The Difficult Road of Transformation (Part Two): How Many Barriers Must Be Overcome to "Move Towards Buyers"?

@E1@ Beijing, Shanghai reports

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With the deep transformation of the wealth management industry, the shift of institutional investment advisory from the traditional sell-side model to the buy-side investment advisory model has become a widely accepted consensus and an inevitable trend in the industry.

This profound transformation concerning the reshaping of industry ecosystems, adjustments to interest structures, and upgrades to service models is, on the one hand, confronted with real bottlenecks such as conflicts in profit models, lagging performance appraisal mechanisms, and insufficient professional capabilities; on the other hand, through the exploratory practices of early-acting institutions, the industry has also seen a set of experiences and approaches that are replicable and scalable.

An interview and research survey conducted by 《China Business News》 with more than ten institutions and academic experts shows that, at present, many leading institutions have achieved breakthroughs through diversified paths such as organizational innovation, institutional reform, technology enablement, and customer companionship. Although institutions that have not yet transformed are worried about imbalances between transformation costs and near-term returns, amid the industry’s transformation wave, they can also move forward step by step, proceed steadily, and realize steady business development.

Establish internal “special zones” and “test fields”

In the deep waters of the buy-side investment advisory transition, a group of early institutions have broken out of traditional thinking constraints and found new routes to transformation through institutional innovation, organizational restructuring, and capability building.

“‘Incremental reform’ is an important path for institutions to transition to the buy-side.” Xu Haining, Founder, Chairman and CEO of Shanghai ZhiHui Technology, suggests that, just like China’s reform and opening-up, institutions should establish independent teams, independent departments, and independent evaluations within the organization, set up transformation exemplars, and then promote nationwide after summarizing experience.

“Some institutions set up independent departments for buy-side investment advisory, separating them from traditional sell-side brokerage business, and avoiding interference from sell-side performance pressure on buy-side business. They provide the buy-side business with a certain period for performance nurturing and do not set short-term profitability targets.” Based on her own practical experience, Xu Haining explained that at the headquarters level, the headquarters builds a unified investment research and investment advisory system, an asset allocation system, and a product screening system. This provides standardized portfolio templates, investment research reports, and customer service tools to frontline investment advisors, reducing their workload. It enables advisors to focus on client communication and investment education companionship, quickly implementing buy-side services while balancing short-term service efficiency with long-term capability building.

Regarding talent development, Xu Haining believes that institutions can rapidly enhance hands-on operational capabilities by establishing a tiered training system for buy-side investment advisors. To provide a clear career development path for investment advisors—starting from “junior investment advisor,” progressing to “senior investment advisor,” and then to “chief investment advisor”—it breaks the traditional career ceiling for investment advisors of “living off sales performance,” turning buy-side service into a long-term direction for career development.

In addition, Xu Haining emphasized that building customer companionship services is equally crucial. “Through online investment education courses, offline investment salons, articles, short videos, live streams, and other formats, with answers to every question, customers can understand the value of long-term investing and reduce irrational actions. This effectively extends customers’ holding periods. As a result, customers’ retention rate and repeat investment rate increase significantly, showing a tendency toward investing against the trend—achieving customer returns higher than portfolio returns.”

“Incremental reform” has become an industry consensus, and in practice everyone also has their own takeaways.

“As an institution that began wealth management transformation relatively early, CITIC Securities’ path is to consolidate the core value of its sell-side business and then steadily promote the development of buy-side investment advisory, achieving synergy and win-win outcomes between the two.” said a relevant person in charge at CITIC Securities.

