"Future 'Advisory + ETF' May Emerge as a Mainstream Wealth Management Model"

Data from the China Galaxy Securities Fund Research Center shows that this year, more than 460 billion yuan of funds have flowed into the ETF market. ETFs have become an important tool for investors to deploy against the trend.

Many industry insiders have said that in the future, "investment consulting + ETF" may become one of the mainstream models in the field of wealth management. In addition, to improve the investment experience of investors, the reduction of ETF fees will be the general trend.

High-quality tool for asset allocation

In the new era of asset management, ETFs have become a high-quality tool for asset allocation for various investors. In recent years, "national team" funds represented by Central Huijin have frequently increased their holdings of stock ETFs; at the same time, individual investors are also actively participating in ETF investments.

Wind data shows that in the first half of this year, Central Huijin increased its investment in stock ETFs. As of the end of June, the total market value of stock ETFs held by Central Huijin Investment and other "national team" funds such as Central Huijin Assets reached 583.866 billion yuan, nearly four times the 11.7695 billion yuan at the end of last year. In addition to continuing to increase holdings of blue-chip broad-based ETFs such as the CSI 300 Index, Central Huijin also bought growth-style broad-based ETFs represented by the STAR 50 ETF, ChiNext ETF, and CSI 1000 ETF.

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In addition, according to the exchange white paper, as of the first half of this year, the number of Shanghai Stock Exchange ETF holders totaled 6.58 million (without穿透联接 fund), a 61% increase from the end of 2020; the number of Shenzhen Stock Exchange ETF holders was 3.34 million, a 1.29-fold increase from the end of 2020.

In the future, fund companies will strive to further increase the willingness of individual investors to participate. Huaxia Fund said that managers need to do the following: First, when designing products, start more from the needs of individual investors; second, when recommending products, since the risk preferences and risk tolerance of individual investors vary, it is necessary to do a good job in investor education and investor appropriateness management, take investor returns as the core orientation, and provide individual investors with multi-scenario and multi-channel services.

Xu Zhiyan, General Manager Assistant of Huaan Fund and Senior Director of the Index and Quantitative Investment Department, pointed out that investor education and services are not only an important way to improve customer experience but also a part of the social responsibility of fund managers. "We cooperate with major brokers to hold multi-level investment exchanges and education and training activities, aiming to improve the professional knowledge level of investors. In addition, we are also actively exploring and implementing more innovative service models, such as live broadcasts of ETF market dynamics in the early morning, allocation reports, etc., all these measures are to enable investors to grasp market trends in a timely manner and make wiser investment decisions." Xu Zhiyan said.

A person from a large fund company believes that to increase the participation of individual investors in ETFs, in addition to improving the product shelf, it is more important to strengthen investor education, shift from focusing on "investment" and neglecting "consulting" to focusing on both "investment" and "consulting", and solve the pain points in the investor's seller market model, such as difficult investment decisions and anxiety caused by market fluctuations. ETFs have the characteristics of low cost, high transparency, and strong flexibility. In the future, "investment consulting + ETF" may become one of the mainstream models in the field of wealth management.

Yin Hao, fund manager of Bosera ChiNext ETF, said that in the future, in terms of product ecology, they will continue to provide investors with a rich range of ETF tools along the idea of large-class asset allocation; at the same time, they will increase efforts in investor education, take customer profitability as the goal, and provide customers with more professional investment research services.Fee reduction is the trend of the times

The reform of public mutual fund fee rates continues to advance, with passive index products successively reducing their management fee rates. Wind data shows that this year, more than 20 passive index products have taken the initiative to reduce fees, mainly focusing on ETFs or linked funds. The Shanghai-Shenzhen 300 ETFs under the funds of Southern, ICBC Credit Suisse, Huitianfu, Ping An, and other fund companies, the China Securities 500 ETFs under Taikang and Ping An, the ChiNext ETFs under Jing Shun Great Wall, ICBC Credit Suisse, and Huaan, the China Securities 100 ETF by Yifangda, the China Securities 1000 ETF by Guangfa, and the Shanghai Composite ETF by Guotai, as well as the securities industry ETFs or ordinary index funds under Yinhua, Harvest, and Fuguo, and the high dividend or dividend theme index products under Huitianfu and Wanjia have all reduced their fee rates.

China AMC stated that the reduction of ETF fees will have a positive impact on the market, helping to attract medium and long-term capital to allocate equity assets. These "patient capital" is conducive to the formation of a "slow bull" market and also helps to reduce market volatility. Of course, the competition among ETFs is not just about who is cheaper, but also includes tracking error, liquidity, risk control, comprehensive service capabilities, etc.

"The decline in the fee rate of broad-based index ETFs is an inevitable trend. On the one hand, reducing fees is to benefit investors and enhance the investment experience and sense of returns; on the other hand, market competition is extremely fierce, and for latecomers, adopting a low fee strategy is one of the effective ways to stand out in homogeneous competition." Xu Zhihan said.

Huatai Bo Rui Fund Index Investment Department emphasized that the continuous advancement of public fund fee rate reform, on the one hand, is the demand for high-quality development of fund managers and fund products; on the other hand, in the current high-speed development of ETFs and passive investments, reducing fees to enhance the competitiveness of ETF products is also a trend. In the short term, the price war may continue, and in the context of product homogenization, a relatively low fee rate may be an advantage in attracting more investors. However, the advantage of future fees may gradually weaken, and the refined operation of ETFs and the diversified supply of products are still the primary considerations for public funds to carry out ETF business.

"In the context of the increasingly popular passive investment philosophy and the increasingly fierce homogenized competition among ETFs, fee optimization is beneficial for reducing investors' holding costs, enhancing the competitiveness of ETFs, and increasing the attractiveness of products to long-term capital allocation. However, fee reduction is just the icing on the cake, not the absolute condition for ETFs to grow and become strong. The key is to return to the basic aspects of the ETF tool attributes." said a person in charge of a large fund company.