Due to high convenience and great customer experience, MWM is expected to be the next booming industry in China.
Traditionally, it had been difficult for the Chinese to invest their savings. Most individuals cannot invest in higher yield products due to limitations on investment size and other restrictions. Most individual investors in China only leave their money with government bonds or banks’ deposits. However, things have started to change. By the end of 2017, there were already 129 million people in China who have bought wealth management products through the internet. The AUM (asset under management) has increased 15 times from 2013 to 2017. At the same time, among all the internet users in China, 97.5% of them get online through their mobile phones.
Smart phones today have made wealth management much easier in China. People do not need to make the journey to banks or other institutions. With just a few clicks, a purchase can be completed. Also, there are more choices for Chinese investors on these mobile platforms. Different products focus in different assets with different risk and return objectives.
To attract more customers, MWM platforms try to innovate even further. For example, Baidu has developed a fund called “baidu has drama” (百度有戏). Investor can put money into movies under production. They then will make profits based on the movies’ future box office results. Xiao’ying wealth management has created a special type of red envelope which contains cash based on customers’ facial features. If the app considers you “good-looking”, you can get more money from the red envelope. What is more, MWM platforms are creating groups for customers on social media or within its own apps. In those groups the platforms are trying to educate the customers while selling them more wealth management products.
As a fast growing industry, MWM also faces certain challenges. For example, the Chinese government is planning to issue tighter regulations; the CBIRC recently issued new regulations regarding banks wealth management products. By restricting certain products, the new rule has significant effects on banks’ profits. In the future, there will be regulations focusing on MWM related areas, which will bring uncertainty for MWM’s future development. Secondly, the privacy and data security may raise concerns for investors who share their financial information with MWM platforms. As small platforms do not have enough resources to build sufficient security system, their customers’ privacy could be in danger. If any bad incidents happen, the whole MWM market will be damaged. Finally, the general economy in China will affect the market too. The recent trade war has brought great volatility to the market. In the long run, the economy growth in China is slowing down. The growth rate of MWM may decrease accordingly.
With all these concerns in mind, the MWM market will be more important for Chinese investors in the future. As the market matures, it will provide safer and more convenient investment channels for the Chinese citizens. At the same time, the investors in China are maturing too. They already started focusing more on long term investment results than short time speculations. With more education, more people in China, from all ages and backgrounds, will accept MWM platforms. The market will get even bigger.