With the arrival of a period of strict regulation, China's asset management industry has reached a watershed moment. On one hand, the trend toward strict regulation brings hard requirements for standardization; on the other hand, the shift in the wealth management market from sales to advisory services has left service providers in a fragmented state. In this context, multi-layered service platforms have become a new business opportunity.
Looking at the development patterns of mature capital markets, independent third-party firms are the backbone of the wealth management industry. According to statistics, in 2015, independent investment advisors in the United States accounted for 42% of all investment advisory practitioners. However, compared to the landscape of overseas wealth management markets, China's independent third-party wealth management market is still in its primary stage of development, with very limited market share in terms of both the number of practitioners and the retail market share of wealth management products.
In terms of industry transaction structure, current 'wealth management' practitioners in China charge fees from the upstream, acting more like distribution agencies for the asset side rather than consultants for investors. With the improvement of investors' own cognitive levels and their recognition of the value of advisory services, China's wealth management business is undergoing a transition from a product-sales-oriented model to an advisory-service-oriented model.
Small and medium-sized wealth management institutions often face three major pain points:
First, high costs and low efficiency, including customer acquisition costs, technology costs, and operating costs, with a general lack of strong middle and back-office functional capabilities; second, strong distribution capabilities but weak asset management capabilities, with single and insufficient product supply, leading to weak bargaining power with upstream providers and a lack of necessary licenses; finally, against the backdrop of increasingly clear regulatory details in the asset management industry, operational risks have increased accordingly, and the requirements for the professional capabilities and response capabilities of practitioners are becoming higher and higher.
For this common development bottleneck of small and medium-sized wealth management institutions, the U.S. solution is the TAMP model. TAMP stands for Turnkey Asset Management Platform. For a wealth management institution, entering a TAMP platform is like getting a key; once the door is opened with the key, they can access services such as product research, due diligence on fund managers, and investment portfolio recommendations through the service system. All middle and back-office services can be obtained with one click within the platform and are handled by the TAMP service provider.
In other words, TAMP actually provides a standardized and multi-layered service platform for fragmented, small-but-beautiful wealth management institutions. Taking the Nasdaq-listed company LPL Financial, a representative of the TAMP business, as an example, the company provides services for more than 16,000 financial advisor accounts and currently has a market value of over $6 billion.
The success in overseas markets has also drawn domestic attention to TAMP. In October 2016, Huatai Securities completed the acquisition of AssetMark, a U.S. financial technology company and turnkey asset management platform. This was the first time the TAMP model was introduced into the Chinese financial industry.
Compared with European and American financial markets, China's financial market has distinct national characteristics. For example, the granularity of regulation in the U.S. market extends to the individual level; the SEC (U.S. Securities and Exchange Commission) recognizes investment advisory services provided by professionals who have obtained practice qualifications, whereas China's financial regulatory system uses institutions as the regulatory unit. Therefore, China's TAMP currently mainly targets B-end clients.
Industry insiders believe that as China's asset management industry enters a period of strict regulation, the gray areas of financial innovation that previously lacked rules now have clearer industry standards. The era of barbaric growth has passed, and after the industry reshuffle, capable and compliant players remain, making the path toward a mature and effective financial market more promising.
