Cai Xinfa, Ping An Group executive, special assistant to the Bank’s president and head of retail banking, Ping An Bank shares his 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, investments, regulations, and technology in 2021, as well as providing their predictions for 2022.
The previous 12 months have proved that private banks can draw in significant amounts of net new assets and client accounts as the industry has adapted to widespread travel restriction due to COVID-19. With the potential easing of these restrictions in 2022, new variants aside, to what extent will private banks return to their pre-pandemic methods of sourcing clients and gathering assets?
Ping An Private Bank has applied technology to empower its operations. During the pandemic, HNW clients were able to access a series of efficient and comprehensive financial services of Ping An Private Bank online without leaving their homes. The business was not affected and achieved faster growth instead.
In the post-COVID era, HNWIs have significantly increased their demand for wealth inheritance, family wealth risk isolation, high-end healthcare management, and plans for retirement and their children’s education. Ping An Private Bank is committed to using intelligent technology to gain insight into the personalised needs of HNWIs by making the most of the comprehensive financial and technological advantages of Ping An Group and focusing on products and services for HNWIs, bringing clients a better service experience through a fine-tuned management of client groups.
The last 12 months have been volatile for investors in China, from the meltdown in the high-yield bond sector to regulatory actions targeting sectors such as technology. How are you advising clients to invest in the world’s second-biggest economy in 2022?
In terms of policy impact: The core factors that will affect the investment of the whole year are that the tone set for 2022 is stable growth, and that the 20th National Congress of the CPC to be held at the end of 2022 may propose new initiatives and goals for modernisation. Stable growth is expected to strengthen risk assets such as A-shares and Hong Kong stocks.
In terms of investment advice, we have the following recommendations:
For A-shares, the index will rise slightly. Focus on investment opportunities in the three main lines, which are new infrastructure and new consumption in the policy line; consumer staples in the performance line; technological innovation and carbon-neutral investment in the long-term growth line.
We expect bonds to be volatile throughout the year. The risk of default will decrease to some extent.
Three major factors, including policy fix-up, performance recovery, and valuation bottoming out, will bring Hong Kong stocks allocation value, but their rise will still require some optimistic signals.
The main factor for Chinese USD bonds will be the impact from the Fed shrinking its balance sheet. Another will be the default in the real estate industry. However, the above-mentioned is expected to improve in 2022, which may bring investment opportunities.
What will be the key investment themes that shape both global markets and those in the region in 2022 and how is that feeding into how you advise clients?
The key investment themes shaping global markets and the Asia-Pacific markets in 2022 will be “gradual recovery from the US to Europe to the emerging markets” and “interest rate increase”.
Specifically, economic recovery will follow the sequence of “US → Europe → emerging markets”, which will bring benefits to and subsequent impacts on different markets. The start of interest rate increases will have a significant negative impact on assets including stocks, bonds, and commodities.
Therefore, our recommendations for investing in the overseas markets are as follows:
– US stocks: The general rally will end, and follow up on the institutional market.
– Overseas bonds: Bonds in developed markets will generally face the impact of interest rate increase and balance sheet reductions, so their allocation ratio should be reduced. Asian bonds, Chinese USD bonds might go up again.
– Crude oil: Lack of opportunities and trend downwards.
– Gold: Need to wait until the end of interest rate increase for investment opportunities.
One of the most-repeated views over 2021 was that the ‘60/40’ portfolio is dead, given the ultra-low to negative yields offered in many parts of the sovereign bond markets. From alternatives to commodities to private credit, how are you helping investors to allocate assets in what was traditionally the fixed income part of their portfolios?
The traditional 60/40 portfolio had been regarded as a classic strategy for a long time, and is still used by many institutions in China.
The reason is that, for investors, the risk-free yields of the Chinese bond markets are still attractive to a certain extent. If investors are ok with some fluctuations, they can choose debenture bonds for allocation in addition to rate securities in the fixed income part of their portfolios, to get higher potential returns. Now an increasing number of foreign institutional investors are gradually entering the Chinese bond market. They too are attracted by the potential yields. It is good for risk diversification as well.
On the other hand, we are not limited to the 60/40 portfolio. In addition to traditional stocks and bonds assets, many institutions provide clients with cash assets and alternative assets. In terms of strategy, if clients want to replace the investment in traditional fixed-income bond assets, they can choose, based on their needs, domestic or overseas retail credit strategy, quantitative stock neutral strategy, or long-short strategy.
Ping An Private Bank has a professional team of investment consultants and product experts to provide market research and analysis for various types of assets and make recommendations on the allocation ratio of general categories of assets based on the market research and analysis, assisting customer managers to provide personalised solutions for investors and build appropriate and healthy portfolios for clients according to their income expectations, risk tolerance, liquidity requirements, etc.
