Citibank targets wealth builders

A Citibank outlet in Hong Kong. Citibank (China) Co Ltd is banking on its growing global presence and experience to provide holistic wealth management services for new wealth builders in China. [Photo provided to China Daily]

Citibank (China) Co Ltd is banking on its growing global presence and experience to provide holistic wealth management services for new wealth builders in China.

New wealth builders, or households with financial assets of $100,000 to $2 million, comprise the world's fastest-growing wealth segment when measured by growth trends across 32 countries around the world, The Economist Intelligence Unit Ltd, the research and analysis division of the Economist Group, said in its latest report.

New wealth builders have $88 trillion in global assets and the value is expected to reach $145 trillion by 2020 at a compound annual growth rate of 7.1 percent, the report said.

Erica Klein, editorial director of Thought Leadership-Americas at The Economist Group, said new wealth builders are largely self-made professionals and entrepreneurs.

"Nearly eight in 10 new wealth builders acquired their wealth in the past 10 years while fewer than 3 percent attribute their wealth to inheritance of any kind," Klein said.

Earlier this year, a survey by Visa Inc found that the affluent class in China has an annual income of around 420,000 yuan ($67,780).With an average age of 33, they are the youngest affluent class in the Asia-Pacific region. With the rise of the new rich, the wealth management industry is also growing particularly rapidly in China, compared with developed markets and other emerging markets.

During the past few years, the number of clients using Citibank (China)'s wealth management services has seen double-digit growth every year, said Zhang Kai, head of consumer banking at Citibank (China).

"In China, the affluent and emerging segment is relatively young. These investors are still in the initial stages of wealth accumulation. Their wealth is mostly earned rather than inherited. They usually have high expectations for investment return with low risk tolerance," Zhang said.

Citibank is holding onto its belief in asset allocation and risk diversification. "We hope to win the trust of our customers by building long-term relations and offering a well-diversified portfolio, to help them achieve their targeted investment return, while managing risk appropriately. Instead of selling a single product, we are providing comprehensive wealth management solutions," she said.

Since the second half of last year, stocks in the Chinese mainland have risen by leaps and bounds. Banks have seen significant fund outflows to the stock market and non-bank financial institutions, such as peer-to-peer lending platforms, for higher returns.

But investors should keep in mind that the stock market has its up-and-down cycles. When purchasing an investment product, there are still huge differences between banks and other institutions in terms of sales processes, staff knowledge, product suitability and risk disclosure, Zhang said.

"Not every investor can tolerate the risks of peer-to-peer lending or other investment platforms provided by non-banking financial institutions. Investors will make risk and return trade-offs, and these alternative investments are unlikely to become their primary investment holdings," she said.

Citibank (China) develops different asset allocation strategies for its customers according to their long-term wealth management plan and risk tolerance level, and this is important especially when the market volatility is increasing, she said.

The bank has a strict due diligence process to screen its product providers in many aspects, including their credit rating, investment management performance, operational procedures and risk controls, she said. Wealth management products will also be assessed with consistent criteria, such as investment strategy, fund manager experience, returns and volatility, before they are approved for sale.