Trustworthy? Upgraded Banking Channels

Without a doubt, we celebrate the recovery of the economy and the resurgence of the capital markets. However, we also hope that the harm caused to fund holders in the last cycle does not recur. In the previous bull market, many fund holders entrusted their money to professional fund managers, yet did not achieve the anticipated returns.

So, how can we fundamentally address the dilemma where funds earn profits but fund holders do not? We believe that beyond the frequently mentioned notion of investor education, a transformation of the entire asset management industry's value chain is necessary, particularly in the banking channels that interact directly with customers.

In the past, the banking channels primarily focused their services on customer product transactions, neglecting after-sales support and portfolio diagnostics. The moment a customer purchases a fund product is, in fact, just the beginning of the service they require.

What is heartening is that the banking wealth management channel, represented by CITIC Bank's smart wealth advisor "Xiao Xin," has begun to emphasize client service and companionship as critical focuses. This marks a significant transformation at the banking channel level and can greatly enhance the experience of fund holders in this market cycle.

Transformation of Banking Channels: From Fund Selection to Investor Companionship

Although over the past few years, fund holders have voiced some grievances regarding fund products, the entire capital market has continued to develop. Not only has the asset management industry's scale reached new heights, but there are also quite a few excellent fund products whose net asset values have increased amidst the fluctuations of the A-share market.

However, many fund holders experience multiple pain points. Most fund holders perceive that after a cycle in the market, they have not received investment returns. Numerous factors contribute to this situation, with a key point being that previously, there was a greater focus on "selection" while the banking channel's services primarily aimed to help holders select outstanding fund managers. Merely selecting funds does not address all issues.

First, the asset management industry as a whole operates on a business model that pursues scale. Yet, we find that the individual alpha of fund managers is challenging to scale. Once the scale expands significantly, alpha may quickly decline. Particularly, the previous model of "heavy stock selection and light portfolio management" naturally struggles to ensure performance continuity and makes it difficult to distinguish whether alpha is driven by luck or skill.

Drawing from the developmental pathways of overseas asset management industries, two types of products, beta and alpha, have gradually emerged. Public funds primarily provide low-fee beta products, while hedge funds offer high-fee alpha products. The former can achieve scaling, while the latter can achieve better pricing of alpha.

Second, when people invest in funds, they often view historical returns as an indicator of future profits, overlooking the impact of style factors and smart beta on returns. Many times, a fund product that performs particularly well in a given year is aligned with the style factor of the market at that time. As market styles change every few years, consistently outperforming a benchmark becomes very challenging. From the chart below, we can see that the proportion of fund managers that have beaten a benchmark for five consecutive years is less than 11%.

Because traditional channels disregard the empowering nature of style factors on performance when selling funds, they easily recommend certain products during their peak style phases (i.e., when historical performance is particularly good) to holders. Once a reversion to the mean occurs, holders may discover that historical returns have not translated into future gains.

Finally, in the past, channels placed greater emphasis on “selection” ability, striving to recommend "good products" they selected to users, while neglecting the personalized needs of different holders. Each individual's liabilities vary, leading to differing investment goals. Some pursue higher returns, while others seek more stability. Recommending the same product to the wrong holder can adversely affect their experience.

Today, with the recovery of the capital markets, we observe changes in banking channels. CITIC Bank's smart wealth advisor "Xiao Xin" is leading a new wave of advisory customer service systems. "Xiao Xin" answers questions such as "What to invest in?", interprets "Is the product good?", and analyzes "How does my portfolio stand?" to provide each customer with a highly individualized service, addressing the unique needs of different clients.

Diagnosing Every Portfolio

As a digital wealth advisor based on AI financial models, "Xiao Xin" demonstrates formidable capabilities in portfolio diagnostics. By analyzing each client's real fund holdings in terms of industry, style, sector, yield, and quantity, and combining them with real data on the client's liabilities, it offers personalized client portfolio diagnostics, helping clients optimize their investment portfolios according to their objectives.

In terms of industry dimensions, "Xiao Xin" can accurately penetrate and analyze the distribution of the client's portfolio across various industries. For example, if it finds that a client has a disproportionately high allocation to a certain industry, it will give appropriate adjustment advice based on market trends and the client's investment goals. Had "Xiao Xin" existed a few years ago, many investors could have avoided overly concentrated positions in crowded sectors such as liquor, pharmaceuticals, and new energy.

