Aussie financial planners considering China should think again
Treasurer Scott Morrison’s recent comments aside, Australian financial planners would do better focusing on the huge non-advised domestic population than the untapped Chinese advice market.
The federal Treasurer emphasised China’s high demand for a wide range of goods and services, including financial services, and his belief Australia is ideally positioned to capitalise on this.
“There are enormous opportunities for our engineers, our doctors, our accountants, our architects, our financial planners and so many more.
“The ChAFTA [China-Australia Free Trade Agreement] will result in China’s removal of numerous barriers to imports and Australian service exporters will gain improved access to Chinese markets.
“These include financial services, legal services, education, tourism, health, aged care,” Morrison told attendees at the Bloomberg Summit in Sydney last week.
But for all the opportunity China and the ChAFTA represent, there are a number of reasons why it may be too soon to pack your bags for the Orient.
No competitive edge
“I don’t think Australian financial advisers are going to have a competitive advantage there in any way, shape or form,” says Tim Mackay, principal, Quantum Financial.
He believes that retail financial advisers would likely have little success accessing the opportunities in China, suggesting institutions may have more luck. However, even in this, he refers to the unsuccessful toe-dipping exercises of Australian financial heavyweights AMP and NAB.
“[Australian banks] have had a go, and come back with their tails between their legs,” Mackay says.
“But on the client side, I tend to agree [that planners are better off focusing locally]. The market’s not exactly saturated here for advice. I would have thought there’d be more opportunities in this market, before stepping into one that you don’t have a competitive advantage in.”
Perspective of an offshore adviser
Brett Evans has specialised in advising expatriate Australians for around five years, as executive director of Atlas Wealth Management. Having grown up as expatriate in Hong Kong, Asia is a key area of interest, “we know the territory pretty well.”
“Their structure [in China] is incredibly different to us. For example, from a pension point of view, you could only invest in equity markets from quite recently,” Evans says.
Given China’s ongoing mass urbanisation, as it shifts from an agrarian to industrial and now a consumer-driven economy, it is little surprise most Chinese citizens have never received financial advice.
“Their culture usually requires them to bundle their money together and bury it in the ground.
“That’s deeply entrenched in their psyche … certainly the new generation coming through would probably more likely be people that would seek out advice.
“But the other thing is that by virtue of the way Chinese psyche is, when they’ve sought advisers, it’s more sharebroking [they’re after rather] than financial advice,” he says.
Legal barriers
A disjointed, confusing financial regulation system is one key reason why Australian financial planning companies will struggle to establish a foothold in China.
This developing regulatory environment was noted by Olga Bitel, economist at William Blair and Company, during a briefing held in Sydney last Thursday, when she emphasised the “rebalancing” of China from industrial to consumer and services.
Bitel referred to the confusion around regulatory responsibility that exists inside Chinese financial companies themselves. “There’s the CBRC [China Banking Regulatory Commission], the CSRC [China Securities Regulatory Commission], the PBoC [the People’s Bank of China].”
However, she believes that as the financial services and infrastructure in China grows, the foreign interest will come.
Evans agrees, saying that as China shifts from an industrial economy, “they’ll need financial services and financial advice”.
But on the legal front, he says: “There are laws that are passed, and laws that are enforced”. Without the benefit of deep experience, it can be impossible for outsiders to know which laws their competitors are following, and which are being widely ignored.
“The biggest thing that China has to do, if they want a truly world-class financial sector, is to work out their capital controls. The biggest problem is getting money in and out of China.
“If we want to attract the talent, they need to do something about that.
“But the one thing you can give the Chinese is that they do play catch-up very well,” Evans says.
“If they’re smart, they’ll seek guidance from the Australian government on how to build a financial services sector … and they will probably reach out to a number of different countries.”
This article originally appeared in a interview with Professional Planner.