Regulatory Crackdown on "Earnings Leaderboards" Promotes Wealth Management Shift Toward Long-Term Value Propositions

Text by Yang Lian

Edited by Li Hengchun

Behind the trend of financial “performance ranking” in regulatory oversight is a policy demand to encourage the industry to shift from short-term performance competition to focusing on capacity building. It is also an important way for financial funds to earn excess returns and allocate to equity markets under policy guidance.

On January 28, the China Banking and Insurance Regulatory Commission issued the “Administrative Measures for Commercial Bank Agency Sales Business,” requiring commercial banks to strengthen suitability management, fully disclose product risks, prohibit market manipulation and misleading customer displays, and not solely evaluate based on sales performance.

Since early 2026, some wealth management companies have attracted incremental funds by displaying yields through “shell products,” adjusting yields on a few newly issued, very small-scale products to show higher annualized returns. Some products attract funds through ranking lists, but as their scale rapidly expands, yields quickly fall back to normal levels after a short period of high returns, drawing further regulatory attention. In February, regulators penalized two wealth management subsidiaries, suspending their product issuance rights, and took action to rectify the chaos of “performance ranking” in bank wealth management.

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This regulatory penalty not only deepens previous valuation rectification but also supports the implementation of the “Measures for the Disclosure of Asset Management Product Information by Banking and Insurance Institutions” (hereinafter referred to as the “Measures”), aiming to establish a dual constraint of “regulatory norms + supervision.” In the context of full net value transformation of wealth management, this move indicates that short-term illegal volume-driven models are unsustainable. Wealth management firms need to abandon “misleading sales” tendencies and shift toward research, investment, and service orientation; investors should also rationally view short-term returns and establish long-term investment concepts.

Specifically, the “Measures” focus on regulating asset management product information disclosure, explicitly prohibiting selective disclosure of performance over certain periods and inconsistent performance display standards across different products. Undoubtedly, the implementation of the “Measures” will effectively curb misleading marketing practices like “performance ranking,” gradually shifting marketing focus toward true and complete risk-return characteristics.

Correcting Short-term Profit-Driven Behaviors

Generally, “performance ranking” refers to some wealth management companies artificially adjusting yields and creating staged high returns through “shell products.” In practice, some institutions tend to select newly issued, small-scale products as “shell carriers,” using a combination of “yield adjustment + valuation modification” to temporarily boost short-term yields.

Yield adjustments may involve directing returns through various irregular methods, such as transferring unrealized gains or realized profits from old products to new ones, using trust T-1 valuation rules for timing tricks, or adjusting yields via non-standard asset transactions. Valuation modifications may include smoothing net value curves with non-standard methods, weakening the traces of yield manipulation, and presenting yield performance that differs from the actual fluctuations of underlying assets.

Through these methods, related wealth management products can rank high on various performance lists, attracting investor subscriptions. As investors follow the trend and the product scale expands rapidly, yields tend to decline back to industry norms over time, forming a negative cycle of “staged high returns—scale expansion—yield normalization.”

Ultimately, investors’ preference for “high returns and stable net value” products and their expectation of guaranteed returns reinforce short-term performance dependence. This, combined with traditional management scale-focused evaluation methods of wealth management firms, encourages some institutions to prioritize “ranking—traffic attraction—scaling up,” hindering the development of long-term research and investment capabilities.

From the industry perspective, if “scale-oriented” behavior persists, institutions are often forced to follow passively; otherwise, they risk losing clients and shrinking scale, further fueling short-term competition based on “ranking and attracting traffic.” Early adopters who fully comply with regulations and abandon this model may face short-term client loss and slower growth, intensifying industry homogenization and violating principles. This not only harms investors’ interests but also weakens wealth management firms’ long-term research and asset allocation investments, disrupts normal market price discovery, and erodes industry trust.

The impacts of these negative behaviors are threefold: First, for investors, they can easily cause doubts about product fairness, with rapid dilution of returns after funds enter, creating significant “return gaps”; second, for the industry, such behaviors undermine long-term research capacity, leading to a “bad money drives out good” effect, detrimental to sustainable development; third, from a market perspective, they interfere with genuine price discovery, exacerbate short-termism, and deviate from regulatory goals of fostering long-term stable funds in banking wealth management.

