Begin comprehensive self-assessment and rectification; financial management companies face a "big test" for rating

With the implementation of the Provisional Measures for the Regulatory Rating of Wealth Management Companies (hereinafter referred to as the “Measures”), wealth management companies are facing a systemwide “big test.”

A Shanghai Securities News reporter learned from multiple sources within the industry that many bank wealth management subsidiaries have already begun carrying out self-assessments and rectification in accordance with the rating framework. Frontline bank wealth management professionals generally feel that the industry’s competitive logic is undergoing fundamental change— the path that previously relied on scale expansion is gradually giving way to competition based on overall strength. Meanwhile, areas with “heavy investment and slow returns” such as investment research and risk control are becoming key variables determining whether a rating is high or low.

“This is not something you can fix just by ‘last-minute scrambling’”

According to research by the reporter, some wealth management firms currently, in line with the requirements of the Measures, have already clarified the lead department, coordinated relevant special work, assessed their current score, and formulated follow-up optimization strategies. In addition, some leading institutions have already initiated transformation and adjustments, and are now working to optimize their own business layout according to rating requirements.

A person in charge of a wealth management subsidiary of a joint-stock bank revealed that, currently, the company has established optimizing the product structure as a core task internally. Specifically, there are mainly three directions: first, reduce the scale of cash management-type products; second, increase issuance efforts for long-term wealth management products; and third, strengthen the layout of “fixed-income+” wealth management products.

Wealth management subsidiaries of banks are an important part of China’s asset management industry. Their 32 subsidiaries collectively manage total assets of over 30 trillion yuan, accounting for more than 90% of the entire bank wealth management market, holding an absolute dominant position. For them, regulators have clearly defined the direction of ratings. How each institution achieves higher scores within this framework depends on actual execution.

“This is not something you can fix just by ‘last-minute scrambling.’” A staff member in the investment research and risk management department of a bank wealth management subsidiary told the reporter candidly that some of the assessment content cannot be improved through short-term, last-minute campaigns. Regulators have already fully considered and closed possible space for regulatory arbitrage when designing the indicator system. Overall, regulators aim to guide the industry toward sound, high-quality development, and the establishment of assessment indicators and evaluation frameworks will push wealth management companies to continuously optimize and adjust in the medium and long term.

The person in charge of the above-mentioned wealth management subsidiary of a joint-stock bank said that the core challenges faced by most wealth management companies include whether their manpower, physical resources, and financial resources are sufficient. For example, in the assessment of consumer rights and interests protection work, differences in investment in consumer protection staff will inevitably lead to differences in work effectiveness among institutions.

Rate on Quality, Not Scale

Industry insiders have long expected that wealth management companies would be rated. Multiple interviewees said that, for wealth management companies, this is a systemwide assessment and a review of comprehensive capabilities.

“This is not just a simple score. It’s a ‘full-body check-up’ of the company’s overall capabilities.” A related person from another joint-stock bank’s wealth management subsidiary said.

The Measures clearly state that regulators will conduct rating of wealth management companies across six dimensions: corporate governance, asset management capabilities, risk management, information disclosure, investor rights and interests protection, and information technology. The rating results will be divided into Grades 1—6 and the S tier. The larger the numerical value, the greater the institution’s risk, and thus the higher level of regulatory attention required.

Among the rating dimensions, asset management capabilities and risk management together account for 50%, focusing on quality-related indicators such as investment research capabilities, product performance, and risk control.

“This basically aligns with the industry’s earlier expectation of ‘emphasizing quality rather than scale.’ Making quality indicators the focus of assessment is a key way to measure the comprehensive strength of wealth management companies.” Zhou Yiqin, a senior expert on financial regulatory policy, said in an interview with the reporter. “This is also how the quality-centered rating system is established from the perspective of institutional design.”

Industry Divergence May Worsen

Influenced by factors such as interest rate changes and market competition, the development paths of wealth management companies are showing clear divergence: leading institutions proactively reduce scale, shifting their focus to optimizing product structure and improving quality; while some smaller and mid-sized institutions are constrained by scale anxiety and still struggle to push volume through their parent bank channels.

Under the guidance of regulatory rating implementation rules, this divergence trend may further intensify. Tian Lihui, a professor of finance at Nankai University, told the reporter that wealth management subsidiaries of large banks have clear advantages in corporate governance, risk management, and information technology, and are likely to cluster at Grades 1—2, receiving priority for innovation business qualifications such as pension wealth management. As for wealth management subsidiaries of smaller cities and rural banks, due to shortcomings in investment research capabilities, system building, and the standardization of information disclosure, they are prone to fall into a negative cycle: “low rating—business restrictions—shrinking scale.”

Zhou Yiqin said that high-rated institutions can enjoy conveniences such as pilot programs for innovation businesses like pension wealth management, while low-rated institutions will be limited in business incremental growth and gradually have their existing stock compressed.

For coping strategies tailored to wealth management companies of different sizes, Tian Lihui suggested: large wealth management companies should seize opportunities in innovation pilot programs and break through in areas such as equity investments and cross-border allocation, moving from “scale leadership” to “capability leadership.” Wealth management subsidiaries of joint-stock banks can focus on specific niche tracks, build distinctive product lines, and form differentiated competitive strengths. Smaller and mid-sized wealth management companies need to take a pragmatic approach: either deepen their focus in regional markets and provide in-depth customer services, or cooperate with leading institutions to make up for shortcomings, avoiding blind expansion that is “small yet all-encompassing.” No matter the scale, improving investment research capabilities, strengthening risk control, and solidly protecting investors are compulsory courses for meeting the “big test” of ratings.