Message from the Factory Director

The new regulations on fund sales have been officially implemented in the past two days, coupled with the previous policies related to the red line of private lending, which has made the already "uncomfortable" third-party wealth management industry even worse. Some friends also asked the factory manager whether in the future, when buying funds, you can no longer go to third-party wealth institutions, but you have to go directly to the fund manager to buy? Is Sanfang Wealth really unable to survive?

You must have a license to sell funds

As early as August 22, Fan Yifei, deputy governor of the central bank, gave a clear signal. He said at the Sixth China Wealth Forum:

"There are more than 5,000 wealth management companies in our country. Their main business is the agency sales of financial products such as funds. A considerable number of them sell insurance, public funds and other products without a license. Issues such as the establishment of capital pools pose serious threats to financial stability. In the future, market access must be strictly strengthened, and wealth management companies must apply for a license from the financial regulatory authorities to engage in the business of selling financial products. ”

See this news. From now on, the small and medium-sized third-party wealth institutions known to the factory director will all be in trouble! After all, there are only 36 institutions in the industry that hold fund sales licenses, and they are basically large companies:

Noah, Li De, Puling, Fanhua, CreditEase, Hengtian, Gaosheng, Xin Hu, Datang, Haiyin, Jupai, Fuguodatong, Jiutai, Yunwan, Aijian, Qiandao, Lupu, Ruiwei, Hongtai, Zizhou, Qingdao Yicai. Those that have already had problems include Minchuang, Jincheng, Puxin, Wangxin, Jinan, Taicheng, Hengyu Tianze, Eastspring, and Nuoyuan.

The vast majority of small and medium-sized wealth management institutions do not have a fund sales license and make a living by selling insurance, non-standard trusts, private equity funds, and private securities funds.

It can be said that since the new regulations on asset management, including the subsequent decline in risk-free interest rates caused by the decline in economic growth, the profit margins of the entire wealth management industry have continued to tighten. Holding cabbage money”.

Just when wealth management institutions were "panic", less than a week later, on August 28, the China Securities Regulatory Commission officially "responded" to Fan Yifei's speech and issued the "Supervision of Publicly Offered Securities Investment Fund Sales Institutions" Management Measures", effective from October 1, 2020.

5 major points

The factory director also summarized the key points of the new fund sales regulations:

1. The first thing to clarify is the fund sales license Not only can you sell public offerings, but you can also sell private placements.

There is a separate provision in Chapter 6 of the Measures:

“In addition to the public fund sales business, a fund sales institution that engages in private fund sales business in accordance with the law shall apply with reference to these provisions. The provisions of Chapters 3 and 4 of the Measures shall not apply unless otherwise provided by laws, regulations and the China Securities Regulatory Commission. ” 2. There are loopholes for private equity.

When it comes to selling private equity, A few days ago, a friend has been telling the factory director that private equity may not be allowed to be sold by third-party wealth institutions in the future, even if they are licensed.

On the surface, this seems to be the case. Article 9 of the Measures states:

"Independent fund sales agencies are institutions that specialize in the sales of public funds and private securities investment funds. Independent fund sales agencies are not allowed to engage in other businesses, as otherwise stipulated by the China Securities Regulatory Commission Except as otherwise provided by the China Securities Regulatory Commission."

But everyone should pay attention to the last sentence.

The "Measures for the Administration of Private Equity Fund Raising" promulgated in 2016 also clearly stipulates that private equity funds can be sold by private equity managers themselves (direct sales), or they can be sold by third-party agencies.

The requirements for agency sales agencies are: having fund sales business qualifications from the China Securities Regulatory Commission + being a member of the China Fund Management Association, and private placements with standardized private placement fundraising methods include all types of private placements, and are not specifically limited to the field of private placement securities.

Therefore, the factory director feels that there is still a hole left for these licensed independent fund sales agencies. According to data disclosed by the China Securities Regulatory Commission, as of September 2016, there were 122 independent fund sales agencies, of course, including The 36 wealth management institutions mentioned above.

3. Set an upper limit for trailing commissions

Since the fund company itself has weak sales capabilities and is still relatively dependent on channels, large third-party wealth is more guaranteed in terms of sales, so in terms of commissions, comparison Strong. In the past, the trailing commission ratio paid by some fund companies to third-party institutions could even reach more than 60%.

This time the measures also clarify that individual sales shall not exceed 50% of the fund management fee, and institutional sales shall not exceed 30%. This is also to make the entire market more healthy and long-term.

4. Short-term performance promotion is prohibited

There has been chaos in the industry before. For example, a certain fund’s annual performance was average. However, in the past one or two months, due to market trends, the performance was very good and a third party was found. Wealth cooperation. In order to sell products, Sanfang Wealth only shows customers the performance of the past two months, and the product quota is running out, creating the illusion that this fund company is very powerful.

