Exploring New Business Models in Asset Management Services

Objectively speaking, thanks to the wealth effect and the possibility of wealth creation in the capital market, investment banks serve as financial intermediaries of wealth management. Chinese securities firms are expected to constantly explore new business models in asset management services. This helps clients with inflation-proofing and wealth creation by means of investment and wealth management activities. Compared with banks, insurance companies, and trust companies in the financial sector, securities firms have a significant edge in professional securities investments. They enable many investors to inflation-proof and increase their wealth beyond the barriers of capital, knowledge, and technology.

Chinese securities firms need to create sound risk aversion and a mechanism for hedging against the risk of a market downturn. One reason securities firms in developed countries manage to earn a trading profit even in a market downturn is that they have a more accurate and reliable judgment of the market. They make good use of short selling and hedging tools, which enable them to make a profit when the market is going down.

Chinese securities firms are also supposed to create a virtual cycle in which they can grow with the development of capital market. Instead of simply attracting more investors, securities firms (including securities investment fund management companies) should be committed to the improvement of the capital market in terms of efficiency and functionality. As institutional investors, they are expected to make the best of their influence to help improve corporate governance, encourage market innovation, advocate value investing, and steer toward the rational allocation of resources. Such investment guidance will bring along a virtual cycle and a mutually stimulating interaction in which institutional investors can improve their profitability and the capital market can further develop.

Along with the transformation from the channel-based profit model to the service-based model in Chinese securities firms, the degree of dependence on revenue from the secondary market will be greatly reduced. The existing risk-and-return structure in the Chinese securities industry will be significantly improved because service products are generally involved in little risk.