The Cross-boundary Wealth Management Connect (WMC) was launched in September 2021, which is a landmark for capital markets in Greater China, after the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect (SHHKSC & SZHKSC) were created. Another milestone for financial market interconnection between Hong Kong and the Chinese Mainland, WMC is the first platform supporting retail investors from Guangdong, Hong Kong and Macau who conduct direct investment and require wealth management in these three places. WMC is a breakthrough, extending the cross-boundary investment channels for individuals in the Greater Bay Area (GBA).
As one of the richest clusters of municipalities in the world, the GBA boasts a booming economy and flourishing personal wealth. Residents’ demand for overseas assets and diversified portfolios is expanding rapidly. While increasing offshore asset allocation options for individual investors, WMC also brings extensive business opportunities to the banking sector.
WMC is a complex topic. In this article, the author touches on its background and analyzes three key trends among inland financial consumers. These trends are vital to any Hong Kong bank wanting to attract southbound investors.
Investors applaud Cross-Boundary WMC
The Cross-Boundary WMC (WMC) has revolutionized investment in Chinese mainland, Hong Kong and Macau. It is now possible to make cross-boundary investments using closed-loop funds flow channels, via dedicated, paired remittance and investment accounts and opened with banks in investors’ places of residence. Initially, investors will have access to low-to-medium medium-risk WMC products in relatively simple categories.
Since its launch, 19 Hong Kong-based banks have been approved to offer Cross-Boundary WMC services. By the end of November 2021, the scheme had attracted over 14,000 individual investors with total cross-boundary transfers exceeding RMB 300 million yuan (source: HKMA).
Key to success: a personalized omni-channel customer experience
Positive feedback on WMC has prompted local Hong Kong banks to prioritize wealth management service expansion among southbound investors this year. However, since individual investors are limited to a single WMC investment account, and product categories are restricted for the time being, any bank wanting to lead the market must provide an outstanding customer experience.
Omni-channel service potential: tapping into mobile
Our research reveals that mobile devices have largely replaced traditional physical outlets as the most used channel among mainland consumers. New channels are in the ascendancy, with social media and video services being the most prominent. In the aftermath of COVID-19, people increasingly rely on digital channels in their daily lives, and banking consumers are no exception.
Hong Kong banks should solidify digital channel infrastructure. A holistic approach would cover customer acquisition, investment and service to meet their expectations for omni-channel services—especially via mobile. There should be significant focus to help ensure the compliance of new online channels, and on intimately connecting southbound customers’ digital lives with banking services.
Digitalized services: opportunities for AI-assisted investment
Regarding digital services, Chinese mainland investors have largely acknowledged AI in financial services. According to the research, more than 80% are prepared to accept AI-assisted financial investment and pension/retirement financial planning advice. The proportion is markedly higher than in other countries and indicates good prospects for digital investment consultancy and wealth management planning services.
For the past few years, Hong Kong banks and investment institutions have prioritized the research and application of AI technology. Those with the right technology infrastructure can consider how to apply AI, data and other technologies to digital services for southbound investors. Those with weaker technical foundations should rapidly level level-up middle and back-office technologies to remain competitive.
Leading in technology adoption will make it easier to lure southbound investors. It will also enhance the profitability, investment and wealth management experiences of existing local customers—and attract new ones.
Processes and platforms provide a data-driven foundation
Customized services are also vitally important to Chinese mainland financial consumers. Their openness to paid customized investment services, especially wealth management solutions tailored to specific circumstances, is higher than in other countries.
Customized services place greater demands on human and technical resources than one-size-fits-all offerings. Given the growing reality of understaffing challenges in Hong Kong, banks should update both their processes and platforms to improve time management and process efficiency. They should also deploy technology to automate certain tasks and augment available human resources, while employing intelligent technology to assist investment decision-making. This technology deployment will give customers direct access to personalized, AI-assisted investment services. Moreover, bank investment consultants will be able to pass unnecessary tasks to machines, and spend more time providing customers with tailored, data-driven advice.
Understanding the three trends to lead the market
As one of the most dynamic regions in Greater China, the GBA has incredible potential and plays a very important role in the national development strategy. To seize the opportunity presented by Chinese mainland investors, Hong Kong banks must thoroughly understand these three behavioral habits. The final step is to provide the high-quality, omni-channel, digitalized and customized customer experiences to meet those needs and outperform their peers.