Tang Ning, founder, chairman and CEO, CreditEase shares his views with Asian Private Banker in the ‘Final Word’, a ten-part series where the industry’s leaders share their thoughts and opinions on key issues around industry trends, business performance, investment solutions, regulations and compliance, and technology.
Industry trends | What is the state of Asia’s talent pool and did your firm pay significantly higher for new talent? What is your view on private banking talent development in Asia?
The recently introduced ‘administrative measures on asset management industry’ in China have created an environment that poses a huge challenge to financial industry professionals who are used to relying on their relationship with clients in building up sales. However, along the development of the industry, a large number of outstanding financial talents have joined such wealth management firms that offer a more diversified and complete product and service shelf. In the process, we’ve seen the emergence of a large number of talents who not only understand advanced asset allocation philosophies but also have the ability to put these philosophies to practice. Furthermore, we’ve observed talents from Hong Kong, Taiwan, Singapore, and other established markets relocating to mainland China, which contributes to the domestic talent pool.
On compensation, CreditEase does not offer higher pay to newly joined talents. Since our inception, we’ve made it our mission to promote the healthy development of the industry, uphold a healthy competitive landscape, and follow the principle of attracting talents by the strength of our business platform and culture. At CreditEase, it is a tacit rule that compensation to new recruits shall be flat with how much they earned from the previous job. This never prevents new talents from joining us, but instead attracts talents who agree with our culture and share our values. With this, we’ve formed a unified team that believes in what it’s doing and seeks common development for all.
Industry trends | How important is it for your business to make substantial inroads in China to ensure sustainability and growth over the next decade?
Wealth growth in China has outpaced all other places in the world, along with the rapid growth of the needs for all-round wealth management services. Over the years, CreditEase has been building up its strengths in terms of talents, investment capability, service capability, and technology capability, aiming to not only maintain its leadership in the Chinese market, but also match its international peers, learn from advanced international practice, and establish cooperation relationships with top-class global institutions to gain access to the best resources.
Business performance | In the midst of what has been construed as an increasingly difficult macroeconomic environment, how do you think the private banking and asset management industry will perform in 2019? Will it be a year to separate the wheat from the chaff?
Asia globally ranks first for HNW and UHNW population growth, which throws into sharp relief the shortage of talents who intimately understand sophisticated asset allocation philosophies and possess professional investment capabilities. The days when relationship managers can simply rely on their relationship with clients to sell wealth management products are over.
We’ve built up strong teams consisting of financial planners, investment consultants, tax planning advisors, family trust advisors, lawyers, tax accountants, and other professionals to provide clients with a one-stop, fullservice wealth management platform. By building up such a platform, CreditEase Wealth Management not only meets the needs of its clients, but also cultivates a generation of professional talents capable of providing wealth management services across asset classes and geographic regions.
Business performance | What is the one revenue line that you must build up significantly in the coming few years to ensure business sustainability? What is your view on the revenue mix of the industry in general?
Asset management fees and carried interest are the main sources of revenue for CreditEase Wealth Management, as we benefit from cumulated AUM scale and good investment performance. Our interest is consistent with clients’ interest. We create value for client assets, provide service to meet their demand, and grow together with clients. Forward-looking wealth management institutions must shift from pure product distribution to asset allocation and comprehensive wealth management services based on client needs. The change of revenue mix reflects the transformation of institutions.
Investment Solutions | Though continued geopolitical uncertainty and volatility pose a challenge for DPM performance, will this ultimately prove to be a boon for the discretionary business, converting clients from trade to delegation? In these same market conditions, how critical will the alternatives business be for private banks in Asia moving forward?
As the sector is shifting from product distribution/trade to asset allocation and comprehensive wealth management service based on client needs, wealth management institutions should make adjustments accordingly in business and talent systems. Those who lag behind will be weeded out by the market.
Investment Solutions | Ten years on from the GFC, how has your product shelf evolved and how has clients’ perception of structured products changed since then?
We believe asset allocation is the best way to realise long-term value for clients. We have optimised our product line based on this concept and formed a model where we put asset allocation at the core and make long-term investments in alternative assets across regions, countries, asset classes, and FoFs. With a deeper understanding of the market, more clients have realised that asset allocation is a science-based approach to wealth management.
Regulations & Compliance | What’s the essential tool you have or are planning to create that will help your firm tackle the uptick in regulatory stringency and scrutiny? Do you think that the compliance costs of your business have peaked?
First of all, the industry needs to be well regulated as a well-regulated, well-ordered environment is key to success. We have the intention and determination to be compliant with regulations in all jurisdictions that we practice in. We also have a complete set of policies, procedures, and enforcement processes to ensure compliance, alongside very experienced compliance colleagues recruited from world-leading financial service companies to keep dialogue with regulators constant and open.
The cost of compliance has dramatically increased in the past decade for everyone, and it keeps increasing. Most of our business is in China where cost compliance is increasing big time and I do not think that it has peaked. We are working with the regulators to create a balanced regulatory environment that allows for good ideas and innovations to still be tested — and flourish once they are proven.
Regulations & Compliance | Are you satisfied with how regulators interact and solicit the industry for feedback?
As with everything, there is always room for improvement. Though all regulators are coming with excellent intentions to protect financial systems and manage systemic risks, sometimes regulation comes with unintentional consequences.
Frequent dialogue with practitioners can minimise the risk. We have very good relationships and interactions with Chinese regulators and have always been open and transparent with our regulators. We give them our feedback, show them our practice, and try our best to work with regulators to help them achieve what they intend to achieve.
Technology | What is your view on robo-advisors and is your firm developing robo-capabilities of its own? Have you observed any robo-advisory developments that could materially disrupt the industry?
Robo-advisors have been around for quite some time. CreditEase rolled out its own robo-advisor product, Toumi RA, a few years ago. While robo-advisors are great tools that democratise financial advisory services, they need to overcome two limitations: how to earn humans’ trust and how to quickly react and adapt to drastic market changes.
The solution is to combine a robo-advisor’s algorithmic recommendations with a human advisor’s experience, judgement, and ability to make quick decisions, i.e. AI (artificial intelligence) + HI (human intelligence) = MI (mixed intelligence). That’s the role that I see robo-advisors playing.
Technology | What emerging technology applications do you expect to reach an inflexion point in their convergence with private banking and wealth management? What impact will they have on the operational models of private banks and wealth managers? Who will be the biggest industry disruptors?
I think a financial virtual assistant (an AI program) powered by financial knowledge graph technology could reach an inflexion point in the next few years. We’ve already seen Amazon Alexa, Google Assistant, Microsoft Cortana, and other virtual assistants helping people get real-time traffic information, order food, and shop online.
I can imagine that your financial virtual assistant will feed you real-time market data and analysis, recommend investment portfolio changes, and even transact on your behalf. You interact with your virtual assistant via voice/text, on your cell phone, in your car (through an in-vehicle infotainment system), and at your home (through a smart speaker). Even though your private banker or wealth manager is away from you, 24/7 expert advisory is always with you through the virtual assistant.
Financial industry outsiders — technology giants such as Google, Microsoft, and Amazon — could be the biggest disruptors. But the biggest beneficiaries could be financial institutions that embrace the technology and build their own financial knowledge graph to feed the virtual assistants and serve their customers well.
Meet 2018’s industry leaders in the full round up of of Asian Private Banker‘s the Final Word 2018.