Minmetals Trust’s Wang: “We are undergoing deep transformation to meet the future expectations of wealth management”
By Cindy Yu
Wang Tao, assistant general manager of Minmetals International Trust, described the transformation of the company following major regulatory changes introduced in 2018 to focus on wealth management and family trust.
Minmetals International Trust Co., Ltd. (Minmetals Trust) is one of the major trust companies in China and traces its history back to 2010 when its predecessor, Qingtai Trust Investment, was first established.
The company was reorganised and took on its current name on 8 October 2010 when it was acquired by Minmetals Capital Holdings (Minmetals Capital), the financial holdings subsidiary of Beijing-based China Minmetals Corporation, an important state-owned backbone enterprise with metal and minerals as its core business.
With a registered capital of $2.01 billion (RMB 13.05 billion) at the end of 2020, Minmetals Trust is one of the largest trust companies in China. Apart from Minmetals Capital which holds a controlling 78% share, its other shareholders include Qinghai Investment with over 21% share and Xining City Investment with under 1%.
During the period, the company’s assets under management reached $525.13 billion (RMB 3.4 trillion), operating income totalled $796.97 million (RMB 5.16 billion), and net profit was $429.37 million (RMB 2.78 billion), growing 24.19% and 32.28% respectively from a year ago.
The following key points were discussed:
- Minmetals Trust decided to transform its business in 2017 in anticipation of the new government regulations.
- The company successfully met the regulatory requirements on fund trust and asset management.
- The annual investment in technology of Minmetals Trust ranks high among trust companies.
- The company aims to deliver wealth management services with a distinctive Chinese identity.
- Wang attributed the company’s rapid growth in the past two years to its sound risk management and control practices.
- Minmetals Trust launched its first family charitable trust in 2020.
The following is the transcript of the interview:
Cindy Yu (CY): Today we are joined by Mr. Wang Tao, assistant general manager of Minmetals International Trust. I'd like to thank Mr. Wang Tao for this interview.
Market-oriented reform drives corporate development
CY: My first question is about the current business development of Minmetals Trust. In 2020, Minmetals Trust made considerable progress both in terms of revenue and profit. What are behind these numbers? What are the main drivers?
Wang Tao (WT): Since 2017, Minmetals Trust initiated a market-oriented reform within Minmetals Group. We follow market-based approaches completely to run the Trust company. It took us two to three years to build and perfect our core customer base and core channels. These have driven our overall business development. On 31 December, our shareholders increased their investment to Minmetals Trust by $1.087 billion (RMB 7.051 billion). Our registered capital is $2.01 billion, (RMB 13.051 billion), ranking second in the industry. What does the increased investment mean? First, our shareholders recognise the management and the methodology behind our business for the past few years. Second, we were fully trusted by our investors with the future development of Minmetals Trust. The shareholders of Minmetals Trust, including state-owned enterprises like Minmetals Capital, Qinghai Investment and Xining City Investment. Minmetals Trust could develop and expand using a market-based approach. This is an important element to our development.
Active policy response and regulatory compliance
CY: You mentioned some changes in the regulatory environment. In the past year, with the macro environment and new regulatory rules, there have been a lot of changes for the entire trust industry, including the decline in AUM of trust companies or structural optimisation. Under the influence of these environmental factors, what will be the impact on the trust industry? How does Minmetals Trust deal with these changes and effects?
WT: Over the past few years, among the “three tough battles” put forward by the central government, the important one is to prevent systemic financial risks for the development of the entire trust industry. Adhering to stringent regulations is also a good thing. There have been new regulations in the past two years, including the equity management rules for trust companies, the new rules for asset management and the draft rules for fund trust. The new regulations require trust companies to be subject to tighter restrictions, to operate in compliance with regulations, and adhere to the bottom line. I think this is encouraged by the regulators. For the transformation of the entire industry, it is the same with the international trends, all asset management businesses must be standardised and based on net value. So, the guidelines by the regulators are very significant. We think the length of the transition period should depend on the realities of China and be based on the current development stage. But in the long run, this is the inevitable trend. From our own point of view, Minmetals Trust quickly responded and adjusted in this regard. Making proactive adjustments and revising strategies according to the market trend are the principles we’ve always followed. Therefore, we believe that if we adjust our business strategy according to the regulatory requirements, we will be able to maintain a good status in the market. Another is the launch of regulations. For Minmetals Trust, completing the business transformation and adjustment has met the regulatory requirements, especially the introduction of fund trust and the new regulations on asset management. The new asset management regulation is a requirement for the whole industry.
