Smart investment advisors, asset allocation, content marketing…How are financial management platforms transforming in 2017?

After briefly summarizing the background of industry transformation, this article discusses it from four perspectives: new investment tools , new core paths, new solutions, and new sales strategies. On the one hand, it hopes to sort out the context of industry transformation, and on the other hand, it also explores the direction of transformation and the problems it faces.

In addition, if you are an investor interested in investment and financial management , you might as well learn about what the current financial management platforms are doing, which can provide you with some ideas on choosing investment platforms and investment methods. The ancients said: Know yourself and know your enemy, and you can fight a hundred battles with no danger of defeat. Besides, this information is related to your money :)

Transformation Background

Let me briefly talk about the background of change and transformation.

The first point is definitely industry supervision . Currently, the core products of most financial management platforms on the market are still fixed-income products, and the absolute main force among fixed-income products is still P2P assets. Since 2016, relevant departments have begun to clean up the P2P industry, followed by a series of rectifications in the field of Internet finance . Many platforms with irregular operations and weak risk control capabilities have closed down. In 2017, as the year of regulatory implementation, fewer and fewer platforms have withstood the test of compliance, while regulatory requirements are constantly increasing.

Supervision is a major imperative for the entire industry, but it is undeniable that tightening regulations mean that the space for innovation is getting smaller and smaller. Even within the scope of fully complying with user interests and financial attributes, financial management platforms that lack relevant licenses and autonomy have found it difficult to innovate in fixed-income products.

The second point to emphasize is that even without such a fierce regulatory purge, relying solely on the sale of fixed-income products is not a long-term solution .

The reason why P2P platforms were so popular in the past few years and dared to offer a 10-20% yield on short-term financial products of one month was, firstly, because during the industry's explosive period, each company had to rely on subsidies to grab traffic (to put it bluntly, the interest is not all given to you by the borrower, but also part of it is given to you by the financial management platform), and secondly, due to poor supervision , many platforms had unclear capital flows, arbitrarily operated capital pools, and even engaged in Ponzi schemes. These platforms, which later caused serious negative impacts, created a false industry prosperity.

But in fact, good things are scarce in any field, and high-quality targets for us to invest in are themselves scarce resources . This is a fact and should be common sense. Under the premise of legality and compliance, stable risk control, and consideration for the interests of users, it is too difficult to rely solely on fixed-income products to make the platform stronger and bigger and generate traffic.

As of the end of April 2017, the total number of closed and problematic platforms in the online lending industry reached 3,676, and the total number of platforms reached 5,890 (including closed and problematic platforms). ——Securities Daily

Third, even if it is a compliant and legal financial management platform, after its bold breakthrough like a newborn calf that is not afraid of a tiger, it still returns to its awe of the financial industry. If you want to disrupt the financial industry, it is not as simple as moving financial operations to the Internet and adding cool black technology.

Since I got involved in the financial industry, I have clearly felt the huge conflict between financial thinking and Internet thinking. The core part of the business process still relies on the financial industry's own original models and experience, and the areas where the Internet excels are still limited to the end close to traffic and data. Instead of wasting energy on areas you are not good at, it is better to find your own strengths and position as soon as possible. In March this year, Ant Financial has announced that it will only focus on tech (technology) in the future and help financial institutions with fin (finance); it will not develop its own financial products and will fully open its platform to financial institutions.

Ant Financial's transition from Fintech to Techfin

To sum it up briefly, the background of the transformation is three things: ① I am not allowed to continue doing things the way I did before; ② The original way of doing things is not sustainable; ③ The original way of doing things can no longer be done.

Then, the only option is transformation.

New investment tools

The first step in transformation is to seek new investment tools. Unfortunately, there are not many options left for Internet financial management platforms .

