Why do securities firms now need to emphasize fund advisory services?

(Source: Quanyan Society)

——A inevitable choice to move from channel competition to wealth management

I. Industry turning point: the failure of the traditional brokerage model

If we simply divide the development of China’s securities industry over the past 20 years, it can be split into three stages:

The channel era → the capital intermediary era → the wealth management era.

In the past, brokerages relied on “channel dividends”—commission income, spread from margin trading and securities lending, and investment banking business. The core characteristics of this model were:

Income highly dependent on market conditions

Weak customer relationships, low stickiness

Single profit structure

But with the following key changes taking place, the traditional model is accelerating toward failure:

1. Commission rates continue to decline

Internet brokerages, price wars, and regulatory push toward transparency have compressed trading commissions to nearly negligible levels.

2. Increased market volatility, making transaction-driven income unstable

Retail trading activity is highly cyclical—income surges when conditions are good, but drops rapidly when conditions are poor.

3. Clear institutionalization trend

The share of long-term capital such as mutual funds, insurance, and pension funds has risen; retail investors’ marginal influence has declined.

4. Changes in regulatory direction

Moving from “encouraging trading” to “encouraging long-term investing and value investing.”

The conclusion is very clear:

👉 Brokerages that rely solely on trading will be unsustainable in the future.

II. The essence of fund investment advisory (投顾) business: from “selling products” to “managing clients”

Many people mistakenly think fund investment advisory is simply “helping clients pick funds,” which is a serious underestimation of this business.

The essence of fund investment advisory is:

👉 A client-centered asset allocation service system.

Its core capabilities include:

1. Asset allocation capability

It’s not about picking one fund, but building a portfolio (equities + fixed income + alternative assets).

2. Risk management capability

Control drawdowns and volatility so clients can “stay the course.”

3. Behavioral management capability (extremely important)

Help clients overcome the human weakness of chasing rallies and panic-selling.

4. Long-term companionship capability

Through ongoing communication, enhance clients’ trust and retention.

In other words:

👉 Fund investment advisory solves the problem that “clients can’t make money,” not whether there are “good funds.”

III. Why “now” must receive attention?

(A) The policy dividend window has opened

In recent years, regulators have clearly supported fund investment advisory pilot programs and gradually made them more routine. The logic behind it is very clear:

Increase residents’ property-related income

Promote long-term capital entering the market

Change the “short-term speculation” culture

Fund investment advisory is becoming one of the key financial infrastructure components.

👉 Whoever builds capability first will occupy the highest ground in future competition.

(B) Major changes in residents’ wealth structure

Chinese residents’ assets are undergoing a profound transformation:

In the past:

Real estate dominated

Bank deposits were the mainstay

Now:

Real estate returns decline

Interest rates fall

Residents begin looking for alternative investment channels

The continuous growth of mutual fund规模 (fund size) is the most direct reflection.

But the problem is:

👉 Residents “know how to buy funds,” but “don’t know how to hold funds.”

That is exactly where fund investment advisory adds value.

© Customer demand shifts from “products” to “services”

In the past, customers asked:

👉 “Do you have good stocks?”

👉 “Which fund has been performing best?”

Now customers care more about:

👉 “How should I allocate my assets?”

👉 “How can I earn steadily?”

👉 “How can I avoid large losses?”

This means:

Demand has shifted from trading tools → wealth solutions.

And fund investment advisory is the core carrier that fulfills this demand.

(D) The key lever for brokerages to transform into wealth management

All brokerages are calling for “wealth management transformation,” but the question is:

👉 Where is the lever?

The answer is fund investment advisory.

Because it has several key features:

1. High standardization, easy to replicate

Compared with private placements and personalized services, advisory portfolios are easier to scale.

2. Natural synergy with mutual funds

It can directly connect to established product systems.

3. Can be embedded into internet channels

Suitable for online and intelligent operations.

4. Advanced fee model (management fees)

Gradually move away from reliance on commissions.

