I’m reading now an interesting study released by Bain & Company and China Merchant Bank in June 2009 about the growth of private wealth in China and the market opportunities for private wealth management firms. You can click here to read the full report. A report like this is great in that it puts concrete data behind a good deal of anecdotal evidence we have seen about the growth in China’s high net-worth individuals (HNWIs) and their habits. It also gives specific recommendations for potential private wealth management (or in our case, philanthropy advisory) firms.
It comes as no surprise that the number of HNWIs in China continues to grow despite the global economic downturn, and they can be found mostly in cities that have strong export-led economies with booming private enterprises, such as Guangzhou, Beijing and Shanghai. Beyond the data (we love data!) what I find to be interesting is the quantification of the attitudes of China’s HNWIs. The excerpt is long but worth reading (emphases mine):
Chinese HNWIs exhibit characteristics of the newly wealthy. Based on our interviews, we found that "continuous wealth accumulation" is the most common wealth goal (almost 40 percent). The majority of China's first generation of HNWIs are also at the peak of their careers-70 percent to 80 percent are younger than 50-and they value the sense of achievement derived from wealth creation. Older HNWIs are more focused on economic security after years of hard work or after witnessing the hardships experienced by their parents.
The second wealth management objective is "to seek an improved quality of life" (more than 30 percent). As long as HNWIs have freedom, in terms of money and time, they want to pursue both material affluence and a better quality of life, including improved health and wellness…
Since there is no inheritance tax in China, the first-generation rich are still too young to think about matters like bequeathing their wealth to descendants. Only about 10 percent of HNWIs surveyed reported thinking about inheritance issues. By contrast, in developed countries like Europe, the United States and Japan, wealth inheritance is the primary objective of wealth management…
Some of China's HNWIs are redefining their wealth objectives. In recent years, charity has attracted increasing interest from some wealthy individuals, especially after the Wenchuan earthquake. Most of these individuals come from big cities, served in either the army or government, settled in the countryside, or have overseas experiences. They support a range of causes, from helping students from their hometowns complete college to opening nursing homes.
The combination of the wealth-accumulation motivation, the lack of generational estate planning, and the interest in charity makes for an interesting time to be engaging HNWIs as donors for China’s charitable causes. The report goes onto say that these individuals tend to prefer to manage their own wealth instead of trusting outside advisors, but that is slowly changing with more trusted brands in wealth management. It goes without saying that giving to charity is primarily about trust and relationships, especially in China. I’m looking forward to finishing the report and co-opting many of the insights into our work with Chinese donors.