From a regulatory standpoint, since wealth management funds are long-term and stable, they are a vital component of long-term capital in the A-share market. The misleading marketing practices like “performance ranking” that seek short-term gains are contrary to regulatory requirements and will inevitably attract regulatory scrutiny.

Transitioning Toward Long-term Capacity Building

From an industry transformation perspective, under the premise of steadily reducing the scale of bank wealth management and the consensus on shifting from agency sales, the regulatory crackdown on “performance ranking” aims to promote the industry to abandon short-term performance competition and focus on capacity building.

The “China Banking Wealth Management Market Annual Report (2025)” published by China Wealth Management Network shows that by the end of 2025, there were 159 banking institutions and 32 wealth management companies with active products nationwide. The number of banking institutions decreased by 59 compared to the end of 2024; their wealth management scale reached 2.58 trillion yuan, down 29.12% year-on-year, and their share of the total market declined from 12.2% in 2024 to 7.8% in 2025, indicating a contraction in both number and scale.

Since 2024, amid the gradual reduction of existing wealth management business, the space for small and medium-sized banks to independently develop wealth management has significantly narrowed, with considerable pressure on scale growth. Although detailed rules for reducing existing wealth management business are not yet clear, to compensate for revenue gaps and enter the wealth management track, small and medium-sized banks have only two paths: licensed operation (establishing wealth management subsidiaries) or channel-based transformation (selling products of other banks).

Licensed operation requires regulatory approval and compliance with various policies, leading to stricter licensing and a cautious attitude. By the end of 2025, only 32 licensed wealth management companies existed domestically, mainly in major cities like Beijing, Shanghai, Shenzhen, and Guangzhou. No new bank wealth management subsidiaries have been approved since 2024. Based on current policy trends, the most likely license recipients are: first, regional leading city commercial banks and rural commercial banks with large scale and strong overall strength; second, institutions in the central and western regions that can fill regional gaps and meet scale and qualification requirements.

According to the latest industry trends, some regions may see multiple small and medium-sized banks jointly establishing wealth management companies through resource integration to meet capital, research, and risk control requirements. Due to limitations such as small scale, weak capital, and insufficient research and risk management capabilities, most small and medium-sized banks face significant uncertainty in pursuing a licensed path under strict policy conditions.

On the supply side, institutions like China Merchants Bank Wealth Management can leverage their parent bank’s extensive retail channels to acquire customers and expand scale. In contrast, most other wealth management subsidiaries struggle to grow independently through their own channels due to channel saturation, high operational costs, and overlapping customer bases.

Therefore, the transformation direction for small and medium-sized banks is also shifting. Entering the wealth management market via agency sales has become a industry consensus, aligning with the “light-asset operation” transformation logic of small and medium banks. Using other banks’ channels to break through brand and scale bottlenecks, and capturing county-level and internet customer groups, has become the best path for market expansion.

Looking ahead, as regulatory standards for various industry behaviors continue to tighten, the space for yield manipulation through technological means is expected to shrink gradually. For wealth management firms, the focus of competition will shift from scale expansion to capacity building from a long-term value perspective, which is also the proper role of wealth management as a source of stable, long-term funds. Under the new market environment, participation in stock IPOs is gradually becoming an important way for wealth management funds to earn excess returns and allocate to equity markets under policy guidance.

In fact, in January 2025, the China Securities Regulatory Commission issued the “Implementation Plan for Promoting Medium- and Long-term Funds into the Market,” explicitly stating that bank wealth management and public funds enjoy equal treatment in policy. This was the first clear policy confirmation of wealth management funds as long-term capital, greatly boosting their enthusiasm for entering the market, with wealth management firms like Ningbo Bank Wealth Management, Xingye Bank Wealth Management, and Everbright Wealth Management gradually increasing their IPO allocations in A-shares.

In terms of industry choices, these institutions respond to the “technology finance” policy orientation by focusing their funds on new tech stocks, mainly for two reasons: one, these companies tend to perform well in initial listing phases with favorable risk-return profiles; two, they align with national innovation-driven development strategies and market preferences for technology growth sectors.

(This article was published in the March 7 issue of “Securities Market Weekly.” The individual stocks mentioned are for illustrative purposes only and do not constitute investment recommendations.)