Recently, Mu Ye participated in a wealth management industry forum and talked about some thoughts on buy-side investment advisors, and here is the main content of the speech.
What is the hard but right thing
The wealth management industry is talking about doing the "hard but right" thing. First of all, we must be clear, what is the right thing to do?In my opinion,It mainly depends on whether it is really "customer-centric".。Some people say that the buy-side investment advisory business has been developed for four years, and the current scale is only 150 billion, which does not seem to be very powerful. I've always believed that the size of ownership is certainly a metric, but for the buy-side advisory business, whether it is AUM, revenue or profit, it is only a natural consequence of success, not a goal to pursue. Our goal should be more focused on whether it creates value for customers, how satisfied customers are, how good is the sense of gain for customers, and what is the profitable experience of customersThese don't seem to be much to be said in the industry. There are not many investment advisory institutions that dare to publish the real account income of their clients. How much money did the customer make, and did he outperform the benchmark?These should be the criteria for judging the performance of the investment advisory business.
So what's so hard?Difficult things do not mean that you have to do very difficult actions, but what is difficult is not only the things themselves, but also the persistence. For example, eating on time every day, working and resting on time, these are not difficult to do in the short term, but it is difficult to stick to them. However, once you stick to it, you will slowly pay off. That's why I often say that "dopamine is easy to get, endorphins are hard to find". The rewards of the hard and right things are more endorphins than dopamine. Unfortunately, the vast majority of us people and institutions will be more indulged in dopamine pleasure and have no patience to wait for greater endorphins.
Specific to the wealth management industry,What is the hard but right thing to do?I think it's about improving the sense of gain for customers. What is a sense of customer gain?We often mistakenly think that they have to make money for customers to have a sense of gain, but in fact it is impossible to do it 100%, especially during the market downturn. What investment advisory services do is to make the customer experience better. What makes a good customer experience?Some people think of customer experience as accessibility, smooth transactions, and easy tools. There's no denying that these do bring a good experience to customers. But on a deeper level, customers ultimately want their accounts to grow. The customer's sense of gain is actually a comparison between the customer's actual income and the expected income, in which the customer's actual income comes from the product income and the customer's behavior profit and loss.
Therefore, in order to improve the sense of customer acquisition, we need to focus on three points: first,It is necessary to increase the income of asset management products。If the product doesn't provide good returns, it's useless to behave right;Second,It is necessary to reduce the behavioral loss of customers, so as to get the income of asset management products;Third,In the whole process of service, help customers establish reasonable expectations。What makes wealth management special is that the client's expectations are sometimes unclear even to him. We often talk about KYC, but can a customer really express his true expectations by asking them to fill out a questionnaire?Not necessarily. Therefore, professional investment advisors are needed to help clients establish reasonable return expectations.
Improving customer access requires the joint efforts of every participant in the business chain, including wealth management institutions and asset management institutions.
What should asset managers do?
Asset management institutions should improve product returns and create value on the product side based on their professional understanding of the financial market, which is the responsibility of asset management institutions. What are the core competencies of asset management institutions?In fact, each ** company is different, some are more focused on investment research, and some are more focused on sales. In my opinion, investment and research capabilities should be the core competitiveness that asset management institutions should focus on. Asset management institutions need to continue to focus on the construction of investment and research capabilities, rather than the construction of sales capabilities, which is what wealth management institutions should do.
In addition, asset management institutions also have something to do in improving the profit and loss of customer behavior and managing customer expectations. For example, when the market is at a high point, it is necessary to resist the impulse of "sporty new hair" and focus on quality over quantity. If you desperately send products at the highest point, it is actually investors who are hurt in the end. In addition, asset management institutions should also cooperate with wealth management institutions to accompany and educate investors, because many contents on the wealth management side are actually output by asset management institutions.
What should a wealth manager do?
Based on in-depth KYC for customers, wealth management institutions should improve customer behavior profit and loss, manage customer expectations, build the ability to adapt customers to products, help customers clarify investment objectives and risk appetite, and make adaptations based on the attributes of customer funds and products. In terms of managing user expectations, it is necessary to help customers establish reasonable expectations of investment periods, returns, and risks, and then dynamically adjust them. In fact, the customer's risk appetite will also change with his own situation and the changes in the external environment, which needs to be dynamically adjusted.
For example, I have observed that the risk tolerance of clients decreases in a bull market** and becomes larger in a bear market. The customer thought that he could bear a maximum loss of 10%, but in a bull market, even if his ** only fell by 2%, he would choose to cut meat and change positions, because he felt that everyone else had made money, and only his ** had not made money. The same client, in the bear market, his ** lost 10%, but after finding that everyone around him lost 20%, he will feel that he is not bad, so he will continue to hold, and his risk appetite in the bear market has become larger. As a result, customer expectations are dynamically adjusted.
