High-net-worth individuals 'want better banking'

They look forward to tailor-made, innovative services, survey shows

A large number of high-net-worth (HNW) individuals in China are not satisfied with private banking services and look forward to tailor-made, innovative offerings, a survey that polled some 700 individuals across 29 cities in China revealed.

A report based on the survey was jointly published by Minsheng Bank Corp and McKinsey & Co. It showed that about 40 percent of customers are dissatisfied with what their current private bank provides for them.

Roughly 50 percent of HNW individuals also allocate just 20 percent or less of their investable assets to their main bank, the survey found.

While offshore investments are becoming more common, they represent only about 10 percent of total HNW individuals' assets. All main investment activity is still onshore in China.

Onshore investments provide a significant opportunity. At least 60 percent of HNW individuals say they have assets offshore. About 10 percent of them are kept offshore. The top two reasons for keeping assets abroad are diversification of risk and a wider product selection.

Entrepreneurs represent as much as 40 percent of HNW individuals in China and comprise the highest number of clients with more than 30 million yuan ($4.8 million) in assets being managed.

This segment ranges from aggressive investors looking for active investment advice to those that require a strong link to their businesses and demand both convenience and access as well as business/private banking propositions.

Around 30 percent of HNW individuals' assets are currently allocated to real estate. Of the remaining 70 percent, basic investment products such as mutual funds and savings deposits represent more than half of their holdings.

China's HNW individuals expressed an interest in increasing their portfolio allocation toward more innovative products such as private equity.

Currently, in addition to local and foreign banks, securities companies and trust companies are also major players in the private banking sector in China.

Business owners, who make up a large proportion of HNW individuals in China, demonstrate distinct demands and preferences toward private banking services.

About 20 percent of HNW individuals are business owners who have little experience of financial investment. They prefer high-return products but often lack investment experience and knowledge. They have a strong preference for a comprehensive array of products and are seeking banks that tailor products to their needs.

About 10 to 15 percent of business owners are savvy investors who rely less on their banking services because they often possess several years of investment experience and deep knowledge of financial products. They value privacy and hence are less willing to rely on their bank for their personal and business needs.

Some 10 percent of investors in business as a first choice have a lower risk tolerance. Their business and personal needs are closely linked and they value convenience and are therefore more willing to use one bank for both of these.