Banks and wealth management companies “two-way run to”

**Current Banks' Wealth Management Products Mainly Sold Through Agency Channels**

A report from the Banking Wealth Management Registration and Custody Center indicates that, as of the end of June 2024, 511 institutions across the market were selling wealth management products issued by wealth management companies, an increase of 20 from the beginning of the year, setting a new high in recent years.

**Journalists Notice the "Two-Way Rush" Between Small and Medium Banks and Wealth Management Companies**

With the growth of the scale of bank wealth management, small and medium banks and wealth management companies are also "rushing towards each other". On one side, small and medium banks are actively expanding their agency sales, and private banks are also "running into the market"; on the other side, after completing the expansion of sales channels in large and medium banks, wealth management companies are accelerating their penetration into the下沉 market of city commercial banks and rural commercial banks.

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**Diversified Wealth Management Needs and Broad Customer Base Require Multiple Channels**

Interviewees pointed out that the diversified development of wealth management needs and the broad distribution of customer groups require wealth management companies to reach more potential customers through multiple channels. In the future, when banks are selling wealth management products on behalf of others, they should explore the needs of investors, improve customer portraits, introduce agency products that meet customer needs in a targeted manner, and strengthen investor education.

**Small and Medium Banks' Agency Sales "Find a Way Out"**

At the beginning of August, Lanzhou Bank (001227.SZ) launched its first agency sale of wealth management products. Compared comprehensively, the wealth management products sold this time have characteristics such as low investment threshold (the purchase amount starts at 1 yuan) and complete online operation. Customers no longer need to be present at the counter for the first-time wealth management risk tolerance assessment. They only need to log in to Lanzhou Bank's mobile banking to complete the agency wealth management contract signing and risk tolerance assessment online, and then they can choose wealth management products to complete the purchase.

When interviewed by our reporter, the person in charge of the relevant business of Lanzhou Bank said that in terms of the admission of agency institutions, the bank comprehensively considers factors such as the scale of wealth management companies, risk control level, investment research ability, maturity of construction, and the completeness of the product system. In terms of the selection of agency products, the main focus is on the stability of product net value, the performance of benchmark achievements, and the flexibility of trading rules. Historically stable closed products and products with flexible trading rules and the shortest holding period are chosen as the first choice for agency products.

This year, under the influence of multiple factors such as the reduction of deposit interest rates, manual interest subsidy rectification, and the low risk preference of the market, the wealth management industry has ushered in rapid growth. The "Report" shows that in the first half of 2024, a total of 178 bank institutions and 31 wealth management companies across the country issued 15,400 new wealth management products, raising a total of 33.68 trillion yuan.

While the scale of wealth management is growing rapidly, interbank agency cooperation is also in full swing. For example, a certain rural commercial bank has put the wealth management products of Xingyin Wealth Management on the shelf, and the bank also sells wealth management products of other rural commercial banks.

Zhang Jinghan, a researcher at Puyi Standard, pointed out in an interview with our reporter that compared with last year, wealth management agency sales are still very hot. Wealth management companies (excluding joint venture wealth management companies) have all opened up agency sales channels with other banks. In June, the number of agency institutions across the market increased to 511, and the agency cooperation between wealth management companies and bank channels is gradually becoming closer. In addition, due to the relatively low risk preference of investors and the increased attention to liquidity, some institutions have increased the proportion of agency sales of products with the shortest holding period and short-term fixed opening, and cash management and low-risk fixed income products are still the mainstream agency products.In accordance with regulatory requirements, city commercial banks and rural commercial banks that have not established wealth management subsidiaries are required to reduce their existing proprietary wealth management to zero by the end of 2026.

Zhang Jinghan stated that for local commercial banks, the issuance of wealth management subsidiary licenses has been tightened, increasing the difficulty for small and medium-sized banks to establish wealth management companies. There is a certain gap in the professional capabilities of proprietary wealth management compared to large banks. At the same time, banks that have not yet established wealth management subsidiaries are facing the requirement to reduce the scale of existing wealth management products. Against this backdrop, banking institutions are accelerating the development of distribution cooperation to meet the wealth management needs of customers within their regions.

Xingye Economic Research Consulting Co., Ltd. pointed out that some regional leading small and medium-sized banks with larger wealth management balances and stronger support from local governments may accelerate the application for wealth management company licenses, but the business gaps of most small and medium-sized local banks will be mainly undertaken by distribution business. Local small and medium-sized banks can cooperate with wealth management companies in various aspects, and can compensate for potential losses in intermediate business income through the development of distribution business, and even enhance customer stickiness, thereby absorbing more low-cost customer wealth management settlement liabilities.

Zhang Jinghan also believes that in the current situation where loan interest rates are gradually decreasing and net interest margins are narrowing, banks are under pressure in terms of income and need to "increase revenue and reduce expenditures" to alleviate operational pressure. Banking institutions can participate in wealth management business through distribution, which can not only increase intermediate business income but also help meet customer wealth management needs, preventing customers from leaving to other financial institutions due to unmet diversified wealth management needs.