02 The value of buy-side advisors
**There is an obvious difference between trading and general commodity trading, that is, there is a huge professional and information gap between buyers and sellers on the understanding of the transaction target. In general commodity trading, the difference between the buyer and the seller's perception of the subject matter is not very large, and it is easy to test. If the merchant sells me a fake phone, I can return it as soon as I get home. However, the perception of buyers and sellers is very different, and the test of the results is very long, so such transactions are naturally unfair and inefficient. The seller has a huge advantage in crushing, so there is a saying of "cutting leeks". How can investors avoid becoming leeks?It is necessary for the buy-side investment advisor to make up for the professional and information gap between the two parties to the transaction, which is the value of the buy-side investment advisor. Buy-side investment advisors provide this value by toBuyparty charges to obtain commercial returns.
Many people say that clients are unwilling and Xi to pay for investment advisory services. This is because the client has not yet recognized the value of the buy-side advisor. The value of buy-side investment consulting is not to ensure that customers make money, but to help customers improve the winning rate of investment. We must not let the common people have another misconception that investment consultants will definitely help them make money. Nowadays, many investment advisory users feel that investment consulting is not very good, and after using investment consulting services, they lose more than they buy **, and feel that the buyer's investment advisory does not help them make money.
We can look at two data. Two days ago, Xiao Wen of Yingmi always said in an interview that the proportion of equity assets of "and slow" customers has risen instead of falling at the lowest point, indicating that customers are in reverse layout under the guidance of investment advisors, which is a bit of a professional player. Another example is CEIBS Wealth, whose investment advisory users account for a significantly higher proportion of profitable clients than non-investment advisory users. I think as long as we do it in a down-to-earth manner, people will gradually perceive the benefits of investment advisory.
The wealth management industry has shifted from a sales model to a buy-side investment advisory model, which is essentially an evolution of the business model from "sales-centric" to "customer-centric".
From the point of view of the service modelUnder the sales model, customers allocate and trade independently, while under the investment advisory model, customers have to transfer part of their trading rights and allocation rights to the buyer's investment advisor.
From the point of view of profit modelUnder the sales model, it is difficult to truly be "customer-centric". Under this model, the income of the seller is more closely tied to the asset management institution, and it is far away from the customer. Recently, an old colleague said to me: "We use the sales model, because customers just like to buy a single product, as long as I have customers in my heart, I can create value for customers by selling fixed income + and FOF." I said you can give it a try, but I believe it's hard to come out of it in the end, it's hard to really make the customer happy because there's a major conflict in the underlying logic. Of course, selling fixed income + and FOF will be much better than selling a single strategy and a single style**, but it is still different from investment advisory, and there are two business models at the bottom.
Under the sales model, it is already good for wealth management institutions not to do evil, not to deliberately increase the display of revenue, package star products, and stimulate sales. But this business model still conflicts with the interests of customers. Because wealth management institutions do not charge customers, whether customers make money in the end is not really important from a business point of view. Under the investment advisory model, the wealth management institution truly stands in the buyer's position and charges the buyer and does not charge the seller. If a wealth management institution wants to be responsible for the returns of ordinary investors' accounts, but charges asset managers in terms of business model, it will inevitably screw, which is actually difficult to achieve in the long term.
03 Challenges of buy-side investment advisors
2023 Annual Review The core challenge facing investment advisors at present is, do you really make customers feel value?If the customer doesn't feel it, it won't last long, and the customer will vote with their feet. At present, the total scale of buy-side investment consulting in the Chinese market is still very small, and there are not many users, which shows that everyone is not so confident in the matter of buy-side investment consulting. Our investment advisory business is now facing the following problems: First,Simply equate portfolio sales with investment advisory services。Portfolio sales may be a little more advanced than sales order strategy and single style, but it is still sales, not investment advisory.
Second,Most of the investment advisors are transferred from sales。However, sales and investment consulting have completely different requirements for the ability of personnel. A higher entry threshold should be set for investment advisory practitioners.
Third,The core problem is that there is no change in the perception of business models。Only when the top level of each institution truly recognizes that buy-side investment consulting is a completely different model from sales, will it reorganize all aspects such as staffing, assessment and incentives from the top-level design. If you don't start from the top-level design, or the original team and the old way of assessment, the investment consultant will turn back to sales.
To sum up,I believe there are four conditions for a successful buy-side advisor. Each of us practitioners and practitioners needs to reflect on whether these four conditions are met.
First of all, is there an idealistic original intention?The original intention here is to truly stand on the side of investors and be customer-centric. Buyer investment is the most impressive thing for idealists. If you weren't an idealist, you wouldn't be able to hold on to it.
Second, do you have a deep professional understanding?If you don't have a deep professional understanding and blindly do investment advisory, you are likely to go back to the sales model.
Third, are there enough resources?This is also important. The investment advisory business is a long-chain business that needs to be delayed. Are you willing to give first and then reap?This payment period may be very long and the amount of payment is very large, is there enough resources to support it?
Fourth, is there enough concentration?Concentration is highly related to the first three conditions, and with the first three conditions, it is possible to have concentration. Only after having determination can we carry out a thorough reorganization in terms of personnel allocation, assessment and incentives, and business processes. If it is not a complete reorganization, it will still not be able to do the buyer's investment advisory, because it is a difficult but correct thing that goes against human nature, and it is necessary to overcome the weaknesses of human nature, so we must have determination to really do it.
I believe that with the joint efforts of people of insight in the industry, the spring of investment consulting business will not be far away.
Because I believe, I choose to persevere, so I see.