Wealth management needs more focus

Wealth management service providers must increase their Chinese product offerings as demand continues to increase, leading professionals said at a forum held by Renmin University of China on Saturday.

The average disposable income of the country's urban residents increased to 26,955 yuan ($4,385) last year from 6,280 yuan in 2000, a 329 percent rise, which has driven up the demand for wealth management services, according to a report.

The forum also heard that the nation's urban and rural household incomes are expected to hit 97 trillion yuan by 2020, which will translate into around 227 trillion yuan in revenue for the wealth management sector.

The development of the wealth management market, however, is now lagging behind demand, experts claimed, especially for products aimed at the mid- and long-term, fixed-income market, which generally targets demand from average net-worth individuals.

But the majority of investors are not fully aware of the risks associated with such investments, said Zhuang Yumin, a professor with the school of finance at Renmin University and the author of the report.

"We believe that wealth management should become a crucial part of deepening the ongoing reform of the financial system," she said.

Zhang said the country's financial regulators should collaborate on setting specific laws and regulations for the wealth management sector and establish relevant financial institutions that could assist in training and building international cooperation agreements.

"As the size of the wealth management sector grows, it is necessary for the government to establish unified regulatory standards for wealth management institutions with regards to market access, product issuance and risk control," she said.

To improve the quality of wealth management services, Liu Jun, deputy general manager of China Everbright Group Ltd, said wealth management and standard banking services should be operated as separate business entities within finance houses.

Liu said a growing proportion of wealth management assets should also be run by professional third parties, who will be able to offer clients more personalized investment services.

Bei Duoguang, chairman of China National Microfinance Investment Ltd, said that the wealth management industry is already seeing more assets flow from banks to management companies, and future expansion of the sector will become more reliant on such non-banking financial firm.

"Nowadays, an increasing number of Chinese investors are also looking for a more global asset allocation strategy. Apart from allowing more capital to flow out of China the government needs to accelerate the opening of the domestic market to foreign capital allowing the yuan to become an international investment currency," said Bei.

He called on Chinese scholars to start researching the creation of more wealth management services for lower-income individuals, and exploring the potential of reducing social inequality by learning from markets such as India, Bangladesh and Indonesia.