Sustainability is higher up the agenda for investors than ever, with last year’s United Nations COP26 event underscoring the scale of effort needed to achieve global net zero emissions by the middle of this century. How are you helping your clients to remove ESG risk from their portfolios and embrace sustainability in their investment strategy?
At present, both China and major overseas economies have proposed carbon neutrality plans. For clients, we differentiate between domestic and overseas investments in the way we eliminate ESG risks.
For overseas investment, some outstanding asset management institutions already consider ESG risks in their investment portfolios. We have cooperation with those institutions in terms of overseas investment to help clients achieve this goal in their overseas investment.
Domestically, ESG is yet to become a factor/consideration for asset management institutions in investment. The reason is that China only in 2021 proposed its plan of carbon peaking by 2030 and carbon neutrality by 2060. China’s carbon peaking is about 20-25 years later than that of Europe, the US and Japan, and its carbon neutrality goal is 10 years later than those countries. The plan is more at the macro/policy level now. Regarding ESG consideration, China is still in its infancy compared to the US, Europe and Japan, resulting in a lack of accurate instruments.
Therefore, we mainly help clients achieve this goal by allocating stock products related to new energy, digital economy, environmental protection, or other similar products that match this goal.
The past two years or so have accelerated the rate of technological and digital adoption at private banks across the region, given the restrictions imposed by the COVID-19 pandemic. From hyper-personalisation to digital onboarding and KYC, what will be the biggest focus in terms of tech deployment for the industry in 2022 and where do the gaps lie?
In 2022, in terms of tech deployment, the private bank will focus on: improvement of digitalisation and intelligence of personalised investment advisory services for clients, as well as big data intelligent monitoring of investment risks in the underlying assets.
AI, big data, cloud computing and other technological means will be introduced into the building of a digital system platform that enables the integration of online and offline service channels, as well as the collaborative services of account managers and experts in different fields, making wealth management instruments and asset allocation more diverse and scientific, to meet the personalised needs of clients.
The challenge is to build a platform for smooth integration and collaboration, as well as more automated and intelligent capabilities for product R&D, investment portfolio, valuation management, investment advice, etc.
In addition, given the continuous impact of the pandemic on the global economy, it is necessary to pay more attention to the risk control of financial investment in underlying assets. Through the use of big data, public opinion analysis and other technological means, risks can be monitored and avoided in real time. There is still much room for improvement in the digitalisation and intelligence aspects of the industry.
Sourcing talent in the region’s private bank industry is becoming tougher than ever, pushing up hiring costs across the region. How can private banks ensure they have adequate access to the talented relationship managers and other front-line staff over the coming years? What is the key to attracting the right candidates?
Ping An Private Bank strengthens its team building through “improvement of internal capabilities” and “introduction of external experts”, attracting outstanding private banking financial advisors, VIP wealth managers and other top talents.
In addition, the Private Bank Wealth Management Trainee Program was launched in the second half of 2021 with on-campus recruitment. A comprehensive training system allows young people to access high-quality growth opportunities and prepare future professional wealth managers.
Candidates are attracted to Ping An Private Bank for a number of reasons:
– company strength: Ping An’s private banking business has grown rapidly, and it will become a first-tier private bank in mainland China with diverse products and benefits for financial advisors to better meet the needs of their clients.
– technology empowerment and support: Ping An Private Bank launched a technology platform called the Intelligent Business Platform, which integrates investment advisory and wealth manager empowerment, and can track market fluctuations and client holdings in real-time. This means that each PB has the systematic analysis, investment research, and service capabilities of the entire organisation behind them to respond to the clients’ needs.
– talent philosophy and performance assessment mechanism: Ping An Private Bank is the first in the industry to propose the performance assessment indicator of the health of a client’s wealth. Through the adjustment of the assessment mechanism, we focus more on the upkeep of user value, instead of solely relying on performance. We focus on customer experience and the correct value system of talents to give new talents a new growth concept and ample room for growth.
In the course of 2021, many private banks have grown their business presence in Singapore as the industry saw more business opportunities among Greater China clients in the city state. What is your private bank’s business split across Hong Kong and Singapore now compared to 12 months ago? Do you think the shift of gravity in business across Hong Kong and Singapore has reached an equilibrium?
In August 2021, Ping An Bank Hong Kong Branch was approved by the Hong Kong Monetary Authority to conduct private wealth management business. In November, we obtained the Type 1 and 4 licences issued by the Hong Kong Securities and Futures Commission (SFC), which expanded the scope of private wealth management services.
We can provide HNW clients with one-stop solutions for public and private funds, Hong Kong and US stocks, insurance, offshore trusts, etc., to meet the all-around and diversified needs of clients and also strengthen the international development of Ping An Bank’s retail and private banking wealth management business.
Meet 2021’s industry leaders in the full round up of of Asian Private Banker‘s The Final Word 2021.
