China’s wealth management industry continues its remarkable growth in 2016.
Take just the securities sector as one example. Despite all the ups and downs in 2015, data from the securities association for the year showed RMB 575billion (roughly US$90 billion) in industry operating income, a 121% increase year-on-year (YoY).
Profits grew 153% YoY, to RMB245 billion with 124 of 125 brokerages profitable. Looks like just showing up resulted in making money.
Trust companies also had a good year with revenue and profit growing 21.2% and 18.8% respectively for the 50 largest players.
As the table from Zben below shows, even plain old household deposits that earn very little interest grew close to 20% YoY to January.
In 2016, expect continued rapid growth in almost all other investment classes as consumers seek out those returns. Rapid growth will continue to create regulatory challenges in ensuring all investment vehicles are what they claim to be.
In private (or hedge) funds, by the end of 2015, there were more than 25,000 Chinese fund managers launching many hundreds of new funds a month. Identifying quality among these is a real challenge for investors.
Indeed, the AMAC, the sector regulator, has taken to announcing a regular list of ‘lost’ managers that it can no longer contact. That they are considering taking disciplinary steps could be considered a good sign but perhaps also be seen as being rather too late for investors in these funds.
Similarly in mutual funds, new fundraising for 2015 reached RMB1.5 trillion, a historic high, from over 800 launches. Whoever can earn the trust of investors as they navigate this overly rich landscape of options will surely earn rich returns.
I expect, given China’s middle class love of technology-based solutions, that “robo-advisors” or big data driven advisory models will quickly gain traction. The ability to scale fast and leverage an algorithm based solution could lead to rapid industry consolidation.
I expect a fierce fight for leadership in this space.
Follow Gordon on Twitter @gordonorr.