Deposit interest rates are falling and public fund competition is intensifying, leading bank wealth management subsidiaries to launch a "fee reduction defense battle."

Under the dual pressure of low interest rates and competition in asset management, bank wealth management subsidiaries are intensively launching a new round of fee reductions.

On May 26, China Post Wealth Management announced that its "Yingrui·Hongjin Minimum Holding Period 365 Days No. 2 (Quantitative Selection)" wealth management product will implement fee discounts, lowering the annualized fixed management fee for all share classes to 0.15% from the product's establishment date to June 1, 2027.

This is just a snapshot of the recent "fee reduction wave" in the wealth management industry.

Since May, several institutions such as Minsheng Wealth Management, Bank of China Wealth Management, CMB Wealth Management, and Ningbo Bank Wealth Management have successively lowered the sales service fees or fixed management fees of their products, with some cash management and fixed income products' fees even being directly reduced to "zero fees".

This round of fee reductions is no longer a short-term marketing move for individual products but has shown a trend of industry-wide spread.

On May 22, Minsheng Wealth Management announced a fee discount for the sales fee of "Daily Increase Cash Management No. 174," reducing the fee rate from 0.50% to 0.05%. On May 21, Bank of China Wealth Management launched a staged fee discount for "HuiXiang Daily No. 20," lowering the fixed management fee to as low as 0.02%.

Meanwhile, institutions such as CMB Wealth Management and Ningbo Bank Wealth Management have also introduced temporary "zero-fee" plans for some fixed income and cash management products.

The industry generally believes that the intensive fee reductions by wealth management subsidiaries in this round are driven by both changes in the market environment and increased industry competition.

On the one hand, as deposit interest rates are continuously lowered, household funds are accelerating their migration into stable assets, making cash management and fixed income wealth management products the focus of competition among institutions.

However, against the backdrop of declining bond yields, the profit margins for such products continue to shrink, and homogenous competition has clearly intensified. Wealth management companies find it difficult to establish differentiated advantages solely based on yield.

In this situation, lowering fees has become the most direct competitive means to attract funds and retain customers.

On the other hand, the competitive pressure from public mutual funds is also continuing to increase.

In recent years, the public mutual fund industry has comprehensively promoted fee reduction reforms, with low-risk products such as money market funds and short-term bond funds maintaining low fee levels for extended periods.

In contrast, the disadvantage in fee rates of bank wealth management products is gradually becoming apparent. To narrow the cost gap with public fund products, wealth management companies are compelled to follow suit and reduce fees.

Meanwhile, under the ongoing regulatory guidance for financial institutions to "pass profits to the real economy" and lower residents' financial costs, the industry's central fee rate is trending downward.

However, multiple industry insiders pointed out that while fee reductions can help quickly scale up in the short term, their sustainability still faces practical challenges.

In the short term, low fees do attract cost-sensitive investors and institutional funds, helping wealth management companies rapidly expand asset scale and make up for price via volume to some extent.

But in the long run, the ongoing suppression of management fees and sales fees also means the profit margins of wealth management companies are being continuously compressed, while core investments such as building research systems, system maintenance, and risk control will not be synchronously reduced.

If the newly added scale cannot cover the revenue gap caused by reduced fees, the long-term low fee model may pressure the profitability of wealth management companies.

Furthermore, after the industry enters a cycle of fee reduction, competitive advantages built purely on "low price" will gradually weaken.

The ultimate competition in the wealth management industry will still revert to investment research capability and asset allocation capability itself.

How to maintain performance while lowering costs, and achieve a balance between scale expansion and profitability, is becoming the core issue for the next phase of competition among wealth management subsidiaries.

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