“The whole industry is due for some sort of cleansing,” said Lam said at a press briefing last week. “After the rise of the [domestic] market last year, a lot of advisers were coming in offering products and services that are not sustainable. Regulators are looking at the risk profile of clients and whether products and services offered are legitimate.”
Noah, which is one of two mainland wealth managers listed on the NYSE, has a client base made up of high net worth investors in China.
Lam said he’s been speaking frequently to the China Securities Regulatory Commission for the past 18 months and the crackdown will impact on Noah in a couple ways.
“It will make sure our clients are not hurt by players not playing by rules.”
It also has the potential to improve relationship management in China, making private bank relationship managers a lot more aware of want they can and can’t do, he said.
“Chinese wealth management is still at a very early stage, so anyone that comes into the market as an RM may not have the right view of what standards should be. The government is trying to set the bar to reach before they talk to clients.
“The short-term impact on us will be to make it a bit more difficult to sell, but in long run it’s positive. The US, Hong Kong and Singapore have gone through the same process of a great rise in the market, the government coming in with a view to regulate it, then a few players end up really driving in the post-cleansing world.”
Lam added that the firm listed on the NYSE because it wanted to differentiate itself as a transparent wealth manager for mainland clients. “We chose the NYSE because it is the location with the highest compliance requirements.”
Hong Kong expansion
Yihao Liu, chief executive of Noah in Hong Kong, added that the needs of mainland clients have clearly changed. “In the past clients were very much product driven and are now moving toward a platform focus. They need many more services, not just a single product.”
In Hong Kong, the firm has RMB 18.4bn ($2.76bn) in AUM. The firm said it has built up a platform with, for example, multi-asset, insurance, credit and trust to meet clients various requirements.
Liu also said the firm has ambitions to target clients outside the mainland.
“We’d like to get clients from Hong Kong, Singapore and elsewhere to invest through the Noah Hong Kong platform”.