Final Word 2020: Shang Xiao, CreditEase Wealth Management

Shang Xiao, president, Heritvest Family Office, co president, CreditEase Wealth Management shares her views with Asian Private Banker in ‘The Final Word’, a year in review by the region’s private banking leaders as they share their thoughts and opinions on key issues around industry trends, business performance, investments, regulations, and technology.

Industry Trends | In what ways has the COVID-19 pandemic irrevocably changed the private banking industry and your own bank’s approach to operations and service?

Offline servicing was dominant in the private banking sector. We used to acquire new customers and establish trust via frequent face-to-face interactions. During the pandemic, various restrictions greatly affected traditional financial services, but also made customers more likely to accept digitalisation. In this sense, we have been able to embrace customers through digital channels, which has contributed significantly to our growth.

Our long-term accumulated digital capabilities have helped us make breakthroughs in several dimensions, such as providing investor education services via live broadcasts; digital marketing via apps, WeChat, SEO, and SEM [search engine marketing]; allowing end-to-end online transactions; and realising a 1 + N professional team service model via online interaction, where one account manager serves as the contact point for the professional service team and various product/service experts.

Industry Trends | Few can deny the importance of Asia’s onshore wealth markets — in terms of asset pools and the need for wealth management from increasingly sophisticated domestic investors. What opportunities do these markets bring to your business, and to what extent will ‘onshoring’ shape your strategic agenda?

Because of the pandemic and Sino-US trade tensions, customers prefer investments in defensive assets and believe China is a better choice relative to the US. Customers are more aware of the importance of long-term asset allocation of primary market and alternative investments by value investing. Meanwhile, we found that customers care more about health insurance plans and enterprise sustainability. Are they sufficiently prepared? Can their enterprise be passed on smoothly to the next generation? These uncertainties for the future can be solved through our Family Office inheritance scheme.

On the other hand, most wealth management institutions are in the process of transforming and digitalising. In the past few years, CreditEase accumulated its own experience as a financial technology enterprise, which we can share with traditional institutions to empower them to execute a smooth transition.

Business Performance | NNA gathering and account opening have proven challenging in a pandemic-affected world. If we continue to experience lockdowns and travel restrictions in 2021, how can private banking businesses adapt?

Digitalisation is an inevitable trend across all industries. KYC and client onboarding processes can now be conducted online with appropriate technology. Even when there are travel restrictions, we can still acquire targeted potential leads via online live events and convert clients via localised marketing events.

We use online live broadcast to share new investment trends and demonstrate digital capabilities, supplemented by localised small-scale marketing activities. Despite the pandemic, CreditEase Wealth Management achieved a 10% YOY growth in the scale of asset allocation from January to September 2020. The number of new investment clients grew by 90% YoY. The average individual adjusted monthly performance of financial planners increased by 29% YoY.

Investments | From a portfolio perspective, how important will (a) Chinese assets and (b) alternative investments be for delivering clients’ objectives over the next five years?

Chinese assets will benefit from the appreciation of the RMB and global reallocation. China’s economic recovery is leading the world. Overseas liquidity is overwhelming while China’s monetary policy has begun to normalise. The interest rate spread of 10-year treasury bonds between China and the US has reached a historical high. Under the expectation of RMB appreciation, the attractiveness of RMB assets will continue to increase globally.

The new domestic strategy of “focusing on internal circulation, driving by dual-circulation” is based on China’s huge market and integrated industrial system, which is conducive to the further transformation of China’s economy into the driving force of scientific and technological innovation. The core assets of consumption and technology are expected to grow rapidly. Therefore, the long-term trend of foreign investors allocating to China’s core assets will not change.

We emphasise the importance of alternative assets in allocation. In an extremely low interest rate environment, alternative assets with higher and more stable returns (such as private equity and REITs) have more investment value. In overseas markets, the return of private equity, real estate, hedge funds and other alternative assets has little correlation with the traditional return on equity and debt. Also, private equity is highly related to high-tech and new economy industries, which is an excellent channel for investors to grasp the dividend of scientific and technological innovation in the next 10 years.

The preferred private equity investment often brings higher long-term return, while real estate private investments can maintain long-term stable and better returns, which can help improve the long-term performance of the entire asset portfolio.

Investments | What key investment themes shape your bank’s 2021 outlook — and why?

A vaccination rollout will release suppressed supply and demand and endogenous growth momentum. The US, Europe, and China are basically at the bottom of the inventory cycle and may take the initiative to replenish their inventories in 2021, boosting the global economic recovery.

With the new normal of the pandemic and the administering of vaccines in developed countries, global demand in 2021 will increase significantly, so that China’s economy will develop from export substitution to demand-driven.

We will comply with official policy regarding the technical innovation in China’s structural reform. We will focus on the development of strategic emerging industries, modern service industries, infrastructure construction, digitalisation, new energy, and other fields under technical innovation in China’s structural reforms. We will optimise the indirect financing structure in the financial capital market, increase the share of direct financing, open up related asset categories, and expand domestic demand for various types of consumer investment.

