Recently, many banks including China Merchants Bank, ICBC, and CITIC have issued notices stating that they will cease their robo-advisory related businesses at the end of this month or early next month. The so-called robo-advisory refers to the official definition of the U.S. Fin

The domestic robo-advisory industry boom that started in 2016 has reached a landmark node.

Recently, China Merchants Bank , ICBC , CITIC and many other banks have recently issued notices stating that they will cease their robo-advisory related businesses at the end of this month or early next month. Compared with the end of last year when banks stopped adding new robo-advisory investments, this time many banks chose to convert their existing robo-advisory portfolios into single fund holdings.

The so-called robo-advisory refers to the official definition of the U.S. Financial Industry Administration (FINRA): robo-advisory refers to the use of big data analysis, quantitative financial models and intelligent algorithms, based on the investor's risk tolerance level, financial status, and expected return targets. As well as investment style preferences and other requirements, it uses a series of intelligent algorithms, investment portfolio optimization and other theoretical models to provide users with intelligent and automated asset allocation suggestions.

In short, use robots to manage your finances and configure and optimize your portfolio.

In 2008, Betterment, the first company focusing on robo-advisory, appeared in the United States. In 2016, domestic startups, third-party financial management platforms, and traditional financial institutions all began to launch related businesses, and robo-advisory has become a new outlet for financial technology . Among them, China Merchants Bank’s “Capricorn Intelligent Investment” is the first entrant in the banking industry. It is a business benchmark product in terms of institutional investment and industry attention. Now, with the "stop service" of "Capricorn Intelligent Investment", the former hot spot of intelligent investment advisory is also worthy of re-examination.

However, this may not mean the complete failure of banking robo-advisors. Many industry insiders told Titanium Media APP, "The robo-advisory market has great potential, but regulatory risks also exist. It is currently in a regulatory consolidation period, and the possibility of a return after the rectification cannot be ruled out."

So, why are banks doing so? Will robo-advisory products be collectively removed from the shelves at this time?

Observation 1: Supervision is not clear yet

In December last year, China Merchants Bank issued a reminder that the bank was carrying out regulatory reforms for Capricorn Intelligent Investment and would suspend the purchase function. Redemption and position adjustment transactions of original holdings customers would not be allowed. Affected, there is a risk of being unable to continue to provide services in the future.

"At present, in order to comply with regulatory requirements , we will suspend the purchase function of Capricorn Investment. If there are any changes to subsequent services, we will notify you in time to facilitate your investment arrangements. We also sincerely hope that we can continue to serve you in the future Providing fund portfolio services is not limited to China Merchants Bank. In the same period last year, the robo-advisory services of at least Industrial and Commercial Bank , CITIC Bank , Shanghai Pudong Development Bank, China Guangfa Bank , Jiangsu Bank and other banks suspended subscriptions. Functions and existing customer services will not be affected, and "in order to comply with regulatory requirements" has been mentioned many times.

The latest document on the supervision of robo-advisors comes from the "Notice on Regulating Fund Investment Advice Activities" issued by the securities regulatory authorities in many places in early November last year.

This "Notice" clearly requires that: first, the business entity is a fund sales agency; second, the underlying fund is a fund product sold by a fund sales agency; third, the service target is limited to the fund sales business customers of the agency; fourth, it is not allowed to Providing fund investment advice and signing separate contracts with customers; fifthly, fees must not be charged separately for providing fund investment advice services; sixthly, institutions that do not have fund investment advisory business qualifications must not provide fund investment portfolio strategy investment advice, and must not provide specific funds in the fund portfolio. Suggestions on composition ratios, performance of fund portfolios, and position adjustment suggestions are not allowed.

also requires that -related rectifications be completed before June 30, 2022.

Industry insiders told TMTpost that the financial regulatory authorities have recently issued window guidance to some bank head offices again, requiring relevant banks to further implement the "Notice on Regulating Fund Investment Suggestion Activities" issued at the end of last year. The choice of many banks to shut down their businesses before June 30 is highly likely to be closely related to this notice.

However, it is worth noting that both ICBC and China Merchants Bank have previously obtained qualifications for fund investment consulting business - Industrial and Commercial Bank of China, China Merchants Bank, and Ping An Bank are the only 3 banks among the 60 approved pilot institutions. Why have they already Even though they received policy support, they also chose to shut down at this time?

Some practitioners told Titanium Media APP that this is related to the currently unclear regulatory framework for robo-advisory. How the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission collaborate is a key issue.

"Banking robo-advisors face dual supervision by the main body (China Banking and Insurance Regulatory Commission) and business (China Securities Regulatory Commission). From a product level, bank-based robo-advisors' positions include products of bank wealth management subsidiaries (regulated by the China Banking and Insurance Regulatory Commission), various funds "The products (supervised by the China Securities Regulatory Commission) and the regulatory entities are very complex," the practitioner said. "The entire wealth management business will need to be coordinated and supervised by the China Securities Regulatory Commission and the China Banking and Insurance Regulatory Commission."

In the context of an unclear regulatory environment, banks. We chose a temporary suspension rather than timely rectification.

