Chinese High Net Worth Individuals Shift Wealth Management Focus from Growing to Preserving Assets; Overseas Diversification on the Rise, Finds New China Private Wealth Report

Thirty Percent of More Than 3,000 High Net Worth Individuals Surveyed Name Wealth Preservation as Top Priority

BEIJING--(BUSINESS WIRE)--The number of Chinese high net worth individuals (HNWIs)—defined as individuals with at least 10 million RMB (approximately $1.6 million) in investable assets—grew to more than 700,000 at the end of 2012, more than doubling since the end of 2008, and on pace to increase an additional 20 percent this year; this according to the far-reaching findings of the China Private Wealth Report 2013, co-presented at a press conference today by Bain & Company, the global business consulting firm, and China Merchants Bank. The leading report of its kind is the third biennial collaboration between the two firms on the outlook for private wealth and HNWI attitudes in China, having launched their first joint report in 2009, and then again in 2011.

“High net worth individuals in China have been very successful in creating wealth,” said Jennifer Zeng, Bain partner in Beijing and co-author of the report. “But as wealthy Chinese age, they now face a dilemma in how to preserve wealth and leave it to their families. This presents many opportunities for banks serving the private wealth market in China, if they can effectively respond to these emerging needs.”

Wealth in China is growing and expanding, the report finds. Average individual investable assets per HNWI were 29 million RMB at the end of 2008 and are estimated to grow to 31.8 million RMB by the end of this year, an increase of nearly ten percent. Further, there are now 20 provinces in China with HNWI populations exceeding 10,000, with five new provinces joining the ranks since 2010:

• Heilongjiang—benefitting from natural resources and the reform and development of industrial bases
• Chongqing—benefitting from the development of central and western regions and Eastern businesses that have relocated to the west
• Shanxi, Shaanxi and Inner Mongolia—HNWI increases resulting from the growth in the coal and natural resources industries

As the ranks of China’s HNWIs have grown, investment behaviors continue to evolve. “Quality of life” and “children’s education” followed “wealth preservation” on the list of top wealth management objectives. “Wealth creation,” which topped the list of wealth management objectives in the 2009 survey, dropped to fourth place in the report released today.

Approximately one-third of high net worth individuals and one-half of ultra-HNWIs—defined as individuals with at least 100 million RMB in investable assets—now consider wealth inheritance planning. More than half of ultra-HNWIs have expressed interest in establishing “family trusts,” while 15 percent have already done or started to do so. A natural unmet need related to wealth inheritance planning, there are currently very few family trust offerings in mainland China—though many HNWIs are considering establishing family trusts. Most ultra-HNWIs have gained their familiarity with family trusts through their exposure to private banks located in Hong Kong.

Chinese HNWIs are increasingly seeking overseas asset allocation for risk diversification and investment opportunities. The percent of HNWIs and ultra-HNWIs with overseas investments have roughly doubled since 2011, with half of ultra-HNWIs now invested overseas. Roughly 60 percent of those interviewed who have overseas investment now said they expect to increase their overseas holdings. HNWIs seek superior advice and guidance in selecting more sophisticated offerings and say that they prefer banks with high degrees of professionalism and expertise in international markets as their service providers for oversea asset management.

China’s domestic private banks face intensified competition, requiring them to maintain and fortify their advantage in brand management, targeted customer segmentation and the development of tailored products and services. Maintaining and strengthening their competitive advantage also demands that domestic private banks assemble high quality service teams and expand product and service platforms through multiple channels. Additionally, Chinese HNWIs’ needs for overseas asset allocation are on the rise in an era of capital globalization. Chinese banks should leverage their deep understanding of and good relationships with Chinese HNWIs, and develop models that best suit their strategy to accelerate their overseas expansion.

“With the development of China’s private wealth management market and proliferation of investment channels, HNWIs’ demands in investment management have become more sophisticated,” said Sameer Chishty, Bain partner in Hong Kong and global head of the firm’s wealth management and private banking practice. “They have stronger needs in mid- and long- term wealth planning, and have rising demands in wealth preservation and inheritance.”

For a copy of the China Private Wealth 2013 report, or to schedule an interview with Jennifer Zeng or Sameer Chishty, Chinese language media contact Pinky He at [e-mail] or [phone], or Dan Dai at [e-mail] [phone]. English language media contact Cheryl Krauss at [e-mail] or [phone], or Frank Pinto at [e-mail] or [phone].

About Bain & Company, Inc.

Bain & Company is the management consulting firm that the world's business leaders come to when they want results. Bain advises clients on strategy, operations, technology, organization, private equity and mergers and acquisition, developing practical insights that clients act on and transferring skills that make change stick. The firm aligns its incentives with clients by linking its fees to their results. Bain clients have outperformed the stock market 4 to 1. Founded in 1973, Bain has 50 offices in 31 countries, and its deep expertise and client roster cross every industry and economic sector. For more information visit: www.bain.com. Follow us on Twitter @BainAlerts.