How to adapt to investor needs?

From the original "self-production and self-distribution" to the current "distribution", bank wealth management has formed a diversified distribution channel. At present, the sales channels for wealth management products generally include three methods: parent bank distribution, direct sales channels, and peer-to-peer distribution.

A person related to a joint-stock bank's wealth management company told the reporter: "We continue to strengthen the construction of sales channels and have formed a distribution channel system of 'national stock large banks + leading internet banks + small and medium-sized city and rural commercial banks', and carry out direct sales of personal and institutional business based on Apps and official websites."

A person from a city commercial bank's wealth management company told the reporter that at present, the company's channel layout is mainly based on distribution channels, gradually expanding other bank distribution channels on the basis of parent bank distribution as the core, and the construction of direct sales channels is still in the initial stage.

Talking about the construction of direct sales channels, the person from the city commercial bank's wealth management company believes that building direct sales channels has certain strategic significance. By directly reaching customers and refining portraits, it can better understand customer needs and provide matching product services. At present, wealth management companies mainly perfect the construction of direct sales channels through a combination of offline and online, with direct sales counters as the main offline and direct sales Apps as the main online. However, from the perspective of direct sales business, there are short-term problems of high investment and low returns. The construction of direct sales channels needs to be combined with its own channel capabilities and proceed according to its own strength based on a clear positioning.

From the overall market, as of the end of June this year, a total of 511 institutions have distributed wealth management products issued by wealth management companies. It can be seen that wealth management companies are increasingly valuing channel expansion. Zhang Jinghan analyzed that the main reason behind this is that the resources of direct sales channels of various wealth management companies are relatively limited. By leveraging the channel capabilities of other banks, they can expand the contact between products and the market while reducing costs and increasing efficiency, and expand the scale of wealth management by leveraging the brand reputation and channel marketing capabilities of other banks. In addition, multi-channel layout can also reduce the regional concentration or channel concentration of investors, with a multi-type and multi-regional customer source, a rich channel management model, and a diversified investor accompaniment, which may to some extent alleviate the concentrated redemption pressure in extreme market environments.It should be noted that the diversified sales channel structure not only enhances the market coverage and sales volume of financial products but also strengthens the market competitiveness and risk resistance of financial companies.

Du Yang, a researcher at the Bank of China Research Institute, pointed out that the diversified development of financial needs and the widespread distribution of customer groups require financial companies to reach more potential customers through various channels. Financial companies can meet the needs of different customers, consolidate their customer base, and improve customer satisfaction and loyalty through multi-channel sales. In the face of a highly competitive market environment, expanding peer agency channels helps financial companies increase market coverage and share. By cooperating with multiple banks and financial institutions, financial companies can better promote their products, enhance brand awareness, and improve market competitiveness. Moreover, high dependence on a single channel may bring risks, and financial companies can effectively disperse sales risks and reduce business uncertainty through multi-channel sales.

In a research report, CITIC Construction Investment (601066.SH) pointed out that agency sales of financial products play a positive role in achieving product complementarity, enriching product shelves, realizing cross-regional business expansion and brand input, and promoting the development of wealth management business. Large bank financial companies still mainly rely on cross-agency sales with large and medium-sized banks to compensate for the lack of their own product lines and further improve the product system. However, cooperation with small and medium-sized banks is relatively less. Against the backdrop of common prosperity and rural revitalization, there is a huge market demand for inclusive wealth management, and it is recommended that large and medium-sized banks accelerate cooperation with small banks in agency sales and layout the sinking market. Small and medium-sized bank financial companies mainly cooperate with city commercial banks and rural commercial banks in agency sales, and the products entering the "financial supermarket" of large banks are relatively few. They still need to promote cooperation with large banks by creating characteristic products and enhancing product appeal, taking advantage of the advantages of large platforms to expand sales channels while expanding their own brand awareness.

To promote the further development of agency business, CITIC Construction Investment proposed in the research report to establish a standardized full-process system, refine and continuously improve the product screening system, strengthen sales standardization and "sales compliance" management, and establish a complete risk management and risk isolation system. In addition, various institutions should explore the needs of investors, improve customer portraits, introduce agency products that meet customer needs, and strengthen investor education.

The person in charge of the relevant business of Lanzhou Bank mentioned earlier that to achieve differentiated competition, agency institutions need to pay attention to three aspects. First, improve product selection capabilities. Build a complete agency product screening system, optimize product access mechanisms, clarify the selection standards for agency financial products, and establish a "white list" system for financial institutions. Based on considering the risk characteristics, liquidity, and asset allocation features of agency products, introduce products that meet local customer needs to enhance the product competitiveness of agency financial business. Second, improve customer management level. Provide personalized agency financial services and wealth management plans by deeply understanding customers' financial conditions, investment goals, and risk tolerance. Third, improve the ability to serve customers. Enhance the business capabilities and service quality of financial managers, and increase customer satisfaction and loyalty by combining internal and external training methods for agency financial business knowledge, problem handling, and marketing skills.