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立 政 治 大 學
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Indirect Competition
Potential customers may also invest their money in fixed income products and/or real estate– other investments are, to an extent, our indirect competitors. However, investing on US stock exchanges should be perceived as a necessary tool of financial diversification. Although we must convince customers that using our services is one of the most important financial steps, Parsec International will position itself as a substantial supplement to a larger portfolio. We will be the least expensive, and best, alternative to diversifying their portfolios away from local equities, local fixed income and local real estate investments.
Parsec International Competitive Advantages
A brief summary of Parsec International’s competitive advantages:
Parsec Financial has over 30 years combined of overwhelmingly successful fee-only wealth management services.
Parsec International will be able to use the most recent investment knowledge from research gathered at the home base of Parsec Financial.
Xiamen International Bank is a strong partner who will work solely with us to give us HNWI leads.
We will concentrate on tier-2 cities in China that have yet to be touched by the wealth management industry.
We will have a better foreign-to-local ratio of employees. The diversity of our company will lend itself to better education and mentoring of junior employees.
Our unique employee policies will separate ourselves from other wealth management firms.
The distinctive competitive advantages that Parsec International brings to this market are:
Experience in this market. Parsec International has 30 years of hands-on experience in this industry.
Sophistication in fee structure. We are the low-cost alternative to products that are “sold”
to HNWI clients.
Parsec’s pricing philosophy is to price according to the assets we manage. Through economies of scale, our services can be delivered with lower prices than the industry, yet yield a higher net profit overall.
Rather than being strictly relegated to Xiamen, Parsec International will expand into the other tier-2 cities.
Our strong financial background and hands on experience will allow us to fully address our markets with comprehensive marketing and customer service.
Sophistication in management and finance. We are able to run an efficient and lean structure, yet still provide quality service to our clients and customers.
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立 政 治 大 學
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Due to our location(s) and size, we will be able to rent office space in more moderately priced buildings than in tier-1 cities.
As a unique wealth management company, we will be able to keep our margins high, allowing us to provide internal financing for growth possibilities.
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立 政 治 大 學
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N a tio na
l C h engchi U ni ve rs it y
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R R i i s s k k
Progress always involves risk;
you can't steal second base and keep your foot on first.
~ Frederick Wilcox
Like any operation, there is always some risk associated with opening a new business.
We percieve our greatest exposure in the low possibility of tightening regulation in the area of QDII. A significant threat to our business would most likely derive from a sudden backlash in international investing for Chinese citizens from the Chinese government. A government regulation limiting outward money flows or tightening restrictions on entrance into the market is a threat.
In the event of a major change in the QDII market, it is expected that money will shift to domestic investments. Clients may also take their money to Hong Kong to be invested overseas in the event QDII is over-regulated. Parsec is sufficiently aware of the potential risks and has contingency plans in place to either minimize or eliminate them.
If the entrance for companies wanting to service QDII is more tightly regulated this could possibly work to our advantage because we would be an existing company and could possibly be “grandfathered” into the Chinese market.
However, if the Chinese government limited the outflows of cash a Chinese citizen could invest each year, one of our competitive advantages would take a severe blow. In the unlikely circumstance that this would happen, Parsec is ready to work with Schwab to manage customer money from outlets such as Hong Kong where the money could be legally transferred into a Schwab account.
On the other hand, if QDII is relaxed and entrance barriers are lowered, this might invite additional competition. With the firm support of Parsec Financial, Parsec International is completely prepared to compete with potential new entrants to the tier-2 cities. With our first mover advantage, we will have better and quicker local market knowledge and more credibility within the Xiamen community.
Competition
Parsec International actively competes with global wealth management companies, several of whom dominate the financial products market, but are based primarily in Beijing, Shanghai and Shenzhen. China International Trust (JP Morgan) and Harvest Asset Management have higher sales, higher AUM and greater financial and marketing resources than Parsec International. But right now, these larger players are not it tier-2 cities. However, if the market for wealth management in Chinese tier-2 cities continues to grow, the major global companies will likely devote greater resources to this segment
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and seek to take our market share. Even so, we will still have our first-mover advantage and our fees are still 2/3 of theirs.
Industry Growth
The Chinese wealth management sector has increased dramatically over the past 3 years.
As such, Parsec International, and other competitors, are increasing their capacities in order to meet this growth. And it is highly likely that this growth will continue at the present rate, and it is forecasted that the supply for wealth management may not keep up with increases in demand. But in the future, Parsec International may face heightened competition (because of attractive market conditions) and be unable to obtain enough new business to maintain our revenue volume and profit margin.
However, it is highly unlikely that the Chinese wealth management market will be over-saturated anytime soon. There is a growing demand and even higher barriers to entry.
Current forecasts show that hyper-competition should not be a problem.