issued by the central bank for the asset management business at the end of 2017 clearly stated that the history of the asset management business breaking down rigid payment redemption is over, and it is no longer allowed to guarantee capital preservation and ensure profits. We can predict that the future in 2018 will witness more financial products (such as trusts and non-standard assets), andthat fixed-income products will no longer be rigidly redeemed, making “wealth investment”face a greater risk in this regard, which will require more caution in operation and allocation.
What is the challenge?
The wealth management industry in China has experienced rapid development for more than a decade. Now it has entered a new stage. Compared with the past, on the one hand, the large number of high net-worth groups in China continues to grow, the wealth management needs of highnet-worth customers are becoming diversified and specialized, and the era of asset allocation has come. One the other hand, with the advent of the era of strong supervision, and with the promulgation and implementation of various regulatory policies, howcan we help customers allocate their own assets and achieve a stable and safe environment? This growth goal is a question that every wealth management practitioner needsto think about.
In fact, for investment, every investor must have a principle to adhere to: The first principle is to work hard to keep the principal (capital). This is the golden rule that Buffett, an 80-year-old sage, gave to all our investors, i.e. working hard to keep the principal, and makinga sound investment.The second principle is to be friends with time. Time is the best testimony and partner, and the benefits of growing with time will go beyond your imagination.The third principle is to make a success of asset allocation. Do a good job of asset allocation via cross-industry, cross-asset category and cross-cycle methods.
These are the three most important principles that Homaer Financial provides to its customers in dealing with uncertain investments in the future. We have also kept these three principles in mind, working together with our customers to practice and grow. And in the principle of “Work hard to keep the principal and adhere to steady investment”, we insist on doing the following things:
1) First of all, we apply the concept of steady investment throughout HomaerFinancial’s fund management and post-services.During actual operations, we will recommend the assets that are resistant to risks or of relatively low risk to our customers during the research and investment phase of financial products. Afterthree yearsof operations, we have no negative returns for the fund year, and customers also have a retirementinvestment income. 2) Secondly, we have established and improved a compliant FOF fund structure, and have professional institutions for management, trusteeship and auditing to ensure that the operation of funds is legally compliant at all times. With the operation of the fund, the qualifications and requirements of the partners will continue to be raised. For example, we now have in-depth cooperation with major institutionssuch as Morgan Stanley Bank. In addition, Homaer is separately registered in the United States, Hong Kong and China, having obtained qualifications from the American Registered Investment Advisor (RIA) and the Cayman Fund. At the same time, it is under strict supervision both at home and abroad to maximize the interests of our investors.
What is the opportunity?
Demand for asset allocation has dropped from ultra-highnet-worth customers to high net-worth customers, and the customer basehas expanded.
At present, nearly 30% of high net-worth individuals in China have outbound investments. With the continuous development of the Chinese economy, the demand for overseas asset allocation by highnet-worth individuals is gradually increasing. Through our investigation, among the highnet-worth individuals who have not yet invested overseas, more than 50% said that they will consider making outbound investments within the next three years, indicating that the demand for global asset allocation is strong.
The wealth management side has been iteratively updated based on changes in customer investment requirements.
For traditional investments, the investment preference of wealth upstarts gradually shifts from being “highly risky” to being “more robust”, which means that this group of people need some more accurate and even customized wealth companies to meet their needs. Here is an easy-to-understand example: Many large supermarkets in the market are now facing closures, but many small convenience stores have risen and are increasing in number. This is because small supermarkets are more precise and flexible and can better meet the needs of customers. Similarly, there will be more and more small, sophisticated and personalized wealth management companies appearing in the wealth management industry.
The globalization of wealth management tends to be obvious. Outbound investment is supposed to meet “rigid” demands.
Looking at the international situation, wealth management is becoming more globalized. The globalization of asset allocation methods, asset distribution, and investment environments has shifted the public’s perspective and internationalized its reach. Therefore, a complete wealth management company will be one with multiple money management methods, and single businesses will be gradually replaced. While overseas markets do have richer and more mature investment products than domestic ones, as well as many well-known institutions with long-term experience and proven returns, domestic investors can make diversified choices in a more transparent and mature environment to increase the likelihood of long-term gains and the ability to counter regional risks.
The wealth management industry in China has experienced a history of development from scratch, from continuous exploration to large-scale development. There are opportunities to accompany it in the context of continuous regulatory policies, continuous deepening of financial reform, and frequent opening-up of financial markets. The challenge requires the entire industry to work together to build a wealth management system with Chinese characteristics.