My other point is that the cooperation of organisations on the new regulations on fund trust clearly mentioned that the direct financing function of trust should be realised. But we hope the CBIRC and CSRC could ease the regulations on the problem regarding the “three types of shareholders” which has existed throughout our history so that we could face the same standards as other industries. For example, having the same capital management plan with the securities firms. Only by solving the problem regarding the “three types of shareholders” can we realise the direct financing function of trust and build a great trust market.
Building an innovative wealth management system
CY: You mentioned that the increased investment by shareholders reflected the market and shareholders' confidence in the development of the company. And we are particularly pleased to see that there are many investors and shareholders in China delegating power to managers to handle the institutions instead of getting involved. You mentioned a particularly critical topic, which is healthy development. You said many trust companies have adjusted their non-standard assets under the new regulations compared to previous situations. In fact, the industry is facing transformation. We see that a lot of trust companies have their own wealth management business. In the area of wealth management, compared with many large asset management institutions, what are the advantages and differentiations of trust companies? Among the 68 trust companies in China, how do you improve your competitiveness, in order to stand out and become a real investment advisory organisation?
WT: From the perspective of asset management, let us take a look at some of the advantages of trust companies compared with other financial institutions. The first and most important advantage is our system. The advantage of the trust system is its independent legal status, which is one of the biggest differences with banks, insurance, and securities. This system is the biggest difference. On the other hand, the business scope of trust is cross-currency, cross-capital, and cross-industry. Such cross-boundary operations and perspectives of trust companies will enable us to have a broader understanding and contact with asset management business. Moreover, the whole trust industry has a history of 40 years. So, in the development process of these 40 years, we have accumulated valuable experiences in operations and businesses. In fact, the Minmetals Trust wealth management team has not operated for a long time but it has its own features. It is mainly reflected in two aspects. First, we did a very in-depth study on institutional innovation. When we did our business development, our team transformed from being “task” oriented to “goal” oriented. All the staff have taken initiatives to take more responsibility and to develop plans. In addition, our core target is to do real wealth management. which is reflected in our systems and arrangements so that everyone will know what real wealth management is and the kind of business they would want to do for a specific group of people.
Our philosophy is not to issue our own products, but to offer full cycle wealth management services to our clients. So we are innovating the entire system. We came up with a four-wheel service system and operation system, which include talent, technology, product, and service. In terms of talent, we have invested a lot in the past few years in building the team. We are not trying to apply the “crowd tactics”. We hope to create a high-quality team and recruit excellent people and let the team grow together with Minmetals Wealth, and Minmetals Trust, and with our clients. For example, we have set up a JinLinghui, a certification and assessment system for relationship managers. We also have a set of certification systems for private bankers. So far, we are the only organisation that has done these systems. those systems and arrangements and the employees with professional qualifications such as CFA, CPA and so on. they represent professionalism and competitiveness. No one in the industry has done this, but we have done it by ourselves. We have requirements on the private bankers, and for the product, especially complex products, everyone must be able to operate these so that we can provide good service to our customers. We also have requirements when it comes to talent.
Minmetals Trust has invested a lot in technology in recent years. The annual investment in technology of Minmetals Trust ranks relatively high among trust companies, with a total investment of more than $15.41 million (RMB 100 million). In terms of wealth management, the most important feature we are working hard on is our Minmetals Trust app. The app was launched in 2019. When the pandemic emerged in early 2020, it is because of the app that customers were able to do remote and subscription, which not only ensured the safety, in compliance with government requirements but also kept our own business development relatively unaffected. During the pandemic last year, our year-on-year growth in wealth business more than doubled. In terms of products, as I mentioned earlier and in terms of transformation, in recent years, we have been doing fine at non-standard products especially non-standard debt products. Then we extended to real estate products and some debt-equity combined products. Now we have standardised products and equity products. Our catalogues are rich and differentiated. Our catalogues have dozens of products every week for our customers to choose from. In addition to debt products, we also have stocks. We have abundant equity products. I believe by improving the four-wheel system, Minmetals Wealth will naturally outplay our peers. We cannot stand out yet because in the industry, many wealth management institutions are also doing well with their own features. Minmetals Trust still has a lot to learn from others and will need to constantly improve its capability.