According to the introduction, on institutional safeguards, CITIC Securities adopts an “allocation of responsibilities with dual separation plus dual-track coordination” operating model to reserve sufficient development space for buy-side investment advisory business, adhere to a long-term approach, and prevent the transformation from going off track. On service upgrades, through a “1+1+N” system and an expert team of over a hundred people, the To B professional service model is applied to To C business, achieving an upgrade from “single-product service” to “team-based integrated allocation service.” On capability implementation, it builds an “industrialized buy-side investment advisory model + full-spectra solution.” Through standardized asset components and a personalized LEGO-like approach to portfolio combinations, it achieves personalized allocation on top of standardized foundations, balancing efficiency and adaptability. On the level of philosophy commitment, it returns to the origin of wealth management, prioritizes customer needs, maintains a long-term approach, firmly believes that reputation accumulation is the foundation for scale expansion, and ensures that buy-side investment advisory business takes root in customer value creation.

CICC Wealth focuses the key point of the transformation breakthrough on directions such as building the organizational structure, establishing a performance appraisal mechanism, and lowering the understanding threshold.

A relevant person in charge at CICC Wealth introduced that, on organizational structure, CICC Wealth set up an IPS (Products and Solutions Headquarters) at the headquarters level, forming an integrated ecosystem of “R&D—investment—promotion” at the headquarters level. Meanwhile, it coordinates with the financial technology team to handle the system digital development work across “pre-investment—during investment—post-investment,” helping improve business efficiency and quality. During business development, the buy-side investment advisory business is also led by the headquarters, and it works jointly with branch institutions to provide personalized solutions to customers.

“On the performance appraisal mechanism, CICC Wealth pays more attention to indicators such as the scale of customers’ assets under retention and customers’ long-term performance. By establishing assessment and incentives linked to customers’ long-term interests rather than to short-term trading behaviors, investment advisors can reduce the ‘tinkering’ of customers’ assets.” the relevant person in charge said.

For the understanding threshold, the person in charge emphasized that buy-side investment advisory institutions should design investment products with a simple structure and easy-to-understand features, avoiding complex terms, business forms, and operating procedures. This allows small and medium-sized investors to clearly understand a product’s risk and return characteristics and to operate it conveniently, thereby reducing participants’ cost and time costs.

Based on years of practical experience, market performance, and in-depth observation, Xiao Wen, Chairman of Yimi Fund, believes that it is necessary to anchor the “roadblocks” and breakthroughs in different stages of the transformation and make an institutional breakthrough, and she also introduced in detail a four-part transformation path.

First, in the initial stage of buy-side investment advisory transformation, the core pain point lies in conflicts between short-term and long-term interests. The key to resolving this pain point is to establish an internal “test field” and to restructure the KPI system.

“The internal ‘test field’ model—borrowing the path of Charles Schwab—is that large institutions open internal ‘test fields’ for investment advisory business, providing dedicated resource support and appraisal cycles, so that they can explore first without the burden of traditional business performance assessments.” Xiao Wen further explained. As for KPI system restructuring, some institutions begin to add “long-term perspective” goals, such as the stability of investment portfolio performance, customers’ repeat investment rate, and average holding duration, instead of relying on a single sales scale (AUM). Regulators are also promoting the establishment of an industry assessment and evaluation framework centered on core metrics such as fund investment returns and the proportion of profitable customers, and strengthening the constraint role of performance benchmarks.

Second, team transformation is the biggest internal endogenous obstacle, especially in traditional institutions such as brokerages. To solve this, it is necessary to reshape teams from sales teams into buy-side teams.

“Leading practices show that buy-side investment advisory requires the efficient coordination of talents across areas such as technology, big data, operations, and content production—not traditional solo operations,” Xiao Wen said.

Third, under the above logic, building a digital foundation is crucial.

“Some early transformation institutions have built independent investment advisory middle-office systems. They platformize and modularize core capabilities such as allocation of major asset classes, generation of portfolio strategies, dynamic risk monitoring, and performance attribution analysis. This enables investment research capabilities to be replicable, strategies to be unified, and risk control to be penetrable.” Xiao Wen further said. “By relying on the digital foundation to standardize and online-enable the entire process—from customer profiling, risk assessment, portfolio construction, and rebalancing reminders to investment companionship—complex allocation logic is converted into simple, easy-to-use front-end tools. This not only greatly improves frontline investment advisors’ operational efficiency but also ensures stability and consistency of service quality, laying a solid foundation for the industry’s large-scale and industrialized business development.”