In terms of style dimensions, "Xiao Xin" can accurately assess the style characteristics of a client's portfolio. For clients who have invested heavily in growth products, "Xiao Xin" alerts them to the risks they may face during downturns and suggests appropriately increasing value-oriented products to balance the portfolio.

In terms of sector distribution, "Xiao Xin" conducts an in-depth analysis of the client’s holdings across various sectors. If a client is heavily concentrated in a particular sector, "Xiao Xin" will suggest diversifying their investments to mitigate risk arising from the volatility of that single sector. For instance, when interest in technology sectors is high, many clients may rush to invest blindly. "Xiao Xin" can promptly remind clients to explore other promising sectors for diversified allocation.

The dimension of returns is a crucial component of "Xiao Xin's" portfolio diagnostics. "Xiao Xin" analyzes the historical returns of clients' fund holdings, evaluating stability and sustainability. During this process, taking into account market conditions and clients' risk tolerance, it provides reasonable return expectations and adjustment suggestions. For clients seeking stable income, "Xiao Xin" might recommend adjusting a portion of high-risk funds and increasing allocations to low-risk financial products.

In terms of quantity, for clients with an excessive number of funds, "Xiao Xin" conducts a simplification analysis. Just as there are clients with dozens of funds in their portfolios, "Xiao Xin" analyzes the number of holdings based on the client's investment goals and risk preferences to determine whether simplification is necessary. Research indicates that portfolios optimized by "Xiao Xin" are managed more efficiently, allowing clients to more easily grasp investment directions.

Compared to traditional portfolio diagnostics, "Xiao Xin" achieves more precise holdings penetration, considering dimensions from both financial needs and fund investments, resulting in more customized optimization recommendations. Regarding financial needs, "Xiao Xin" thoroughly considers factors such as clients’ liabilities, income levels, and investment goals to formulate personalized wealth management plans. As for fund investments, "Xiao Xin" not only provides recommendations on "what to buy," but pays greater attention to after-sales needs of "how is my holding," systematically reviewing all aspects of client fund holdings to provide suggestions on asset allocation ratios, style structure balance, and optimization for each fund's performance. This personalized portfolio diagnostic service truly realizes individualized solutions for every client.

Customizing Every Product Recommendation

As previously mentioned, the provision of highly individualized service is an important feature that distinguishes "Xiao Xin" from traditional wealth management. The differing liabilities determine the varied investment goals of investors, influencing their definitions of what constitutes a good product.

As an external "observer" in the asset management industry who interviews hundreds of fund managers annually, many friends often ask me: can you recommend a few good products in today’s market? I usually respond by saying: to answer that question well, I need to understand a lot of factors, such as: what is your financial situation? How much investment experience do you have? What is your risk tolerance?

Only by fully understanding investors’ circumstances can we provide targeted answers. However, these questions may not be convenient for in-depth discussion among friends. Differentiated risk preferences and investment goals also imply that what I consider good products may not necessarily be viewed the same way by others.

As CITIC Bank's AI intelligent investment advisor, "Xiao Xin" provides a deeper understanding of investors and can tailor product recommendation plans for clients. For example, for clients with a lower risk tolerance, "Xiao Xin" may recommend money market funds, steady income financial products, and so forth. For clients with a higher risk tolerance seeking high returns, "Xiao Xin" would recommend equity funds and other equity investments.

Moreover, "Xiao Xin" combines market trends and industry dynamics to provide clients with more targeted investment advice. For instance, which sectors are influenced by the Federal Reserve's interest rate cuts? "Xiao Xin" can provide you with immediate answers. If you wish to understand which sectors the market is currently focusing on, you can ask "Xiao Xin," and it can even recommend products based on the trending sectors you've selected.

In terms of specific product evaluation, "Xiao Xin" is capable of conducting 360-degree assessments, which are more comprehensive compared to simple scoring models.

"Xiao Xin's" product evaluation not only focuses on a single metric but assesses multiple angles. In terms of profitability, "Xiao Xin" analyzes a product's historical return performance and expected returns. For instance, when evaluating a financial product, "Xiao Xin" examines its performance across different market environments and compares its return advantages with similar products.

In terms of risk-control capabilities, "Xiao Xin" pays special attention to the risk control measures of products. For example, for fund products, "Xiao Xin" assesses their resilience during market downturns and the extent of maximum drawdown. By analyzing the maximum drawdown over specific time periods, it reflects the product's risk management capabilities.