We will seize the asset rotation opportunities in the global economic recovery cycle in 2021: stocks → commodities → bonds → gold → cash.

We recommend a focus on strong profitability stocks of star companies. The banking and non-banking financial sectors, especially those with lower valuations, may outperform the market significantly in 2021. The opportunity of excess returns in the Chinese stock market lies in those that are less dependent on external factors in terms of maintaining their profitability, and we will recommend our clients to focus on star companies.

In 2021, China will enter the stage of “broad currency and tight credit” and its bond market will be in a bull market phase. We prefer RMB assets. In the long run, the proportion of RMB assets in global asset allocation will continue to increase. It is expected that RMB may continue to appreciate in 2021, but the market is not sustainable and relies more on the fluctuation of USD.

Vaccines are expected to become widely used in emerging markets in the 3Q21, which may stimulate the rapid growth of their economies. We should pay attention to the good control of the pandemic situation and rely on the recovery of larger emerging market economies for services, tourism and commodity exports.

Investments | What important steps did your bank take to drive the sustainable investing agenda and to increase access to sustainable investing opportunities in 2020?

CreditEase Wealth Management advocates the notion that every high-net-worth client should invest 1% of his or her assets in charity, either through direct donations, low interest loans or sustainable investments, so that the wealth may contribute to the greater good. CreditEase Wealth Management offers tailor-made charitable projects to clients, based on their preferences, and helps clients realise their charitable aspirations with its professional resource coordination and project execution and management.

In 2020, CreditEase established the CreditEase Foundation, which has created an assortment of charity projects and established a variety of special charity funds. CreditEase Wealth Management has established impact investment funds, helping farmers to boost sales via live commerce.

CreditEase Wealth Management Private Equity Fund of Funds incorporates ESG into the evaluation system, covering key areas with great social impact, such as medical care and health, new infrastructure, low-carbon environmental protection, education and new consumption.

CreditEase Impact Funds, in the planning, will invest in social enterprises so that investors can obtain long-term and stable returns, and at the same time, support underprivileged groups.

Regulations | Both Singapore and Hong Kong are placing a strong emphasis on cultivating a competitive and supportive environment for family offices. What further initiatives should each/either regulator undertake to nurture the development of a family office-supportive ecosystem?

We noticed that a lot of family offices have global asset allocation needs. Instead of focusing on a single local market, they seek services to help allocate family assets around the globe and across asset classes. We believe it is critical to have a cooperative and healthy relationship between regulators from different jurisdictions in order to nurture the development of a family office-supportive ecosystem.

Therefore, we think one thing that regulators can do is to improve dialogue between each other across jurisdictions to harmonise rules and regulations around cross-border investment.

We believe support for investment advisory licensing and registration is key to nurturing a family office-friendly ecosystem. We have seen that in the US there are many registered investment advisors (“RIAs”), and in Hong Kong investment advisory services are licensed and regulated by the SFC under type 4 regulated activities. We hope a similar licence category can be granted in mainland China to allow more qualified professional investment advisors to support family offices.

Technology | Where do you see the best application of data analytics/machine learning in private banking?

CreditEase has been working in the fintech industry for a long time and continues to utilise technology to promote financial innovation and wealth management. It has innovatively transferred its experience on big data application in the domain of risk management to the domain of wealth management.

CreditEase independently developed the Big Data Client Scorecard, which utilises big data to identify target clients and to categorise client profiles. The results have been applied in precision marketing, empowering CreditEase to better meet client needs, improve business efficiency and to provide asset allocation recommendations and consulting services tailored to specific wealth management stages of different clients
Benefiting from the digitalisation in the early stage, by labelling the interests and preferences of clients based on their browsing history and behaviour analysis, CreditEase can recommend the most relevant services and activities to each individual client.

Even more, CreditEase can assign the most fitting client manager to each client based on the analysis of objective characteristics and behaviour patterns of clients and client managers, which improves the order placement rate as well as the client satisfaction rate.

Technology | How is your bank optimising the utility of the relevant digital tools to prepare frontline staff for client engagement in a post-pandemic environment?

CreditEase Wealth Management has developed the Financial Planner App for financial planners, which enables financial planners to share articles, opinions, and WeChat posts of strategy managers to target clients smartly and easily.

Our intelligent robot client service offers automatic Q&As, resulting in a drastic improvement of the efficiency of feedback, and a reduction in the workload of supporting staff.

The Mobile Dashboard to Managers on our Financial Planner App allows managers to easily track on one page key financial indicators, such as team activity, staff daily performance, pipeline of the month etc. All of the above can make management more efficient and standardised.

Our online 1+N professional team service model means that one account manager serves as the contact point for the professional service team and various product/service experts. As our customers became more and more used to online service models, we have found some of them are more willing to interact through online video chats rather than going to a particular office offline. This also means that our experts can serve more HNW clients and are not limited to a specific geographical location.


Meet 2020’s industry leaders in the full round up of of Asian Private Banker‘s The Final Word 2020.

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