Vanguard, based in Pennsylvania, has over 30 million clients globally and plans to work with Ant Financial’s 900 million users in China to offer low-cost financial advice. The partnership is a government-backed scheme to help people adopt mutual funds, FT wrote.
Jim Norris, head of Vanguard’s international business, said the new 200,000 clients had fetched significantly higher funding than anticipated, with $315 million newly put into the joint venture. Norris said the average allocation was around $1,575 — higher than the company thought it would be.
Norris said the company “plans to provide more materials on Ant’s platform to help educate clients about the importance of investing towards important goals, such as retirement, as opposed to trading or just saving,” according to FT.
The joint venture opened up purposefully low at just Rmb800, or around $113, so as to make sure good quality financial advice was easily available to customers. Before, this level of advice was only available to a small number of rich Chinese officials, FT wrote. The advice service costs around 50 basis points a year, and can invest in over 6,000 funds from Ant as a part of the Bang Ni Tou (Help You Invest) initiative.
The asset management industry in China is still in fledgling stages, but regulators in Beijing are looking to change that now. The industry has only been around for about 20 years, and local supervisors are just now granting permission to 16 managers to offer investment advice using mutual funds.
China’s domestic public fund saw a record high for assets under management with Rmb17.8 trillion in April, up a fifth in 2020 at that time, according to the Asset Management Association of China. Withdrawals from money market funds and bond funds since then have sliced those numbers, which now sit at Rmb16.9 trillion as of the end of June.
Vanguard and Ant Financial announced their partnership at the end of 2019, looking to offer customized forecasts based on companies’ time horizons, risk preferences and investment goals.