China Fund News reporter Yan Jingying
On September 25, Ge Xiaobo, Chairman and President of Guolian Securities, attended the 2024 China Institutional Investor Forum hosted by China Fund News, and delivered a speech on the topic of wealth management transformation to help the construction of a world-class investment bank.
Ge Xiaobo, chairman and president of Guolian Securities Co., Ltd
Ge Xiaobo pointed out that in the development of international investment banks in the past decade, the transformation of wealth management has contributed a huge force. Judging from the domestic situation, the Central Financial Work Conference proposed that it is necessary to "profoundly grasp the political and people's nature of financial work". Among them, the most important embodiment of the people's nature of finance is to maintain and increase the value of customers' property, and the ultimate foothold of the embodiment of the people's nature needs to be realized through the wealth management business.
Regarding the recent merger and integration of the securities industry, Ge Xiaobo believes that integration itself is the main theme of the development of the securities industry. In the past few years, there have been 200 to 300 mergers and acquisitions around the world every year. With more mergers and acquisitions, there will be more specialized, high-quality investment banks. There is still a gap between domestic securities companies and international first-class investment banks, and the transformation of wealth management has a long way to go.
The following is the full text of the speech——
Hello everyone, the theme of my speech today is the transformation of wealth management to help build a world-class investment bank. It can be seen that in the development of international investment banks in the past decade, the transformation of wealth management has contributed a huge force. Judging from the domestic situation, the Central Financial Work Conference proposed that it is necessary to "profoundly grasp the political and people's nature of financial work". Among them, the most important embodiment of the people's nature of finance is to preserve and increase the value of our customers' property, and the ultimate foothold of the embodiment of the people's nature needs to be realized through the wealth management business.
Today's speech mainly includes four aspects: first, the changes in customer demand for wealth management under the new normal economic conditions; Second, the stones of other mountains can be used to attack jade, and the future of wealth management can be seen from overseas experience; the third is to build a first-class investment bank, which is what we lack in this process; Fourth, the thinking brought about by the transformation of wealth management of domestic securities companies.
The new normal of the economy has brought about changes in residents' wealth allocation, and the ability to allocate is the basic need of wealth management
At present, the mainland economy has entered a new normal. I understand that there are three main aspects of this new normal: First, with the increase in economic volume and the slowdown in GDP growth, it will have a long-term impact on the profitability of investment targets and listed companies. Second, with the decline of population, how to form a balance between labor and technology, which is also the main trend in the future. Third, the long-term low level of government bond yields may have a greater impact on the entire valuation system, which is the most important anchor of the capital market.
The new normal of the economy will inevitably bring about changes in the allocation of residents' wealth. Over the past decade, the proportion of property income in disposable income has been increasing, and has now reached about 10%. If high-net-worth families and the middle class are considered, this percentage may be even higher. In the structure of residents' income, the growth rate of property income is faster than the growth rate of operating income for most of the time, and there is still huge room for growth.
From the perspective of net-worth transformation, ten years ago, net-worth products only accounted for about 20% of all products in the market, and now they are far more than 50%. The most important thing about the net-worth transformation is the impact on the customer's mentality. In the past, the default can only be seen when the income expires. Now the fluctuation of market capitalization and net worth will lead to changes in customer sentiment every minute. How do we manage this change? This is precisely the most important thing to do in wealth management.
From the perspective of the development of public funds, the three development curves can clearly see that fixed income + is growing rapidly, overseas QDII is growing rapidly, and the traditional equity growth rate is not so fast.
Data source: WIND database, Guolian Securities
Fixed income + more reflects the concept of asset allocation and the characteristics of low beta, instrument-based products represent the state of low fees, and overseas varieties represent diversified investments, and the changes in these varieties actually reflect the needs of individual customers for allocation. Objectively speaking, the allocation capacity is a very scarce resource in China's capital market, and retail customers have a great demand for asset preservation and appreciation.
From the perspective of overseas experience, there is a lot of room for asset management in the future of wealth management
If we select the situation of overseas developed countries, 35% of the United States allocation is stocks, and if pension and mutual funds are added, 50% of the allocation is stocks. The opposite is true in Japan, where 10% directly own stocks, and pensions and public funds combined are 20%, which is similar to China's.
In other words, even in countries with more mature capital markets, the allocation of residents is not 100% stocks. Alternative allocations in the United States have increased significantly since the financial crisis, and diversification has huge benefits for improving the risk-return of investments.
In terms of the overall trend, the total size of assets under management in United States has surpassed bank assets, and I think this trend will also be realized in China. Judging from the current situation in China, asset management only accounts for about 60% of bank assets, and there is a lot of room for the future.
In the past decade, Morgan Stanley's most eye-catching overseas investment banking development "star" should be. Morgan Stanley's growth was largely driven by the acquisition of Milbarney, which led to a strong transformation in the wealth management space, which led to a huge diversification between Morgan Stanley and Goldman Sachs. Therefore, there is still huge room for asset management and wealth management, even in developed markets.
