Classic wealth management is aimed at millionaires and billionaires. For the first time outside of Switzerland, UBS is now targeting less wealthy clients. It is also a first for China’s regulator.
From Shenzhen, UBS wants to attract Chinese medium-sized companies.
UBS is taking the first step in China to win over medium-sized companies for the bank. She launches a wealth management app called WE.UBS. This “we” is a rather rare pronoun in the world of wealth management, which otherwise focuses on individuals, on “high and super high net worth individuals,” on the rich and super-rich.
In Switzerland, UBS is already addressing the so-called affluent customers in asset management, i.e. the upper middle class. Now she is doing this for the first time abroad, in China. On Wednesday she presented her app in the southern Chinese metropolis of Shenzhen near Hong Kong. It is a multiple first – for UBS, for foreign banks in China and for China’s financial regulator.
For UBS, says its China boss Eugene Qian, the app is the “first completely digital platform with which we want to offer our service model, which is more than a century old, to an aspiring middle class”. Depending on the definition, several hundred million of the 1.4 billion Chinese belong to the middle class. WE.UBS is targeting the wealthiest part of it, Chinese people with liquid assets of one to seven million renminbi (between around 150,000 and one million Swiss francs). The bank wants to attract hundreds of thousands of customers by the end of 2023.
According to its own statements, UBS is the first foreign bank in China to offer wealth management specifically for these clients. Since 2020, the French company Amundi has been the first foreign wealth manager to acquire a majority stake in a joint venture with a Chinese partner in China.
The competition quickly followed, with Goldman Sachs hitting the milestone this summer. Credit Suisse wants Enter wealth management onshore in China in 2023. Banks are one of the few economic sectors where Beijing has recently welcomed foreign firms.
Chinese tech companies like Alibaba and Tencent have been operating digital investment platforms in their home country for a long time. But since tightened regulation in 2020, according to Eugene Qian, UBS has been the first provider to receive a license from the Chinese financial regulator CSRC as a so-called third-party fund provider. “The regulators want to say to the market: ‘China is opening up its market further, we have given this license to a global player with a good reputation.'” Other Chinese providers are said to have tried unsuccessfully for a license for years.
It is also noteworthy that UBS is not launching its new product in China’s traditional financial metropolis of Shanghai, where it also has its Chinese headquarters, but in the technology stronghold of Shenzhen. The bank cites several reasons for this: A particularly large number of young and digitally influenced potential customers live in the city and the surrounding Greater Bay Area.
The custodian bank for WE.UBS, the digital provider WeBank, is also located in Shenzhen. This partly belongs to the Tencent group, whose cloud is now used by UBS. The big bank wants to learn from this experience for its entire China business – and maybe beyond. Eugene Qian refers to the strategy of the entire group to rely on a so-called hybrid cloud. A lot of data – but not, for example, sensitive customer information – is stored cheaply on third-party computers.
The new app will be operated by new company UBS Fund Distribution, which is wholly owned by UBS Hong Kong and is based in Shenzhen’s newest Qianhai Special Economic Zone. The Chinese government wants to make Qianhai a core part of the integration of Hong Kong and Macau SAR into mainland China. In the future, many Hong Kongers will commute to work there via a bridge over the Pearl River Delta. Since spring 2020, however, the border to Hong Kong has been practically sealed due to the pandemic restrictions.
Part of a larger plan
With its offensive in China, UBS is banking on the wealth pyramid in the country expanding; that in the coming years a broader middle class will acquire a certain amount of wealth. In view of the development in the country and not least also after the statements made by the state leadership at the most recent party congress, it is quite conceivable that the segment of the ultra-rich in China will no longer increase its prosperity the fastest. Some of the wealthiest could increasingly be drawn to Singapore. It is no coincidence that UBS is also expanding its asset management in the city-state.
In Switzerland, where UBS traditionally covers the affluent segment broadly, the bank has already taken a number of steps with the “Key4” offering to be able to serve these customers primarily digitally. More and more Swiss UBS clients are now primarily interacting with their bank via their smartphone.
In the USA, too, UBS has kept an eye on a digitally affine and rather younger affluent clientele. However, it recently canceled the purchase of the fintech Wealthfront that it had announced at the beginning of the year, which serves precisely this segment. You will now have to find other ways in the US to tap into this clientele.