A Brief to The Report

The Future Market Pattern and Business Model of Asset Management Industry

 

CWM50 published the report:


China Wealth Management 50 Forum (CWM50) officially published "The Report on the Future Market Pattern and Business Model of Asset Management Industry" (hereinafter as the Report) on August 17th, 2019.

 

About the CWM50:


China Wealth Management 50 Forum (CWM50), established on September 12th, 2012, and is a non-government and non-profit academic think tank. CWM50 is committed to building a premium platform for the professionals who are interested in China's financial and wealth management industry. The platform aims to facilitate the exchanges of theories, thoughts, innovations and experiences. CWM50 could contribute to the optimization of China's financial system by leveraging its theories and practical experiences to advise the decision makers and research institutes, and fueling the growth of Wealth Management industry with rich ideas.

 

A brief to the report:


After The People's Bank of China issued  the  Guidance on Regulating the Asset Management Business of Financial Institutions (hereinafter as the New Rules on Asset Management Business, or the New Rule), CWM50 has held lots of conferences about the new rule, and gathered the experts from leading financial institutions to conduct deep research on China's asset management industry. After continuously observing and preparing for over a year, CWM50 officially published “The Report on the Future Market Pattern and Business Model of Asset Management Industry”(hereinafter as the Report) on August 17th, 2019.


The writing group of the Report was led by Mr. Kaisheng Yang, the former CEO of Industrial and Commercial Bank of ChinaICBC, the largest bank in China and the highest market value of the world and Director of CWM50, and composed of more than twenty experts from five leading financial institutions of China, including ICBC, E Fund Management Co., Ltd , CITIC Trust Co., Ltd. , Shenwan&Hongyuan Securities Co., Ltd.  and Taikang Asset Management Co., Ltd.


The whole report has nearly 200,000 words, and is divided into one main report and five sub-reports. The Report first defines the legal relationship of asset management business, then summarizes major problems and challenges industry confronts in the process of revolution and development at present. Then, the Report analyzes and forecasts market pattern and business model in the future, based on the deep analysis of the resources difference and competitive advantages of each sub-industry, including bank (etail bank), insurance, fund (mutual fund), securities (broker-dealers) and trust (rustee). In the end, the Report gives a number of suggestions to industry supervision department of China, in order to promote sustainable and healthy development of the industry, and to advance supply-side structural reform and serve the real economy further more.


According to the Report, asset management business is recognized as off-balance sheet business, which connects residents' wealth on the on hand and the physical economy on the other hand. Since the investors authorize asset managers to manage their wealth on the basis of trust, the relationship between them can be defined as fiduciary relationship, and the asset manager shall take charge of fiduciary duty to the investors. Generally speaking, asset management product is a kind of securities, because they are raised from more than one investor, need to be hold and custody by third party, and asset management product can issue by shares.


With the rapid growth of China's economy and dramatic increase in residents' wealth, China's asset management industry has thrived for more than ten years. There are some problems revealed during the fast development of the industry. First, the regulatory standards are not very consistent in different sub-industries, that lead to some financial company make profile from the  regulatory gap;  second, the continually guarantee on return of investment  twist the pricing of financial market; third, it is very often that sales activity is not in accord with suitability duty when raising money to asset management product; fourth, lots of investors couldn't understand "investment" correctly, which made education to investors become difficult ; fifth, the regulatory standard gaps among products led to lack of core competitiveness of some financial institutions; and at last, it is a quite a challenge to reduce the amount of the products that issued before the New Rules on Asset Management Business.


It is strongly suggested by the Report that commercial banks should realize the isolation of deposit&loan business and asset management business, and push asset management business forward to directly financing; insurance companies who carry on asset management business should actively expand business in pension and third party asset management, and enhancing the abilities of managing assets of parent companies; mutual fund management companies should improve their sales abilities while strengthening the advantages in investment and research and product innovation; securities companies (broker-dealers) should enhance the capabilities in active management and develop comprehensive asset management platform; trustee companies should actively lower leverage and reduce "channel" business as well as strengthening the abilities in managing core assets.


The Report proposes a number of policy suggestions from the perspectives of promoting the supply-side structural reform of financial industry, raising the ratio of directly financing and supporting the development of physical economy. First, it suggests to clarify two fundamental concepts through modifying Trust Law, Securities Law and Investment Fund Law: the first one is the relationship between investors and asset manager is fiduciary relationship and the other one is the asset management products should be treated as securities. Second, it suggests to gradually uniform the regulatory standards and tax rules on all types of asset management products. It also brings up some other suggestions such as keeping the criterion of executing regulatory rules consistent between central and province regulatory authorities, accelerating the issuing of detail rules to the New Rules on Asset Management Business, etc.


The Report also points out the directions for financial institutions' self-improvement, including clarifying the relationship between asset management business and other business, practically implementing isolation of risks, strengthening professional abilities, taking advantage of fintech and so on.


To promote sustainable and healthy development of the industry, the Report also appeals for more attention on investor education from the regulatory authorities, financial institutions and investors, with the full use of multi-channels like internet.


IF you are interested in the full report, please follow CWM50 by WeChat(ID: cwm-50), or email to




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【A Brief to The Report】 The Future Market Pattern and Business Model of Asset Management Industry

2019-08-17