Common investment tools include bonds, stocks, public funds, private funds, trusts, gold, foreign exchange, insurance, real estate, futures, options, etc. Some of these investment tools have too high entry barriers (such as private equity, real estate, etc.), some are too risky and not suitable for ordinary players (such as futures, foreign exchange, etc.), some are restricted by the platform (such as stocks can only be bought and sold through securities companies), some are difficult to educate users (such as mentioning insurance, it is easy to think of a lot of negative information), and some are similar to fixed-income products and cannot generate large traffic (such as trusts, bonds, etc.)...

If you want to attract more users, greater sales volume, and more on-book assets, the investment tool must simultaneously meet the requirements of low investment threshold, low investment risk, easy user acceptance, suitable for large traffic, and the platform must be easy to qualify for sales . Taking all factors into consideration, the most suitable one is the fund .

Looking at several leaders in the field of Internet finance, Ant Fortune , JD Finance and Lufax are comprehensive wealth management platforms. In the past two years, they have been continuously strengthening their fund business and increasing the proportion and level of fund business . Representatives of the P2P field, such as Yiren Wealth (formerly Yirendai), Tongbanjie , and JiMuBoxi, launched fund businesses in 2015-2016. Later, JiMuBoxi further split and upgraded its fund business and independently launched Xuanji Smart Investment to provide asset allocation solutions. Looking at the overall situation, each company chooses funds, funds, and funds.

Xuanji Smart Investment

It’s not that most platforms have the same choices, it’s that most platforms have few choices.

New core path

The core path of the financial management platform is very clear, which is to guide an ordinary user to pay and purchase financial products step by step. When selling fixed-income products, the following issues often need to be addressed before guiding users to deposit funds:

• Is the platform safe?
• Are financial products reliable?
• What is the rate of return and maturity?
• How much money should I invest? How much interest can I receive?

In response to these four issues, the core paths are as follows:

Platform trust enhancement information (providing a sense of trust)

↓

Introduction and basic information of financial products (providing a sense of security)

↓

Investment principal and income (interest temptation)

↓

Enter the payment purchase process

When it comes to buying funds, users want to solve more complex problems:

1. What is this fund?
2. What is the background information of this fund?
3. What are the underlying assets of this fund?
4. How should we understand the yield curve of this fund?
5. Is this fund a good buy now?
6. How much money can this fund help me make?
7. To what extent did this foundation lose money?
8. What is the handling fee for this fund and which platform is more cost-effective to buy it on?
9. Are there any better funds to choose from?

…

Obviously, when it comes to buying funds, users not only need to understand security and yield, but also need to have basic knowledge of funds, investment areas, timing judgments, purchase rules, as well as their own investment capabilities and risk preferences before they can make a purchasing decision.

So the core path of selling funds becomes:

Platform trust enhancement information (providing a sense of trust)

↓

Understanding Funds (Understanding the Basics)

↓

Judging and selecting funds (investment areas)

↓

Determine whether it is worth buying (fund information, fund performance, investment timing)

↓

Determine whether you can take risks (risk appetite)

↓

Confirm purchase rules and investment capabilities (handling fees, minimum investment amount, etc.)

↓

Enter the payment purchase process

The above path describes the entire process of a novice user purchasing a fund. Depending on the user's own understanding of the fund, the user can directly enter this path from the subsequent links. For example, if the user has a certain understanding of fund products and has a relatively clear investment direction, then he can directly determine the investment timing; if a user is a veteran in the fund market, it is very likely that he only needs to confirm issues such as handling fees and then directly enter the payment and purchase process.

New solutions

It can be clearly felt from the core path of selling funds that converting a fund user is much more complicated than converting a fixed income user. In the early days, various financial management platforms basically adopted the fund supermarket model when introducing fund business. However, problems also followed: the Internet financial management user group has a large base, generally low risk tolerance, insufficient understanding and cognition of funds, insufficient decision-making ability, and difficulty in obtaining effective and timely communication. Simply listing the fund information and letting users choose what to buy is indeed too high a threshold for novice financial management users.

How to lower the threshold for financial management users to purchase funds? How to guide more users into the core path?

