Recently, at the "2025 China Securities Wealth Brokerage Summit Forum" co-hosted by the Securities Times and Southern Fund, Ge Xiaobo, President of Guolian Minsheng Securities Company Limited, shared profound insights on the development of the wealth management industry with the topic "New Trends in Wealth Management Transformation Powered by AI and Driven by Buy-side Investment Consulting." Ge highlighted that there are still many areas needing improvement in China's wealth management transformation process. For instance, the depth of buy-side investment consulting services is insufficient, and the concept of "long money long investment" has not been fully realized, along with a relative lack of excellent client managers. He emphasized that buy-side investment consulting will become the cornerstone of future wealth management, and the application of AI will help empower institutions to establish a configuration transmission mechanism from headquarters to frontline staff and ultimately to clients.
Ge stated that the proportion of income from buy-side investment consulting is set to rise significantly. He noted that wealth management is closely tied to economic development and grows alongside the expanding middle class. With the world's largest middle-class population, China needs to build strong wealth management services that can cater to this demographic. Looking at the development trajectories of overseas institutions reveals two significant trends. Firstly, the share of wealth management and asset management in financial institutions has noticeably increased. For example, Morgan Stanley's wealth management and asset management now account for half of its total sales revenue. Secondly, the buy-side investment consulting model has become mainstream, as seen in Morgan Stanley's Solomon Smith Barney and UBS's private banking, where buy-side consulting income surpasses 50%.
In contrast, commission and margin income in China's brokerage retail business currently exceed 70%, indicating that buy-side consulting income will significantly increase while traditional commission and margin income will continue to decline, according to Ge. He also mentioned that international mergers and acquisitions have profoundly influenced the global securities and wealth management landscape. After Morgan Stanley acquired Solomon Smith Barney, its business structure became more stable, with valuation performance exceeding that of Goldman Sachs; while UBS's acquisition of Credit Suisse initially caused market fluctuations, UBS's market value quickly ascended to the top of the wealth management industry post-merger.
Ge pointed out that the core technology of wealth management primarily manifests across several key dimensions. The foremost task is to balance clients' expected returns with their risk tolerance. Establishing reasonable expectations for clients is fundamental, while controlling drawdown risk through strict portfolio management is critical for helping clients overcome feelings of greed and fear amid market fluctuations. On the execution front, securities firms possess unique advantages in financial engineering that can enhance the value of professional tools. For instance, although individual financial instruments have limitations, incorporating non-Beta tools can significantly improve portfolio performance. Ge revealed that despite market fluctuations, the vast majority of clients using Guolian Minsheng Securities’ structured Snowball products still achieve considerable returns.
Regarding client perception, Ge emphasized the necessity of achieving "mutual respect." On one hand, clients must be guided to maintain a healthy respect for the market; on the other, their real risk tolerance must be accurately assessed. Finally, client trust must be founded on professional capability. Addressing the various challenges posed by the low proportion of consulting income, Ge stated that China's wealth management industry is currently in a "mixed state of ups and downs." On a positive note, the wealth management sector is beginning to take shape within the country, evidenced by three trends: institutions are increasingly engaging in consulting services as a crucial revenue stream; securities firms are proactively transforming their organizational structures to reduce the weight of traditional brokerage services; and there is a significant increase in the proportion of consulting personnel while the ratio of brokerage staff has noticeably declined.
However, there are still many areas needing enhancement during China's wealth management transformation. The depth of buy-side investment consulting services remains inadequate, leading to an extremely low revenue share of less than 5% for the industry, far below the over 40% level in Hong Kong's Chinese institutions. Additionally, the "long money long investment" mechanism has yet to be effectively established, and wealth management funds have not played a substantial role in long-term investment. There is also a relative shortage of excellent client managers who have not yet secured full client trust. Ge asserted that buy-side investment consulting is foundational to the future transformation of wealth management, with public fund consulting being a crucial lever in this transformation. He particularly noted that the essence of buy-side consulting lies in the shift in legal relationships, moving from pure agency to full power of attorney arrangements. This transformation necessitates a fundamental change in service philosophy, shifting from product-oriented to client-oriented perspectives that match appropriate assets based on client risk tolerance and liquidity needs.
Ge also discussed that the range of investment targets for fund consulting remains relatively limited, suggesting an expansion of investment target scopes. In terms of how securities firms can develop wealth management services, Ge identified three key areas of work: First, consulting is essential, and the foundation of consulting is asset allocation and services, both of which are indispensable. Second, team building is crucial; the current construction of brokerage teams faces serious challenges and there is a need to cultivate a substantial number of skilled professionals capable of serving clients. Third, client trust is paramount, which relies on professional competence. Once a long-term trust relationship is formed, it becomes a substantial competitive advantage in wealth management.
Ge illustrated how Guolian Minsheng Securities utilizes a three-tier account system to offer precise services: through the public fund consulting system serving a vast number of clients, combining top-down allocation recommendations with bottom-up distributed consulting; tool-based accounts fulfilling clients' needs for transparent, low-cost tools like ETFs; and ultra-high-net-worth clients enjoying tailored services with more complex tools to construct their investment portfolios.
On the subject of financial technology's role in empowering buy-side investment consulting, Ge believes that AI empowerment should focus on solving core issues—allocation and allocation transmission. He specifically emphasized that the difficulty in achieving "long money long investment" stems from drawdown risks. Thus, he proposed three key dimensions for risk management: Firstly, asset diversification should consider global products for more stable returns; secondly, multi-scenario and multi-time frame allocations to secure reasonable returns under varying market conditions; and thirdly, creating low Beta, low correlation, and high Sharpe ratio asset portfolios to enhance investment structures. Ge pointed out that merely achieving good asset allocation is not sufficient. The key to successful wealth management lies in transmitting institutional allocation capabilities to frontline staff, who then convey this to clients.
"The core of AI empowerment focuses on constructing a transmission mechanism from headquarters to frontline staff and finally to clients," Ge stated. He mentioned that the asset allocation service platform needs to tackle three critical issues: how to realize a bi-directional process from combination to product and back; how to optimize investment portfolios through diverse tools; and how to achieve dual transmission of allocation concepts from top to bottom and vice versa. He underscored the importance of frontline client managers' insights into client needs. Regarding customer account diagnosis platforms, there is a need to address account fragmentation. Given the characteristics of China's capital market, client accounts are often fragmented, requiring integration for comprehensive analysis of private equity funds, stocks, off-the-shelf products, etc. Furthermore, precise client profiling and diagnosing allocation deficiencies are crucial. "Wealth management fundamentally remains a people-centered business. Technology is merely an aid; the true core lies in client managers' understanding of drawdowns, their knowledge of financial instruments, mutual engagement with clients, and adherence to compliance standards," Ge concluded.