Bank Wealth Management Companies:
A New Category In The Making
CBIRC, the banking and insurance regulator, issued guidance in 2018 to encourage banks to set up separate wealth management subsidiaries to replace their wealth management departments. In June 2019, the first bank wealth management company – Bank of Construction Wealth Management Company – was established. By the end of 2020, a total of 24 BWMCs had been approved and 20 of them had begun operating. See Figure 10 for the list of approved BWMCs.
Although named “wealth management companies”, businesses in this new category are set up and regulated as asset managers. With a very broad investment scope covering both the public and private market, BWMCs can serve both retail and qualified investors with different product offerings.
Banks have long been regarded as the most important distribution channel for investment products in China. BWMCs are well-positioned to leverage the distribution network of their parent bank, which is a valuable competitive advantage over other types of asset managers.
However, there are also some serious challenges for this new category, including firms’ lack of equity investment experience. According to China Wealth (Asset) Management Registry and Custody Co., Ltd., at 2020 year-end, 92.26% of existing investment products managed by BWMCs were fixed-income vehicles. As figure 11 shows, direct equity exposure accounted for just 2.31% of total assets.
As a result, BWMCs are very keen to form partnerships with equity asset managers. Such partnerships include joint ventures with international players. Examples include the September 2020 joint venture between BOC Wealth Management Co., Ltd and Amundi Asset Management. In Aug 2020, a JV application by BlackRock Financial Management, Inc., CCB Wealth Management Co., Ltd and Fullerton Management Pte Ltd (a subsidiary of Temasek Holdings) was approved.