Build a prosperous wealth management market
CY: For foreign investment, China is also opening its financial markets. Foreign institutions are being allowed to access the China market. For those foreign institutions, what are your opinions and considerations?
WT: From the perspective of wealth management, each financial institution has its own resources and specialties. Strictly speaking, I do not think there will be fierce competition in the wealth management market because there’s a huge wealth management market in China with enough market space. It’s been over 40 years since the country’s reform and opening up, so there has been an accumulation of wealth. The current size of China’s wealth management market is around $24.67 trillion (RMB 160 trillion) and it is still growing at a speed of around 10% per year. So as an emerging market, China has unlimited potential for development. Therefore, many international institutions are interested in China's wealth management market, and everyone hopes to have a share in the market. Clients of each organisation has different preferences. Brokerage customers are more likely to have an appetite for higher risk, and bank customers are likely to be more conservative when we do asset allocation. Actually, we offer a lot of options, including trust products. We have our own products for our clients. There is a lot of collaborative opportunities. For example, in the field of wealth management, we believe that family trusts or family offices are relatively high-level businesses. Now it is clearly proposed in China that all family trusts must be implemented through trust companies and trust plans. Similarly, for all asset management organisations or wealth management institutions, if their high-net-worth clients have such demands, they must work together with trust companies to provide services to customers. If we fully utilise different features of different asset management institutions and wealth management institutions and work together, the market will be more prosperous and the growing demands of the people for wealth management products will be better served.
We want to do wealth management with a Chinese identity. Why did I mention this? Several regulators have been talking about trust culture. Real wealth management is inseparable from culture, history, and domestic environments, including laws, policies, and systems. So why do we want to do it with Chinese identity? Only the Chinese-funded institutions know our clients, their growth, their knowledge structure, and how their families grow. Many foreign institutions do not have the first-move advantage compared with us. However, they will bring a lot of advanced management experience, including some excellent products, and some good practices in the international market. We can learn from them. It’s a huge market, it can accommodate many institutions, as each institution has its own advantages. It is also a symbiotic system, which I think is a good thing. They can come in; we can go abroad. Particularly, many of China's high-net-worth clients have overseas assets, or some of them want to do global asset allocation and management. I think we can learn from each other in these aspects.
Adhering to risk control
CY: In 2020, there’s the issue of COVID-19. COVID-19, which had significant impact on people's lifestyle, real economy, in the entire financial industry, not only in the trust industry. There was a rise on both non-performing rates and the scale of non-performing assets. So risk control and management became the top priorities. Mr. Wang, you mentioned some initiatives and actions that Minmetals Trust took to manage risk. Please elaborate on this topic.
WT: Whether it is asset management or wealth management, risk control is our lifeline. I have spoken to many peers about this. Minmetals Wealth or Minmetals Trust achieved rapid growth in the past two years for a few reasons. First, we adhered to the bottom line of risk. We put the risk as a basis for all our business expansion. While building the risk management system, we added our own feature. Our risk management system is called “One Core and Eight Aspects”. One Core refers to the risk management concept of four intentions and four guarantees. We need to ensure the bottom line of risk. All front offices should always be alert. One mistake leads to nothing, which means when conducting business, if there are any defects and problems all the people responsible for the operation will be taken accountable. All your achievements might disappear in an instance. You have to take full charge. One mistake leads to nothing, which is the requirement for the front office. Next, always have a clear and honest mind. That’s the requirement for the middle and back office. Our goal is for risk to be controllable, measurable, and affordable for the middle and back office, especially departments related to risk control and operation. In the review process of all projects, we identify and measure the risks and make a judgment call whether the risks are acceptable to the company so that we can decide whether we will do the business. The last one is always to be prepared for risks, which requires all employees to be aware of risks in their minds, hearts, and behaviours. This is the “one core” concept which is composed of four intentions and four guarantees. The eight aspects include market risk, operational risk, moral risk, technological risk and so on. We have detailed plans for all. At the same time, we have risk guidelines for business operations. We make one policy for each company, one guideline for each city, and one guideline for each industry. There are different industries such as real estate, construction and installation and other industries. That is why there are also guidelines for the industry. Then there is one type, one policy. We have different guidelines for them so that our people could have a good understanding of the bottom line of the company's business. If we follow these rules to do business, it will go very well and eventually risk will be controlled. In addition, our risk control and approval personnel visit some projects regularly and irregularly, to check if there are operational risks in these projects, including the ones due to market changes like the pandemic you just mentioned. The impact on many industries will be tracked dynamically, including consumer finance and real estate and so on. In addition to our internal team, there are also third-party institutions, including supervision companies, accounting firms, and law firms. They will cooperate with each other in upper management. If there are more eyes to check, then the risk will be better controlled. This is a risk concept.