Finally, in Xiao Wen’s view, the essence of investment advisory business is to manage trust. It needs to start from the long term to “preach,” and intervene in irrational behavior through continuous interactive engagement across pre-investment, during investment, and post-investment. At the same time, it is empowered through digital and intelligent means. For example, by using AI assistants like Yimi Qieman’s “AI XiaoGu” and semantic understanding technology, it improves the efficiency of human-machine interaction, enabling personalized companionship in the “one thousand people, one thousand schedules, one thousand faces” manner, and converting expert capabilities into scalable service capabilities.

Regarding the industry institutions’ generally observed transformation progress and results, Tian Xuan, a Beijing University professor specializing as a Distinguished Professor of Peking University’s Boya program, believes that, at present, buy-side institutions that are ahead in transformation have already sought balance between short-term performance pressure and long-term goals through systemic reforms. For traditional business teams, they retain a certain proportion of assessment weight for short-term revenue. For transformation business teams, they set indicators for customers’ long-term value. Some institutions achieve delayed incentive payout—for instance, distributing commission in 3 to 5 years, with compensation linked to customers’ gains and losses.

Liu Yuzhen, another Boya Distinguished Professor at Peking University, summarized four major incremental transformation paths and their functions for current buy-side institutions in terms of transformation pacing.

First is the “step-by-step” transformation strategy, using pilot projects to reduce reform risks.

“Some institutions use a ‘step-by-step’ approach to gradually advance transformation, avoiding the ‘pain points’ caused by a full-scale reform. For example, by cooperating with a third-party TAMP platform, they implement the buy-side investment advisory model first in certain branch offices. After the pilot succeeds, they expand it.” Liu Yuzhen said.

Second is the “dual-track system” appraisal mechanism. Liu Yuzhen pointed out that institutions gradually adjust their appraisal mechanisms by reducing the weight of short-term sales indicators while increasing the share of long-term indicators such as customers’ account retention rates, profitability experience, and service satisfaction. Some even pilot linking investment advisors’ income to the long-term growth of customers’ assets, gradually shifting investment advisor behavior through phased incentive mechanisms. In this way, it both preserves short-term sales momentum and provides a buffer for team transformation.

Third is strengthening customer education and value propositions. In Liu Yuzhen’s view, through continuous investor education, institutions help investors understand the importance of asset allocation and the value of long-term investing, and convert complex investment concepts into plain, easy-to-understand language—for example, using a framework of “long money, stable money, and active money” to help clients understand the use cases and allocation strategies of different funds. Meanwhile, providing low-barrier investment advisory experience options—such as waiving initial investment advisory fees—is also an effective way to help customers gradually accept the buy-side investment advisory model.

Fourth is combining internal capability building with external cooperation to quickly fill capability gaps. Liu Yuzhen introduced that currently some institutions improve investment advisory professionalism rapidly by combining internal training and external cooperation.

Under cost pressure, it may be possible to “move in small steps and run fast”

Although the transformation path is becoming clearer, some institutions have not yet launched or deeply advanced the buy-side investment advisory transformation. The main reason is concerns about transformation costs and returns, which are particularly prominent among small and medium-sized institutions.

A relevant person in charge at CITIC Securities said bluntly that some institutions that have not yet transformed may have three major concerns, all centered on balancing transformation investment with short-term returns.

“First, the upfront investment in product systems, technology platforms, and professional talent is substantial, and significant returns may not be visible in the short term, testing strategic choices and resolve. Second, the revenue model for buy-side business is more long-term, requiring gradual advancement on the basis of consolidating existing business. Third, resource constraints make it difficult to rapidly build a comprehensive buy-side investment advisory service system.” the person in charge analyzed.

