* Financial firms looking to automated advice to cut costs
* China robo advice assets forecast at $27.1 bln end-2017
* Market expected to double every year to 2021
* Ant Financial, ICBC to offer robo advice this year
By Elzio Barreto
HONG KONG, April 27 China's wealth management
industry is preparing for a boom in automated investment advice
and trading programs, or "robo-advisors", as brokerages, banks
and insurers look for a cheaper way to increase revenue from
Robo advice services barely existed in China before 2015,
but they are expected to manage $27.1 billion of assets at the
end of 2017, though that remains small relative to the $182
billion figure for the United States, where services launched
several years earlier, according to market research firm
But the market in China is forecast to more than double
every year from 2017 to 2021, compared with U.S. growth of 29
percent a year, which will rapidly narrow the gap, Statista
The number of Chinese investors using robo services is
forecast to soar to 79.4 million over that period from fewer
than 2 million last year.
"Everyone talks about the billionaires, but actually we're
talking about hundreds of millions of customers in that income
band who are basically starting to have investable assets that
they want to reposition and redeploy," said Matthew Phillips,
financial services leader for PwC China and Hong Kong.
"The only way to service those customers is to automate
Competition from large financial technology (Fintech)
companies, including Alibaba Group affiliate Ant
Financial, Ping An-backed Lufax, and startups such
as WaCai is pushing traditional financial companies to embrace
Some traditional players without the technical expertise to
develop their own robo advisors are turning to technology firms
such as Pintec Group's Xuanji and MiCai.
Others, like China Merchants Bank (CMB), the
country's largest non-state-backed lender, have managed to
create their own.
After a months-long nationwide advertising campaign, CMB
launched in December its "Machine Gene Investment", or Mojie
robo advisory service, which pre-selects a range of assets and
trades them automatically, cutting the costs of investment
advice for users of its internet banking app.
The bank said users had invested an average 36,900 yuan
($5,360) each so far in the new service, and a person familiar
with the bank's business said the service had racked up 3
billion yuan in assets under management in just a couple of
After months in development, Ant Financial, the world's
largest fintech firm, will be launching automated advice to its
millions of clients this year, people familiar with the plans
told Reuters. The company itself said it wouldn't be offering
them "in the short-term".
The sources also said Industrial and Commercial Bank of
China (ICBC) is about to introduce a similar tool.
ICBC, the world's largest bank by assets, declined to
Moves by the two behemoths could tempt others off the fence
about robo services.
"When you have a main-street bank that did a huge marketing
campaign in that particular field ... that solution becomes a
must-have for the industry, and the bigger state-owned banks
follow them," said Gregory Van den Bergh, chief executive of
MiCai, China's oldest robo advisor. "It's had a very good effect
on the industry."
Xuanji signed early in 2017 to have its technology run
Minsheng Securities' robo advisor and expects to soon close
other deals with an insurer and a bank in China, CEO Zheng
Yudong said. MiCai is getting many inquiries from banks in
mainland China, though the company can't disclose the names of
clients, Van den Bergh added.
An EY survey of wealth management clients and industry
executives showed Chinese respondents, who are already used to
handling most of their finances on mobile phones, were the most
likely in Asia Pacific to open robo advisory accounts.
As many as 76 percent said they would consider it, compared
with just 25 percent in Australia.
Given low-interest rates in China and expensive real estate,
Chinese investors are seeking alternative ways to generate
returns, while avoiding the volatility that followed a major
slump in Shanghai and Shenzhen stock markets in 2015.
Many hope that a robo-tailored portfolio can deliver.
"Robo advisory is not for gamblers. It's not a sexy product.
It's supposed to prevent volatility; it focuses on stability, so
lower returns, but no spikes up and down," Xuanji's Zheng said.
($1 = 6.8825 Chinese yuan renminbi)
(Reporting by Elzio Barreto; Additional reporting by Shu Zhang
in Beijing; Editing by Will Waterman)