Regarding win rates, "Xiao Xin" studies a product's probability of winning under different market conditions. For instance, for equity funds, "Xiao Xin" analyzes their ups and downs over past years, providing clients with more accurate investment references.

In terms of cost-performance ratio, "Xiao Xin" considers both product returns and risks to assess cost efficiency. For instance, for an investment product, "Xiao Xin" compares the return-risk ratio to recommend products that offer better value.

Additionally, "Xiao Xin" takes into account other factors such as product liquidity, the strength of the management team, and more. By providing 360-degree assessments, "Xiao Xin" offers clients more precise and comprehensive product recommendations, aiding them in making well-informed investment decisions.

Accompanying Every Individual

On the investment journey, time is a crucial factor affecting fund holders' returns. However, the high volatility of the A-share market makes it challenging for fund holders to hold onto their investments. Especially in periods of market downturn, as fear spreads, fund holders gradually lose confidence and can easily panic sell at the bottom.

In such a highly volatile market environment, consistent customer companionship becomes particularly important. As a professional intelligent investment advisor, "Xiao Xin" not only shows warmth but also high professionalism in providing customer support.

When the market fluctuates, "Xiao Xin" promptly analyzes the reasons behind the market trends and their implications. For example, when broad market movements affect funds, "Xiao Xin" explains to clients the specific impact mechanisms of market fluctuations on different types of funds. Equity funds are significantly influenced by market volatility, while money market funds are less so. Accordingly, "Xiao Xin" provides differentiated advice based on varying macroeconomic assessments.

Moreover, "Xiao Xin" also pays attention to industry and sector rotations in the market. When certain industries excel due to policy support or market demand, such as renewable energy and pharmaceuticals, "Xiao Xin" promptly informs clients about these industries' development prospects and investment opportunities, encouraging clients to strategically position themselves for long-term gains.

Investing is akin to navigating through a dark forest. One of the most trying aspects for investors is the loneliness of the journey, lacking companions and direction, which has led to the rise of many fund influencers on social media, accompanying investors along their path. However, individual influencers ultimately cannot address every professional question nor provide targeted companionship for each investor’s account.

This is where "Xiao Xin" has an advantage, as it provides continuous customer accompaniment, offering professional interpretations and advice, helping clients hold onto their investments and gain returns, thereby truly achieving shared growth with clients.

In the Era of Inclusive Finance, Serving Every Customer with Heart

As the cornerstone of the asset management industry, inclusive finance aims to provide fair and accessible financial services to the public. Public funds play a vital role in inclusive finance, offering diversified investment products that cater to varying risk appetites and investment goals for every ordinary citizen.

CITIC Bank's smart advisor service "Xiao Xin" was born in response to the trend of inclusive finance. With its powerful functions and attentive services, "Xiao Xin" offers professional wealth management services to every ordinary citizen. Regardless of the amount of investment, even a person who purchases just 1000 RMB in funds can enjoy high-quality, personalized advisory services.

Currently, there is a substantial number of public fund investors in the market. At the end of 2022, for instance, there were over 759 million public fund holders, and more than 4.3 trillion RMB has been distributed in dividends to these holders, generating considerable returns for investors. However, for ordinary investors, selecting suitable investment targets from numerous fund products is not an easy task. The emergence of "Xiao Xin" is precisely to address this challenge.

"Xiao Xin" leverages the latest artificial intelligence technologies, applying large models, natural language processing, knowledge graphs, and combining them with industry-leading quantitative financial analysis techniques to provide clients with accurate investment recommendations.

During service, "Xiao Xin" not only focuses on clients' investment needs but also emphasizes their investment experiences, ensuring that every client interaction is personalized and tailored. Additionally, "Xiao Xin" provides 24/7 service, ready to answer clients' investment concerns anytime and anywhere, allowing them to feel the compassionate support throughout their investment journey.

Moreover, "Xiao Xin" actively implements the principles of inclusive finance, continually lowering service thresholds to allow more ordinary citizens to enjoy professional wealth management services. "Xiao Xin" also enables clients to easily obtain wealth management solutions through an integrated online process, even when their time and energy are limited.

In conclusion, in the era of inclusive finance, CITIC Bank's "Xiao Xin" intelligent advisory service wholeheartedly serves every client, providing ordinary citizens with professional, convenient, and personalized wealth management services, assisting them in achieving wealth growth and enhancing their quality of life.