Xiao Wen systematically summarized the three major costs of institutional transformation: talent costs, system-building costs, and the lag in revenue timing (high costs before investment and low returns, followed by low costs before returns and then higher returns).

“Buy-side investment advisory requires practitioners to have comprehensive capabilities such as asset allocation, customer communication, and behavioral guidance. Training or recruiting such professional talent is costly. Institutions need to invest significant resources in training, and in the short term it’s difficult to cover that through business revenues.” Xiao Wen said.

As for system-building costs, the buy-side investment advisory model depends on technology support such as an intelligent investment research and advisory platform and customer management systems. Building or purchasing such systems requires considerable capital investment. Xiao Wen believes that for small and medium-sized institutions, technology investment may become a burden, and they also need to continuously bear ongoing maintenance and upgrade costs.

Institutional transformation also has to bear the pressure of delayed revenue. “Buy-side investment advisory income is linked to the scale of customers’ assets under management (AUM). You need to accumulate a certain scale of customer assets to achieve stable returns. In the initial stage of transformation, you may face slow revenue growth or even losses, compared with the rapid returns of traditional sell-side models.” Xiao Wen further explained.

Tian Xuan also believes that, “institutions that have not seen any transformation action generally worry that transformation costs are higher than returns.”

“Especially the explicit costs caused by initial manpower investment, system upgrades, and compliance restructuring; plus implicit costs such as customers’ long migration cycles and difficulty quantifying service value. The fee model requires customers to accumulate to a certain scale to reach break-even, and under market volatility, short-term revenue pressure may shake transformation resolve.” Tian Xuan said.

From the perspective of the industry’s trend toward fee reductions, Hu Conghui, Vice Dean of the School of Economics and Business Administration at Beijing Normal University, interpreted the practical inevitability of transformation.

“Against the backdrop of the ongoing advancement of fee-reduction reforms in the asset management industry, the profit space of the traditional model relying on product sales and management fee splits has been clearly compressed. Objectively, it weakens the appeal of the ‘sell products’ model.” Hu Conghui said. “This provides a realistic opportunity for the development of buy-side investment advisory. Even though there are concerns about short-term revenue pressure and increased system investment, when the fee-reduction trend is irreversible, building for buy-side investment advisory in advance and exchanging high-quality services for long-term asset accumulation may actually become a more sustainable growth path.”

“The concern is understandable, but it is short-sighted. Under the inevitable trend of regulatory push and customers’ needs upgrading, transformation is a ‘survival investment’ aimed at the future, not an optional cost.” Tian Lihui, Dean of the Institute of Financial Development Research at Nankai University, emphasized.

A relevant person in charge at CITIC Securities also stressed that, from the perspective of industry development trends, buy-side investment advisory is an important direction for the wealth management industry and forms a complementary pattern with sell-side business. Institutions should, while consolidating their own business advantages, focus on niche customer segments and create specialized buy-side investment advisory solutions.

“Building such solutions fundamentally lies in capturing the essence of what buy-side investment advisory provides to customers: solutions with the right risk-return characteristics. Move in small steps and advance steadily to realize stable business development.” the relevant person in charge at CITIC Securities added.

Small and medium-sized institutions can take lightweight, differentiated transformation paths

Transformation has become unavoidable.

Compared with incremental transformation for large leading institutions that can leverage resources, talent, and technology advantages comprehensively, small and medium-sized institutions are often constrained by real issues such as scale, costs, and capabilities. So how will their transformation paths differ?

Multiple industry interviewees believe that small and medium-sized institutions may need to focus even more on lightweight, differentiated, and collaborative approaches.

Regarding transformation paths for small and medium-sized institutions, Xu Haining proposed four recommendations to break through with “small and beautiful, small and specialized.”

“First, position buy-side investment advisory business as an incremental business within the wealth management segment and a second growth curve, enabling coordinated development with sell-side business. Use incremental revenues to offset transformation costs and reduce short-term transformation pressure.” Xu Haining said.