IV. Strategic significance of investment advisory business for brokerages

(A) Reconstruct the income structure: from trading income to management fee income

Traditional brokerage income structure:

Brokerage services (trading commissions)

Margin trading and securities lending interest

Investment banking business

The problem:

👉 Strong cyclicality and large volatility

Changes brought by the investment advisory business:

Ongoing management fees

Growth driven by customer asset size (AUM)

Improved income stability

👉 From “making a living by luck/conditions” to “making a living by assets.”

(B) Improve customer stickiness: from low-frequency relationships to long-term relationships

Traditional model:

Clients trade only a few times per year

Almost no ongoing interaction

Advisory model:

Continuously track portfolio performance

Regular communication

Long-term companionship

The result is:

👉 Noticeable decline in customer churn rate

👉 Large increase in asset retention rate

© Open the door to high-net-worth clients

Core needs of high-net-worth clients:

Asset allocation

Risk control

Long-term planning

Fund investment advisory is the “ticket” to enter the high-net-worth market.

Once trust is established, it can be further extended to:

Private placement products

Family offices

Comprehensive financial services

(D) Build differentiated competitive capabilities

Against the backdrop of commission becoming increasingly similar, the differences among brokerages are becoming smaller.

But advisory capability differs:

Research and investment capability

Portfolio construction capability

Client service capability

👉 These are barriers formed through long-term accumulation.

The essence of future competition is:

“Who understands clients better” + “who can help clients make money.”

V. Core capability building for fund investment advisory

If brokerages truly want to do investment advisory well, they need to establish four major systems.

(A) Research and investment system: the underlying layer of capability

Includes:

Macroeconomic research

Asset allocation models

Fund selection systems

Risk control frameworks

The key is not predicting the market, but:

👉 Building stable, replicable portfolio strategies.

(B) Product system: portfolios rather than single products

The traditional sales logic is:

👉 Promote one fund

The advisory logic is:

👉 Provide “portfolio solutions”

For example:

Conservative portfolio

Balanced portfolio

Aggressive portfolio

To meet different risk preferences.

© Client operations system: core competitiveness

Includes:

Client segmentation (asset size, risk preferences)

Refined operations (content, services, companionship)

Behavioral guidance (avoid frequent subscriptions and redemptions)

👉 The outcome of the advisory business depends to a large extent on “operations.”

(D) Technology system: the key to scaling

Investment advisory must rely on technology to achieve:

Intelligent advisory (Robo-Advisor)

Data analysis

Automated rebalancing

Client profiling

Otherwise it cannot be scaled through replication.

VI. Challenges the industry faces today

Although the outlook is promising, there are still many problems in reality:

(A) Insufficient client education

Many investors still stay at:

Chasing hot trends

Looking at short-term returns

While advisory emphasizes long-term and stable performance.

👉 The cognition gap needs time to be bridged.

(B) Uneven advisory capabilities

Some institutions:

Are still sales-oriented

Lack genuine asset allocation capability

Leading to poor client experience.

© Fee models are not yet mature

Clients’ acceptance of “paid advisory” is still being cultivated.

But this is an inevitable trend:

👉 In the future, it will definitely shift from “making money by selling products” to “charging for services.”

(D) Impact from short-term market volatility

When the market drops sharply:

Client trust can easily waver

The advisory system faces a test

Truly excellent advisors need to get through market cycles.

VII. Future trends: three directions

(A) Full online transformation

APP becomes the main battlefield

Content-driven growth

Intelligent advisory becomes widespread

(B) Advisory + content ecosystem

In the future, it’s not just allocation, but:

👉 Content + services + community

Strengthen trust through continuous content output.

© Move from fund investment advisory to all-asset investment advisory

In the future, it will expand to:

ETF allocations

Global assets

Alternative investments

Forming a true “family asset management platform.”

VIII. Closing remarks: this is an industry reshaping

Fund investment advisory is not just a simple new business; it is:

👉 A fundamental shift in the securities industry business model.

In one sentence:

In the past, brokerages made money from “trading”; in the future, they will make money from “trust.”

Whoever can:

Put the client at the center

Provide a long-term, stable return experience

Build deep trust relationships

Will win in the competition over the next 10 years.

If we look at this round of change from the perspective of 20 years in the industry, its importance is no less than the transition from the branch office era to internet brokerages back then.