A Study On Personal Finance Service Of Commercial Bank In China

Personal finance service or Family Financial Planning arouse accompanied by the post-World War II economic recovery.With the development of economy and the improvement of people's living standard,the wealth of the family are accumulating,and the demand for personal finance service is becoming more and more exuberant.Consequently,personal finance service has become a great business opportunity for commercial banks,and even more a competitive arena for all institutional financial players.The government policy also weighs on enhancing general household income.On the other hand,increasing complexity and openness of financial markets escalate the uncertainty of a family's future income and expenses,making the personal finance service process more of an exquisite risk-return design procedure.Many factors can influence our family wealth and investment purpose,like every rate decision from the central bank,regulatory and policy changes in equity market and real estate industry,the consistent RMB appreciation,and so on.Undoubtedly,wealth management has become an important part in our daily life,and more families are seeking wealth maintenance and growth through proper financial planning.As a quickly evolving business,the concept of personal finance service has been explained differently.This paper defines personal finance service as a scientific and coordinated process to decide optimal customized investment allocation and composite financial planning for clients,through which they can achieve certain education and career goals.The process is based on detailed and structured analysis on individual cash flows,asset appraisal and a variety of financial indicators.To clarify,the concepts of individual and family are considered equal in major researches,and denote the smallest economic unit with independent decision making status.This paper shall assume the consistency of the two concepts.The theory framework of personal finance service is built around Portfolio Theory,CAPM Theory,Family Life Circle Theory and the Theory of Multi-objective Portfolio,the last two theories providing most practical guidance.The essence of personal finance service is individual's long term asset allocation within certain time horizon.Portfolio management theory aims to solve the asset allocation and risk control problem,while Life Circle Theory suggests a smoothed consumption pattern to guarantee a balanced level of consumption through the whole life cycle.As a systematic project,not only achievement of goals is important,but also risks aroused should be considered.A proper personal finance service plan should be customized according to each family and based on comprehensive application of theories,and thus should be scientific,systematic,feasible and consistent.There are many descriptive researches available on this topic,which allow us to continue in-depth research.From the industry practice perspective,personal finance service has been proved as a profitable and high-growth business by commercial banking practice of developed countries,thus becoming a competitive and challenging arena for market players.During recent years,personal finance service business develops in a fast pace however coupled with problems.Some lie with external environment,like inferiority of financial market,limited investment channels,high inflation erosion to investment return,lack of all-around financial planning service due to clients' cognitive errors on their risk profile and separation of commercial and investment banking firms.Others lie with the banks themselves.The personal finance service business in China is still in its start-up stage,inferior in practice compared to most developed industry practices,and very short of qualified practitioners.Besides,the IT support,research,product pricing and risk management skills are far from enough for the business.Personal finance service can be falsely replaced by sales of WM products,accompanied by overselling and missselling,thus unable to provide real customized and suitable financial planning for clients.The paper assumes both theoretical and empirical methodologies to discuss applications of Family Life Cycle Theory and the Theory of Multi-objective Portfolio in Chinese personal finance service market.And by focusing on analyzing the current situations and existing problems in personal finance service services from the both sides of suppliers and consumers,tries to probe the causes and to provide pertinent suggestions for commercial banking personal finance service practices.The paper consists of nine parts and is structured as follows.Part 1 presents a general introduction,exam the concept and scope of personal finance service,stating research background and methodologies employed in this paper.Part 2 reviews and analyzes the existing researches and literatures relevant to this topic both at home and abroad,including the Modern Portfolio Theory of H.Markowitz,Portfolio Management,Family Life Circle Theory and the theory of multi-objective portfolio,and implies the practical guidance those theories bringing to personal finance service.Part 3 systematically reviews the course of development of overseas personal finance service business,its external environment,internal management experiences,asset allocation and investment instrument statistics.Part 4 analyze current situations and restricting factors of personal finance service business from perspectives of both business environment and commercial banks,summarize the problems and restrictive factors in personal finance service business.Part 5 mainly talks about personal financial products and related practices.The author brings investment suggestions based on different features and risk return procedures across a range personal finance service tools,and then discuss the product management issue.Part 6 discuss how the commercial bank provides personal finance service,including custom segment,product management and service process.Part 7 Based on previous theoretical and empirical analysis,brings the main theoreticalframework and discussion in this paper.It introduces the multi-objective portfolio selection model to construct family financial portfolio and investment strategies,according to family life cycle and individual risk tolerance features.Part 8 gives a brief on how the commercial bank deals with the risks,analysis the types and its appearance in China,and then discusses the risk management skills.Part 9 discusses possible trends on personal finance service and proposes improving suggestions for commercial banks.This paper aims to elevate core competencies of Chinese commercial banks,enhance the personal finance service management system and help the personal finance service business develop in a fast and healthy way.The paper also contains suggestions for personal finance service practitioners in improving financial planning and marketing skills,and can be considered as good reference for researchers in personal finance service business.