Second, combine one’s own endowments to focus on building core investment advisory capabilities. Xu Haining suggested that small and medium-sized institutions can tailor capability training for buy-side scenarios—such as asset allocation, customer companionship, and investment education communication—based on their target customer base and the strengths of their investment advisory personnel.

Third, build a suitable lightweight organizational structure around the buy-side investment advisory business, clarify responsibilities for each role, and achieve systematic operations for buy-side investment advisory business.

Fourth, small and medium-sized institutions can proactively collaborate with high-quality asset-source institutions, client platforms, and professional investment advisory teams, achieving resource complementarity and capability sharing to build a business ecosystem and form a development path of “small and beautiful, small and specialized.”

In practice, third-party platforms already provide small and medium-sized institutions with low-cost, high-efficiency transformation solutions.

“On how to reduce system-building costs, we believe the breakthrough point lies in converting core middle-office capabilities into products and modularized outputs through financial technology, enabling mid-sized institutions to quickly build a ‘lightweight but high-performance’ enablement hub at a reasonable cost.” Xiao Wen said. The Yimi TAMP platform provides an “plug-and-play” digital middle-office solution.

The Yimi TAMP platform covers three areas: strategy research and asset allocation “external brain,” an intelligent advisor workbench, and a “resource library” for content and companionship.

First, Yimi outputs its well-developed “Mingxing” series target-risk strategies (eight tiers from cash management to global allocation), along with corresponding large-class asset investment research frameworks, through strategy partnerships. This is akin to quickly introducing a market-tested “standardized strategy factory” to brokerages, allowing them to rapidly establish a systematic and layered product shelf for allocation products without building a massive investment research team from scratch.

Second, the Yimi TAMP platform provides integrated tools for account diagnosis and investment planning that include professional algorithms (such as KYC/KYP models developed in partnership with Morningstar). The tools automate and standardize complex processes like asset analysis, portfolio construction, risk disclosure, and report generation, greatly improving investment advisory service efficiency and professionalism. For the headquarters, this is also a “management lever,” enabling unified service workflows, monitoring of service quality, and accumulation of customer asset data—achieving intensive enablement and management.

Finally, the Yimi TAMP platform also provides systematic content assets—from market interpretation and strategy reports to investor education. This helps partners build continuous, professional customer communication capabilities and alleviates the pressure on branch advisers in content creation and quality.

“We believe the core of this model is ‘capability as a service.’ Institutions do not need to bear high fixed team costs. Instead, depending on business development needs, they flexibly introduce the required middle-office capability modules and obtain professional support close to that of leading institutions at variable costs. Under current operating pressure, this helps find a viable enablement path.” Xiao Wen summarized.

Experts also recognize the important value of external cooperation for small and medium-sized institutions.

Liu Yuzhen mentioned that, currently some institutions cooperate with third-party organizations that have TAMP platform capabilities to introduce standardized investment research frameworks, strategy portfolios, and investment advisory service tools, while also running hands-on “training and pairing” in practice to gradually improve the service capabilities of investment advisory teams.

Evidently, at this new stage of industry development, the buy-side investment advisory transformation is no longer a “multiple-choice question,” but a “required course” related to the industry’s survival and future. There is no standard answer for this transformation, and there is no shortcut that can be done overnight. Large institutions can take full advantage of resources to deploy comprehensively, while small and medium-sized institutions can take lightweight, differentiated, and ecosystem-based paths. The core is to stay true to the original intention of putting customers’ interests first, maintaining a long-term approach, and enabling professionally—resolving conflicts between short-term and long-term interests and balancing transformation costs and returns.

Interviewees generally believe that, with the sustained advancement of regulatory guidance, technology enablement, customer maturity, and institutions’ practical efforts, the path for institutions’ investment advisory to move toward buy-side will eventually become wider. A new wealth management ecosystem centered on customers, grounded in professionalism, and aiming for long-term value is accelerating its formation.