Thanks to smart phone apps like Alipay and WeChat Pay, hundreds of millions of Chinese have quick and easy access to financial services. Those offerings are becoming increasingly sophisticated: For the first time, ordinary Chinese investors will also have access to watchdog-approved financial advice.
The service will be available through a partnership between Ant Financial, which operates Alipay, and the $5.9 trillion US fund giant Vanguard. The joint venture is the first to win approval from the China Securities Regulatory Commission (CSRC) to provide professional advisory services.
The automated system will be run by Ant, which is providing the platform and back-office fund management operations. Valley Forge, Pennsylvania-based Vanguard is furnishing investment and asset-allocation strategy, advice, and product selection. Vanguard won’t provide the investment funds because it doesn’t have authorization to do so. The companies didn’t disclose which Chinese firm will provide the funds, or exactly what type of investments will be available.
The CEO of Brazil’s Nubank, one of the fastest growing financial companies in the world, has said that the future of finance looks like platforms like Alipay, which have democratized services that used to only be for the top 1%. The super app has more than 100 services, from ride hailing to investing in mutual funds. But for all the whizzy money gadgets, including access to one of the world’s biggest money market funds, financial advice offerings were only available for wealthy Chinese people.
“Millions of Chinese investors lack access to professional investment advisory services,” said Peter Zhang, CEO of the joint venture. “We will reduce complexity and significantly lower the threshold for individual investors to access high-quality wealth management advice in China.”
Other US financial firms have also announced new ventures in China, despite the ongoing trade war between the world’s two largest economies. Wall Street bank JPMorgan said this week that it got approval from authorities to launch a majority-owned securities venture in the country. In the past, western companies have typically been limited to joint ventures in China, where American firms have long coveted a piece of its $40 trillion financial market.
Given their lack of penetration so far, it’s open question as to how much of an opportunity will emerge, and how much American institutions will be able to make of it.