Simply put, there are two types of solutions: one is to educate users on decision-making (if you don’t know how to buy, I will teach you how to buy); the other is to reduce user decision-making (if you don’t know how to buy, I will help you buy). In the exploration of these two directions, the former focuses on content marketing , and the latter focuses on smart investment advisors .

4.1 Content Marketing

Content marketing is a solution that guides users to make decisions and provides teaching and Q&A services to users through content. When many platforms first start to expand their fund business, the simplest approach is to introduce some news and financial management knowledge, and then add interpretation of fund selection to form a content module.

The advantage of the content is that it can systematically convey the ideas of the financial management platform to users and intuitively solve various problems that users may have before purchasing funds. However, if you want to convert fund users through content marketing, you need to pay attention to several issues:

• Content filtering. When creating content, you should consider what kind of content users need and what form of presentation they can accept, rather than simply grabbing and listing it.
• Content efficiency. Content serves sales. Just like the conversion funnel of user behavior , content should also have an internal logic similar to the conversion funnel, so that users can be persuaded step by step according to the logic until they are ready to accept the fund.
• Content credibility. Nowadays, the content sources of many platforms are third parties with sales intentions, but once the content is linked to sales, it can easily arouse users' vigilance. If you want users to be persuaded, you must consider how to build the credibility of the content in advance;
• Investment philosophy. The last point is actually the most important. Whether it is fund companies, financial big Vs , market information, operating skills, etc., there are only so many resources and only a few sets of theories. Why should users accept content on this platform? Even if you accept it, why should you buy funds on this platform? It is very important that the platform form its own investment philosophy and apply this investment philosophy to content positioning, logical structure, resource screening, presentation methods and other aspects in order to secure its position in the competition with peers.

To give a typical example, Ant Fortune uses the community as its entry point and introduces multiple content sources such as news, big Vs, fund managers, etc. It has invested a lot of resources in the content field, but judging from its complete abandonment of the social route this year, the effect is not obvious. Does this mean that the content path is not feasible? Not really. The wealth accounts that are about to be launched are still inseparable from content. From the information released, users can obtain industry trends, investment advice, product recommendations, after-sales service information, etc. Ant or fund companies still need to provide corresponding content to educate and guide users to make decisions.

Fortune account model

But what was wrong with Ant Fortune’s previous content? Obviously, Ant Jubao, which aggregates content resources from multiple parties, has inadequate content screening, lacks logical organization between contents, and does not have a clear investment philosophy . The entire content module is an open grocery store, allowing users to take what they need. As a result, most of the users without initiative are still not converted.

Will the wealth account that is currently being planned solve these problems? Let's wait and see.

4.2 Smart Investment Advisor

While Internet finance is facing transformation, it also happens that technologies such as big data , blockchain, machine learning, and artificial intelligence are beginning to be put into practice in the financial field. The most typical application on financial management platforms is smart investment advisors.

Smart investment advisor is artificial intelligence + investment advisor . Investment advisors are the bridge between financial management clients and financial products. They communicate fully with clients and comprehensively consider their investment objectives, investment expectations, and risk tolerance to provide asset allocation plans. In the past, this service was only available to high-net-worth individuals. On the one hand, smart investment advisors process customer information and behavioral data, and on the other hand, customize asset allocation plans through algorithm models, thereby completing the connection between the two and proposing personalized financial management plans. After the funds are invested, they continue to provide fund management, risk monitoring, scheduled position adjustment and other services.

