Mr. Zhichen Sun, the new chairman of CCB Principal Asset Management, Ltd. (CCB Principal), was considering the future. CCB Principal was one of China’s largest fund management companies with over USD94.29bn in assets under management (AUM) as of the end of 2018. It was a subsidiary of China Construction Bank Corporation, one of China’s top four banks. The asset management industry in China had always been quick to leverage technological change to gain an advantage. Since the debut of robo-advisors in 2015 in the Chinese market, this change was coming even faster. As a rising star in the area of financial technology (FinTech), robo-advisors applied automated algorithms to realize investment goals for clients in a cost- and time-efficient method. Between 2016 and 2018, not only FinTech startups in China rushed to launch robo-advisor platforms, but also renowned internet companies like Alibaba and traditional financial institutions like big banks, asset management companies, or security firms in China began to introduce robo-advisory services into their existing business. Artificial intelligence had brought both opportunities and challenges to traditional investment managers. Mr. Sun and his management team needed to analyze the characteristics of the Chinese market and the pros and cons for launching robo-advisory services, and decide CCB Principal’s strategy going forward. Should they start offering robo-advisors as a core service?
The case reviews the origin and development of robo-advisors in the US, Europe, and Asian markets, and introduces the unique features of the asset management market in China. Thinking from the perspective of a chairman of one of the top asset management companies in China, students are expected to look into the characteristics of domestic Chinese investors (mentality, investment goals, level of sophistication, etc.) and the Chinese market (political and regulatory environment, technological application, product development, etc.), analyze the advantages and constraints for the development of robo-advisors in China, and come up with a suitable business model for CCB Principal’s future strategies.
The case is based on the knowledge of financial advisors, robo-advisors, the asset management industry in China, and modern portfolio theory (MPT). The case aims at helping students understand the application of MPT in practice as well as the development history, the presence, and the outlook of robo-advisors globally and in China as a financial innovation. It also facilitates learning about financial markets and the asset management industry in China and the role of artificial intelligence (AI) in the financial industry. The case can be used for teaching in the area of finance, including but not limited to asset management, algorithmic asset allocation, fund industry, and financial innovation.
The teaching objectives of the case are:
- To understand the development of robo-advisors globally and in China
- To understand the advantages and constraints of robo-advisors compared with traditional human financial advisors
- To understand the features of the financial market and the asset management industry in China
- To explore the future of robo-advisors in the financial industry
- To provide students with a basic understanding of the role of a chairman of fund management companies in China