On the other hand, in the dual-core strategy that we just mentioned, because we are growing our business around our core customers it would be better for the overall risk control. In addition, in terms of the structure and layout of our business, we will also spread out our concentration. We will not concentrate all our business on a certain field or type of business. For example, in real estate business, traditional real estate government credit investigation is one part. We are doing consumer finance, infrastructure and supply chain is distributed. We are doing some risk diversification. Although Minmetals Trust is developing fast, it is still relatively sound and stable. In recent years, we have intensified efforts to reduce some of the existing non-performing assets. Overall, we are actively managing the company. The non-performing rates for our overall assets and existing assets, overall stock, and bad stock channels, are still low in the industry. This is also because we’ve been reporting to the regulators constantly. The regulator is also clear about our actual asset quality.
Giving back to the society by utilising the advantages of the trust system
CY: Mr. Wang has repeatedly mentioned an interesting keywordthe healthy development of enterprises.In 2018, The Asian Banker launched a new project in Londoncalled Wealth and Society.Its focus is on high-net-worth individuals and entrepreneurs,how they accumulate wealth,and also give back to make the society better.Our focus in these areas includesustainable development, impact investment, andESG (environmental, social, and corporate governance).I would like to know how Minmetals Trust helps its clients to do impact investingand what have you done and what is your plan in terms of ESG?
WT: Minmetals Trust is building a brand system,which includes one main brand and three sub-brands.Minmetals Trust is the main brand,then the three sub-brands are our wealth management,family trust, and charitable trust.We’ve put a lot of effort into building the brand system and we’ve stuck to it for a long time.Minmetals' charitable trust has its own unique featuresand what we have been doing for a long time is the Sanjiangyuan series, which is focused on environmental protection and scientific investigation. It is one of our largest charity trusts in terms of business volume.We are at the top of the industry in terms of number of transactions,but the funds of our charitable trusts are mainly donations from our clients in the main business.Every year, we would take our clientsfrom wealth management, investment and financing productsto visit Sanjiangyuan for a field trip.So that everyone can see their own contributionto the China Water Towerand environmental change.
In addition, there are some other charitable trusts,including the traditional Chinese medicine charitable trust. This is the first charitable trust in China that focuses on traditional Chinese culture and Chinese medicine with the hope that people can inherit and promote traditional culture. In addition, in the family trust, there are seven business segments and one is called family philanthropy. Family philanthropy is crucial in terms of spiritual heritage driving wealth heritage. Philanthropy is a must for many overseas families.
We launched our first family charitable trust in 2020. Family clients will donate part of their wealth to charity while doing wealth management and heritage. That is the idea behind our business. In addition, we are also setting up cooperation with external organisations around public welfare charities, including communication with charities and Civil Affairs Bureau for us to better give back to society. It shows the social responsibility of state-owned enterprises. We put these all together then we let the donors find the reassuring institutions, credible institutions, and professional organisations. that can help them give back to society.
CY: Thank you very much Mr. Wang for today's interview. We have learned about the performance of Minmetals Trust and its strategies for the future. We also learned that Minmetals Trust could bring unique and new value to its wealth management clients. We are pleased to see Minmetals Trust's commitment and initiatives in impact investing and ESG. We hope Minmetals Trust does well in 2021.
This is a sponsored article and does not necessarily reflect the opinion of the publisher.
Keywords: Wealth Management, Transformation, Regulation, Asset Under Management, Jinlinghui, Cfa, Cpa, Technology, High-net-worth Clients, Risk Management, Charity, Wealth And Society, ESG, Sanjiangyuan, Family Philanthropy, Impact Investing
Institution: Minmetals Group, Minmetals International Trust, Minmetals Capital, Qinghai Investment, Xining City Investment, Civil Affairs Bureau,
Guest: Wang Tao, Cindy Yu