Smart investment advisory is definitely one of the important development directions in the future. Currently, many domestic platforms of all sizes are working in this direction. However, there are only a few that have truly achieved convincing and convincing results. In the field of smart investment advisors, there are still several problems that need to be solved:

1. The persuasiveness of the model. Although the starting point of smart investment advisors is to reduce risks through decentralized allocation, provide personalized allocation with data, and liberate manual operations with technology, can the model itself support these visions? Not necessarily. There are actually only a few configuration plans that can be connected to the so-called smart investment advisors currently available on the market, and it is still questionable whether the configuration plans can pass the test of financial logic. Simply showing the historical performance of the plan is not convincing.
2. Platform credibility. The platform should not only provide users with a sense of security, but also convey the ability to realize smart investment advice. Smart investment advisors are equivalent to giving decision-making power to the platform, so users will naturally have higher requirements and expectations of the platform.
3. Difficulty of financial product portfolio. Under the current market conditions, subscription, redemption and position adjustment between different financial products can only be achieved by establishing sub-accounts. However, the subscription conditions, minimum purchase amount and redemption time of different products are not the same, and the channel cost is also very high. Even if the configuration plan is convincing, the above problems must be solved in order to be implemented. Currently, the first batch of FoF funds in China are under review and are expected to be launched in the first half of the year, by which time some of the above-mentioned problems may be resolved. (Fund of Funds, called mother fund in Chinese, is a fund that invests specifically in funds.)
4. User understanding. Although smart investment advisors have greatly liberated users' investment operations, users are still required to accept concepts such as asset allocation, risk awareness, and investment strategies. Currently, a large number of smart investment advisory products focus on the simplicity of the investment process. However, investment is a matter that requires a long time to make decisions. If users cannot accept these concepts, the simplicity of the process will make users lack a sense of ritual and trust.
5. Public acceptance. Finally, the current smart investment advisor is still more like a concept that can attract a group of users to try it out, but it still requires a market cultivation period to convert users on a large scale. Of course, if large companies invest enough, perhaps this cultivation period will not be that long.

There are many domestic cases in the field of smart investment advisors, such as Financial Cube, Micai, Latte Finance, etc., and even Capricorn Smart Investment of China Merchants Bank. The ideas and product forms are similar, and they have always been in a lukewarm state, and the above-mentioned problems are common.

Mi Cai

New sales strategy

In this part, I actually just want to talk about regular investment in funds .

The key reason why fixed-income products are difficult to invest in is the instability of the asset side. Suppose a wealth management platform sells an average of 50 million yuan in fixed investments per month. In the first month, there are 80 million yuan in fixed-income targets to meet the demand, but in the second month, there are only 40 million yuan in fixed-income targets, and users' fixed-investment needs cannot be met. However, this problem basically does not exist for funds. Funds have stronger liquidity and it is highly recommended to subscribe through fixed investment. At the same time, for novice users who are not sensitive enough to the financial market, regular investment is also a very good operation method: judging the appropriate time to buy is very difficult for professionals, and buying in batches can spread the purchase cost and reduce risks.

It’s not that users are unable to bear risks (it’s just that the level of risk they can bear varies), but they are limited in their thinking about fixed income products and do not seriously face their own risk tolerance. Regular investment itself is actually a good education for users: start with a small amount of money to get in touch with funds, understand and feel the risks through regular investment, and thus face yourself better.

The above are all advantages. Similarly, we should also look at where the current problems are:

1. The conversion path is unclear. At present, no company has done particularly well in a series of aspects such as user pain points, reasons for launching, entry scenarios, sales funnels, etc.; the conversion path of fixed income products is relatively mature on various platforms, while the conversion path of fund regular investment is still in its infancy.
2. The experience is generally poor. It is also related to the accumulation time of the industry. At present, the entrance to the fixed investment function, the connection between pages, and the management after fixed investment are still in the stage of "having this function", lacking polishing, and there is huge room for improvement.
3. Not enough attention. Regular investment not only connects sales, but is also an operating technique and investment strategy. If you only regard it as a subscription function, you are actually minimizing valuable things. A better way to handle it is to have the same understanding and positioning of fixed investment from upstream to downstream of the business, so that users can naturally transition to the operation of fixed investment and smoothly transform into fund users.

Conclusion

Transformation and change are the general trend, and the entire industry is facing new opportunities and problems. This article focuses on the extension of the context. Due to the limitations of energy and space, many topics still need to be further explored and discussed. If you have anything you want to discuss, please leave a message and let’s chat.

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