In order to put an end to this kind of unobjective false propaganda and "hunger marketing", the Measures also clearly stipulate that short-term performance promotion is prohibited, and any performance range displayed in fund promotional materials should exceed 6 months.

5. Strengthen access to fund sales licenses

As mentioned before, most wealth management institutions do not have licenses, and many financial advisors do not have the professional ability to identify fund products. But from 2016 to 2018, the industry grew wildly, and the managers of these institutions still recommended high-risk equity products to customers, thus accumulating a lot of risks.

In order to better protect investors, these measures stipulate that the same controller is prohibited from controlling two or more exclusive sales agencies, one participates in the other and controls the other; it strengthens restrictions on the establishment of branches, etc.

A win-win situation for funds of funds

In recent years, the entire market has been moving away from non-standard products. As long as the third-party wealth institutions that want to continue doing business sincerely are looking for standard products to "break through" , the prerequisite is to first obtain a public fund sales license.

These licensed institutions have begun to sell public funds. As we all know, public funds do not have back-end income sharing, and third-party wealth can only earn a meager subscription fee + a certain proportion of management fees.

If you want to make money by selling public funds, the scale must be large enough. Even for TOP wealth management institutions, this requires a process. At present, the proportion of total income is still relatively average.

What to do? You still have to make money, especially listed wealth management companies that are under performance pressure. Later, everyone knew that the equity FOF fund of funds model became popular.

To put it simply, a private equity fund affiliated with a third-party institution issues a long-term fund of funds and plans to invest in several well-known leading VC and PE funds to attract customers.

This model can be said to be a win-win situation. First of all, the risk is relatively small. A parent fund may invest in 5-7 sub-funds, and a sub-fund may invest in 10-20 projects. In this way, investors The money was eventually spread across about 100 projects, allowing customers to buy with confidence and institutions to sell with confidence.

It has also improved the image of the entire third-party organization. For example, a customer bought a product from a third-party and eventually invested in a fund under Sequoia. The profit can be seen in a few years, but at the moment, he is still happy. , after all, it can be said that Shen Nanpeng is helping me make investments, and the brand recognition of the three parties will also increase.

And because these are top funds, the projects they receive are basically the best in the market, and the success rate is relatively low. In fact, the investment logic of VC/PE is very simple. It is inherently a high-risk investment. As long as 1-2 out of 10 projects succeed, the investment will be returned.

Back to the three parties, the most useful thing about this model is its high profits. A fund of funds has a term of 10 years and a management fee of 2% per year. If a customer buys 1 million products, the institution will lock in an income of 200,000, not counting the back-end income sharing of the sub-fund.

This is also the reason why large institutions are launching fund of funds. Who wouldn’t love it if it can contribute profits?

Polarized equity private equity

On the one hand, for third-party institutions, private equity business can be said to be one of the most important income pillars during the non-standard transfer period. If it cannot be sold, Private equity will have a serious impact on itself.

On the other hand, due to the influence of stricter supervision, the introduction of new asset management regulations, and the effectiveness of financial deleveraging in recent years, China’s VC/PE market has made a comprehensive correction and gradually entered a capital winter; in the first half of 2020 , affected by the sudden epidemic, the VC/PE fundraising market has been hit hard again under the background of the capital winter. The following is the situation of VC/PE funds in the past 10 years according to the statistics of China Investment Research Institute:

Despite the sharp decline in scale in the past two years, leading institutions are still not short of money, and the primary market is a typical "drought" Those who die from drought will die from fishing!"

Otherwise, how could Hillhouse and Sequoia have so much "money power" in the first half of the year, and they would like to buy out the global pharmaceutical industry...

Apart from these leading institutions, other They're all pretty miserable. But there are also some high-quality dark horse VC/PEs. Many of the founders of these funds came from leading institutions and worked alone. They are very capable, but they are not enough to "break out of the circle".

When a fund has good performance and strong capabilities but is not known to everyone, then they have to find some channels for marketing, and Sanparty Wealth is one of the important channels.

Once the third party is not allowed to sell equity, these equity fund companies will no longer have an "uncomfortable" problem, but can only directly play gg.

Therefore, in the opinion of the factory director, the probability of not allowing independent fund sales agencies to sell private equity is relatively low. There are needs on both sides. The most important thing is that the country has been emphasizing support for direct financing and encouraging capital to support the growth of small and medium-sized enterprises.

If we really want to cut off this road, wouldn't it be a "slap in the face" type of reverse operation?

In fact, the direction of the regulatory authorities has always been very clear, to protect investors and eliminate industry chaos, and there will be no one-size-fits-all approach. Let truly compliant institutions continue to survive, and completely eliminate the "cancer" of violations of laws and regulations.

Truly realize the virtuous cycle of "seller does his duty, buyer beware".