Educated generation builds financial, insurance portfolios using convenient online applications

Thirty-one-year-old Tang Xinyi deems herself a "veteran investor". She has reasons for that declaration - she dived into the capital market upon graduating from the university by buying some money market products. Now, she has been managing her personal wealth for nearly eight years.

With more than 1.5 million yuan ($212,338) in personal wealth devoted to wealth management, the majority 95 percent of Tang's assets are now invested in mutual fund products bought on online platforms. Most of the products are characterized as "generating stable returns", according to the product descriptions.

Tang has set an ambitious short-term goal - make 600,000 yuan in investment returns this year, a whopping 40 percent annual return - an achievement that hardly any mutual fund manager made last year.

"I know that seems quite far-fetched, especially because market volatility has been quite drastic these days," Tang laughed. "But investment is one of my greatest interests. I am very much willing to direct most of my spare time to studying the market and making timely adjustments. Setting a target is very important so that I will be more serious about my choices," she said.

"I hope I can make enough money to be able to retire at the age of 40. Then I can quit my job and stay in a more livable place like Yunnan province," said Tang.

Tang is not alone. Over 90 percent of the younger generation with a college education background said that investment is integral to their life planning, according to a report released by investment firm Invesco Great Wall in February, which interviewed more than 3,000 people aged 22 to 32.

Increasing life quality, guarding against any possible future risks and becoming more carefree in the job market are the three major reasons why the younger generation has started wealth management plans, according to the report.

Similarly, a survey released by the Tencent Research Institute in late July showed that 66.7 percent of the 3,193 polled investors born in the 1990s or 2000s said they had either purchased or were holding some wealth management products at the time of the interview. Another 18.8 percent, who had not built their investment portfolios yet, were making such plans.

As rookie investors, the younger generation has adopted a prudent investment style, according to the survey. Nearly 70 percent of the interviewees said they had allocated no more than 30 percent of their assets for wealth management purposes.

Money market products are the most popular among the younger generation, as 79.2 percent of those with investment experience have purchased such products. A time deposit is the second most frequently chosen item, followed by stocks or stock-based mutual fund products.

In terms of investment targets, new energy, biomedicine, internet and semiconductor industries have attracted the most attention of younger investors.

Meanwhile, the younger generation has planned for their future. While still in their 20s or 30s, as many as 32.6 percent of the polled young investors had purchased wealth management products for retirement, according to the Tencent Research Institute.

A white paper jointly released by financial information portal Hexun and Taikang Insurance Group in late January showed that the younger generation has now become the major buyers of insurance policies, as over 70 percent of commercial insurance in China has been purchased by people aged 26 to 45.

Experts from China Insurance and Pension Research Center explained that the younger generation born in the 1990s are especially aware of the importance of security compared to the older generations, showing surging demand for insurance products, especially following the COVID-19 pandemic. As they have grown up in the digital age, online platforms will become a major distribution channel for insurance policies in the near future.

The proliferation of online financial platforms has provided much convenience for purchases, which is a major reason for the surge of wealth planning among the younger generation, according to experts from the Tencent Research Institute.

Research by consulting firm iiMedia Research showed that the number of online wealth management service users in China reached 670 million in 2022, which was 1.8 times of the number in 2015.

Meanwhile, 180 million Chinese citizens have opened personal accounts for securities applications by the end of last year, which was 3.5 times of the number in 2015. In light of the maturity of the Chinese securities market, the number of securities application users will exceed 260 million by 2025, iiMedia Research estimated.

Experts from market consultancy McKinsey said these online platforms have better-associated wealth management functions with daily life scenarios such as shopping or social occasions.

Meanwhile, the Generation Z group — those born between 1995 and 2009 — can accept new things more easily. Under the same logic, they can easily become the first users of online wealth management platforms, which are still in the early development stage. But as these platforms mature and upgrade, their user viscosity will increase, which means that the younger generation will become increasingly loyal to them.

Social media platforms such as Douyin and Xiaohongshu have become the major channels for Gen Z to acquire wealth management information or stay in tune with updates in the financial world, according to McKinsey.

This was especially noticeable in 2021 when portfolio managers were regarded as "idols" on the internet. "Star portfolio managers", such as Zhang Kun from E Fund Management, who dazzled with a performance purchasing certain Chinese liquor companies' stocks, reaped much attention online. Hashtagged topics were started for him on the micro-blogging platform Weibo, with a passion usually only seen for pop idols.

In light of this trend, McKinsey experts suggested traditional financial institutions reach into social media platforms that are most used by the younger generation. The institutions can either set up official accounts or work with internet influencers whose followers are mostly from Gen Z. Influencers can help traditional brands build a connection with the younger generation more rapidly.

"Gen Z in China equals an incremental market size of 300 million people. Traditional financial institutions such as securities firms must make their brand images younger to attract this group and make them their potential clients," said McKinsey.