(Yicai Global) Nov. 10 -- Chinese have seen their wealth growing rapidly in recent years and now hold around CNY120 trillion in investible assets in total, per financial institutions' estimates.
The market's stellar prospects lure sundry players, but underlying the façade of fierce market competition reports of illegal operations by fly-by-night institutions are becoming rife, prompting regulators to intensify their administration of financial markets and products.
Put another way, the days of the Wild-West growth of the wealth management market are over and the new sheriff in town is poised to introduce a little law and order.
Disorderly Wealth Management Market Growth Brings Further Reshuffling
The overall value of China's wealth management industry to date is far lower than the investible assets of its residents, thus showing promising prospects in a market that is still very nascent, notwithstanding its growing pains.
"In recent years, the market has seen many new competitors emerge each year, most of whom soon disappear," Gold Finance Group Vice President and President of King Grandchain Fund Co. Jiang Xueqi said with emotion. "Rivals differ at various periods. Many companies entice clients with PowerPoint presentations, but this dodge will not survive in the long run, I suppose."
Leshi Internet Information & Technology Corp Beijing [SHE:300104] (LeEco) once raised funds in the market from massive wealth management institutions who committed to offering a minimum annual return of 12 percent to pool funds from their clients. At that time, LeEco's valuation was from USD6 billion to USD8 billion, but the company has now become mired in a morass of debt and its investors may well face disastrous consequences. This case epitomizes the disorderly growth of the wealth management industry and the problems with many of its equity-based products that will only become apparent five to eight years on, whereas many companies are still three-to-five-year neophytes in the wealth management market from whom risks will still emerge in due course.
Investors Are Ill-informed, and Gold Finance Group Intends to Refashion the Industry's Frame of Reference
The wealth management industry is developing helter-skelter and with a rocketing value, but many investors are still immature in terms of investment awareness.
Any high-net-value customers view wealth management firms with quite ingenuous notions, Jiang said. Wealth management's key function is the preservation and increase of asset value, rather than aid to investors in accumulating wealth or even explosively multiplying it.
Many equity investment or equity-based products in the market claim annualized returns as high as 20 percent or even 30 percent. "However, the actual earnings of these products that are actually legitimate are ultimately unlikely to reach 30 percent."
"You really need to be careful," Jiang always warns his clients.
The latent and emerging risks confronting the immature wealth management market render stricter regulation inevitable, while the sector will also need to migrate to a more measured pace of development from an irrational pursuit of sheer scale.
As a wealth management industry leader, Gold Finance has long foreseen this trend. The firm now focuses on offering its clients fixed-income products, and sets the real economy as its pivot as much as possible to build a bridge between customers and industry-specific incubator towns it has built.
"We have no way to make our customers become rich overnight, but will help them beat inflation in the long run and bring an appreciable increase in the value of their assets," said Jiang.
Gold Finance will continue to introduce sound, stable and sustainable wealth management services and concepts to customers, and move forward together with all its investment partners in mutually-beneficial collaboration.