Observation 2: It has gradually become a useless business, and it is difficult for banks to invest in it for a long time. Another major reason why

was shut down is that banks have not really made their robo-advisory business bigger and stronger.

“For today’s banks, robo-advisory is a useless business.” An industry insider told TMTpost App.

Still taking Bank of China industry's first intelligent investment advisory system "Capricorn Intelligent Investment" as an example. At the end of 2016, "Capricorn Intelligent Investment" was launched. In October of the following year, China Merchants Bank announced that the scale of "Capricorn Intelligent Investment" exceeded 8 billion yuan. However, this development trend has not continued. The last report card is-as of the end of October 2021, Capricorn Intelligent Investment has served more than 200,000 customers, and its cumulative sales have exceeded 14 billion yuan.

For the bank's business volume, this scale is very small, and its revenue proportion is negligible.

A robo-advisory practitioner told Titanium Media App, “ On the surface, the reason why banks have suspended robo-advisory business is due to regulatory conflicts. The deeper problem is that fund investment advisory is a high-investment and long-term business. Banks often do not have the patience to invest heavily in for a long time. "

In his opinion, for most banks, if a certain business has been invested for a long time but the output is insufficient, other departments will inevitably compete with it for resources, making it difficult to sustain in the long term. On the other hand, the fund business is the main business in the personal financial business of banks, but if the robo-advisory business really wants to take off, it must make money by providing investment advisory services rather than making money through transaction commissions. "Banks do Robo-advisory needs to revolutionize . "

Observation 3: Banks have lost their lead

In the early days of the development of domestic robo-advisory, the author once compared the differences between robo-advisors in China and the United States.

For example, China does not yet have special legal provisions to regulate the robo-advisory business, while the United States is relatively complete; China has fewer ETF funds, and the risks that can be diversified are also limited. Most of the robo-advisors in the United States are ETFs, and investors can diversify Investment in to hedge system risks; the Chinese market has a higher proportion of individual investors than the United States, and is accustomed to short-term operations or principal-guaranteed and interest-guaranteed products, and the U.S. financial market is dominated by institutional investors, etc.

After several years of exploration, the market environment of China’s intelligent investment advisory has been improved. For example, the concept and acceptance of passive investment by investors has been significantly strengthened, and the digital transformation of in the financial field has received top-level policy support.

The most important thing is that the fund investment advisory market, which is inextricably linked with and robo-advisory, has started a rapid expansion stage (the main difference between the two is that the target of fund investment advisory can only be funds, while the former can include other assets).

In October 2019, the pilot fund investment consulting business was officially launched, kicking off the transformation from sell-side investment consulting to buy-side investment consulting. In the past two years, fund investment consulting has entered the fast lane of development. The China Securities Regulatory Commission stated at a press conference in July last year that the total service assets of fund investment consulting have exceeded 50 billion yuan.

Judging from the results of user development, the radiation intensity of fund investment consulting cannot be underestimated.As of the end of 2021, the cumulative service users of Alipay "Help You Invest" have exceeded 3 million, the number of contracted customers of Yingmi Fund's investment consulting services has also exceeded 230,000, and the number of participating customers of Huatai Securities' " worry-free investment " Over 700,000 people, etc.

However, there are still some core problems in the fund investment advisory industry. The "China Fund Investment Advisory Blue Book 2022" released by KPMG China pointed out that China's fund investment advisory market is currently facing five major pain points:

Emphasis on "buying" rather than "selling", lack of The investment behavior of long-money accounts results in users not being able to earn the "price difference"; the "sell-side investment advisory" model is changing to the "buy-side investment advisory" model, which has not yet become popular; there is a lack of "customer full life cycle life goals" Long-term wealth planning services; passive underlying assets are insufficient; the phenomenon of "investing heavily and neglecting investment" is common, and the space for intelligent investment advisory needs to be improved.

Among them, problems such as the transformation from "sell-side investment consulting" to "buy-side investment consulting" are fundamental issues that require the industry to "self-revolution." From the perspective of banks, has lost its lead in robo-advisory (fund investment advisory).

Since October 2019, there have been 60 institutions in China that have obtained pilot qualifications for fund investment advisory, including 25 fund companies, 29 securities companies, and three third-party fund sales companies and banks. Industrial and Commercial Bank of China, China Merchants Bank, and Ping An Bank were the first batch of approved institutions to obtain pilot qualifications in February 2020. However, these three currently approved banks have suspended the development of related businesses.

Compared with competitors, although banks and third-party fund sales companies have customer base and traffic advantages respectively, their investment research teams and experience are obvious shortcomings. The advantage of a fund company lies in its investment research team and mature experience in doing FOF, but its disadvantage is its channels; because the sales department and research institute of securities companies provide "consulting" and "investing" facilities respectively, many institutions believe that the benefits will be more obvious.

Tianfeng Securities previously analyzed that wealth management is currently in the "quantitative change" stage from "selling products" to "selling allocations", and fund investment advisory will become the most important license basis. At present, securities companies have occupied the first-mover advantage, and follow-up Or further reduce the market share of bank agency sales.

(This article was first published on Titanium Media APP, author | Cai Pengcheng, editor | Tianpeng)