China’s Industrial and Commercial Bank of China (ICBC) and China Merchants Bank have announced that some of their Robo-advisors would be suspended, explaining that it was to comply with regulatory requirements.
Robo-advisor is a digital financial service that employs computers to decide how to divide up clients’ funds among several asset classes, including stocks, bonds, and cash.
China Fund Daily reported on June 27 that state-owned ICBC said it would terminate subscription and relocation services for its Robo-advisory system by June 30.
ICBC stated that the bank would offer asset inquiry and product redemption services through the AI investment part of mobile banking if customers want to keep holding AI investment products. Their AI investment products will be automatically converted into constituent funds at the end of July.
If clients do not redeem current funds, their fund portfolio will change to a single holding product within a month.
Privately-owned China Merchants Bank said it was adjusting the service as soon as July 1, including the suspension of services such as its Robo-advisor’s purchase, adjustment, performance display, and investment companionship. In addition, the Robo-advisory function on its app would also be disabled.
Both said the changes are to comply with relevant laws and regulations.
Many commercial banks declared last year that the subscription function for their Robo service would be temporarily unavailable. However, they have not yet made any new announcement relating to the matter and are still halting purchases.
Robo-advisors are a go-to for brokerages, banks, insurers, and other investors for cheaper and easier access to various investments compared to conventional wealth managers. On a global scale, its size is expected to reach 135 billion dollars by 2026. Moreover, it is estimated to grow from $18.71 billion in 2021 to $28.10 billion this year at a compound annual growth rate of 50.20%.
Yet on the mainland, the booming market is slammed with a series of regulations. According to Beijing Youth Daily, the Chinese authorities issued the Notice on Regulating Fund Investment Proposal Activities late last year. It provided a framework for new activities that would be prohibited.
This includes refraining from displaying or launching new fund investment portfolio strategies, adding new users to the online fund portfolio strategies, and allowing clients to add additional portfolio strategy investments. In addition, multiple state agencies uploaded the content of the notice.
At the time, insiders said the regulations make suspending Robo services necessary. Banks needed to communicate with China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission on the relevant rules to clarify what is allowed and not allowed to do.
Currently, only three commercial banks have obtained the pilot qualification for fund investment advisory business, and ICBC and China Merchants Bank are two of them.
The other one is Ping An Bank, which has stopped featuring its Robo-advisor service on its app.
Many other banks have also announced the suspension of several investment advisory services. Those named by China Fund Daily were China CITIC Bank, Longzhi Investment of China Construction Bank, Bank of China, Minsheng Plus Bank, and some others.