With the advent of the era of low interest rates, the mainland will inevitably face a trend of decreasing the allocation of bond assets and increasing the allocation of equity products such as pensions and funds. The low interest rate environment will inevitably require investment banks to strengthen asset and liability management, and mainland financial institutions will inevitably need to strengthen their asset and liability capabilities and diversified investment capabilities.
Integration is the main theme of the development of the securities industry, and mergers and acquisitions bring more high-quality investment banks
At the beginning of this year, many important reports pointed out that China's financial sector accounted for about 8% of GDP, which is higher than that of developed countries in the West. However, I believe that the reason why the financial sector accounts for a high proportion of GDP is due to the uneven structural development of the financial sector. The future trend should be that the proportion of the financial industry in GDP will gradually decrease, and the proportion of the securities industry in GDP will gradually increase, which can reflect the rapid development of China's financial industry.
Recently, there has been some consolidation in the industry, and Guolian Securities is also doing consolidation. Consolidation itself is the main theme of the development of the securities industry, and there is no well-known investment bank that has not carried out large-scale mergers and acquisitions. In the past few years, there have been 200 to 300 mergers and acquisitions around the world every year.
In the past decade or so, the United States has grown from 5,000 investment banks to only 3,000 now. The characteristics of these 3,000 companies are worthy of our attention: the concentration of the top 10 securities companies is higher than that of China, and the top 10 sales revenue accounts for more than 80%, while the concentration of China is only 60%; United States top 10 reflects a huge difference, the ninth and tenth places are already boutique investment banks, and the business model between Morgan Stanley and Goldman Sachs is completely different; With more mergers and acquisitions, there will be more specialized, high-quality investment banks.
For domestic securities companies, what is the gap between us and first-class investment banks? I conclude that there are three major gaps: first, the wealth management ability to serve retail customers is insufficient; second, the diversification and professionalism of the transaction are not enough; Third, the vision and ability of international business are not enough.
From the past decade, Morgan Stanley has far surpassed Goldman Sachs, in which wealth management has played a very important role. How do Chinese securities companies manage their wealth? What makes a successful wealth manager? First of all, I think it's the idea of people's nature. Wealth management is customer-centric and helps customers maintain and increase the value of their assets for a long time, which is an important embodiment of the people's nature of finance. How to be customer-centric? This has a completely different perspective from asset management. As far as asset management is concerned, it is more about strategy, and there can be no drift between strategies. Where there is a strategy, there is a beta, where there is a beta, there is a drawdown, and the drawdown has an impact on the customer. How to protect customers is the most important thing to do in wealth management.
Nowadays, many companies are doing wealth management transformation, and I personally believe that in the transformation process, there are a few points that are most important:
The first is the concept aspect, including organizational structure and assessment. For example, at present, the traditional brokerage business still accounts for half or more of the retail business. Although commissions are earned, there are not many retail customers who actually make money. This requires a change in our assessment and management system philosophy. The second is the system of asset allocation. For securities companies, there is no essential difference in asset allocation between companies. There may be technical capabilities and quantitative characteristics, but the conceptual and methodological gap is not large. The asset allocation of wealth management pays attention to the transmission of asset allocation ability, and whether the company's asset allocation ability can become the asset allocation ability of financial managers, and then become the result of customer property preservation and appreciation, in fact, this is what we need to develop the most.
Just now, the leaders also mentioned long-term investment and patient capital. We believe that wealth management funds are long-term money, with the characteristics of "long-term money and long-term investment". But now we have not achieved "long money and long investment", and the biggest reason is due to the drawdown. The drawdown is related to two major factors of the customer itself: first, it is possible to overestimate its own risk tolerance; The second is that your judgment of the expected income is inaccurate, and the superposition of the two will cause very poor results.
In the process of asset allocation, I think there are three concepts that are more important: first, there must be a real allocation concept, not simply focusing on equity, otherwise the drawdown will be large; the second is to do a good job in the layout of real investor education and investor infrastructure; The third is the necessity of low-beta products and diversified investment.
For any emerging market, high volatility is a natural attribute, and "short bulls and long bears" are also natural attributes. When it comes to the risk management and allocation of retail customers, I think it is not enough to only allocate rights and interests, but to have corresponding supplementary allocation, and the more important thing is fixed income. From the perspective of global retail asset allocation, fixed income accounts for the majority or even the vast majority.
In terms of investor education, it is important for investors to know about themselves rather than about the product. The most important thing for self-perception is to know where your true risk tolerance is, and configure it according to the corresponding tolerance. I am afraid that my own risk tolerance is very low, but I feel that I can bear a high risk, which is an important source of relatively large losses. At the same time, to establish the right expectations, many people want to get a 10% return without risk, which is not possible.
In addition, within the scope of regulatory requirements, quantitative investment can still play an important role in the capital market and allocation, and bring investors investment returns through the diversification of strategies.
Finally, I would like to thank China Fund News again for the invitation. In the past ten years, China Fund News has made brilliant achievements, and I hope to speak more for the development of the fund industry and securities industry in the future, and bring more enlightenment to investors to improve their awareness.
Editor: Captain
Review: Xu Wen