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China’s uber-rich grows appetite for discretionary wealth services
With markets becoming increasingly tough to navigate, China’s uber-wealthy are much more willing to pay for financial advice and discretionary wealth management services are in demand, says a top official of a Chinese wealth manager.
Darryl Yu 18 Aug 2016
With markets becoming increasingly tough to navigate, China’s uber-wealthy are much more willing to pay for financial advice and discretionary wealth management services are in demand, says a top official of a Chinese wealth manager.
“They feel that the market is so complex. It’s getting more difficult to manage their assets especially when you have US$30-US$40 million. Hence financial advice is going to be important,” says Kenny Lam, group president of Noah Holdings Limited. 
Lam predicts that the trend will make Chinese investors more assimilated with those in the US and European markets, where a higher proportion of high-net-worth individuals seek financial advice. Discretionary service is a form of investment management where wealth managers can make buy or sell decisions for the client’s account based on parameters set with the client. 
“The last 18 months, it’s been a structural change. I always say that clients are always going to be sophisticated. But the combination of a stock market crash, currency depreciation and a slowing economy will make anyone very worried,” explains Lam.
For Chinese investors it’s mostly about maintaining wealth instead of actively growing it. A Charles Schwab report on the rising Chinese affluent discovered that 7 out of 10 investors cited market volatility as their biggest investment concern. “Private banking globally has been about wealth preservation. Private banking domestically in China has been about wealth growth. I think that has shifted,” states Lam. 
The conservative mindset of Chinese HNWIs reveals a break from the traditional view that most Chinese HNWIs are only concerned with high-octane returns. According to PwC/UBS’ Billionaires report, top threats to HNWIs wealth range from the regulatory environment to taxes. Lam states that Chinese HNWIs like their international counterparts are now looking to have a “certain part of their wealth well planned and protected.” The billionaires report states that only 44% of billionaires identified in 1995 remain so today, indicating that wealth preservation is a challenging affair. 
However, there are some holdouts in China’s vast wealth management market. Charles Schwab’s report shows that most (65%) of the emerging affluent Chinese investors still seek investment advise from friends and family rather than financial advisors. This indicates that there is still much more to be done in terms of educating investors. “The client servicing needs is rapidly changing in a pace I could have never expected,” shares Lam. “That’s something I worry about because if the clients don’t understand, then they are at risk.” 
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