Ping An’s Lu wealth management unit offers two zero-commission months on Hong Kong launch, might ignite price war
- Lu International (Hong Kong), a subsidiary of Lufax Holding, part of Ping An, launched on Monday and is charging zero commission until the end of September
- It will be difficult for companies to keep a zero-commission rate for a long period, Hong Kong Investment Funds Association chairman says
The entry of a wealth management unit of Ping An Insurance, mainland China’s largest insurer, promises to ignite a price war in Hong Kong’s financial market.
Lu International (Hong Kong), a subsidiary of Lufax Holding, part of Shenzhen-based Ping An, sells fund products for large fund houses such as BlackRock and Fidelity on its online platform. The company launched operations in Hong Kong on Monday and will charge zero commission until the end of September.
“We will operate completely online, and will adopt a lot of technology to cut our operating costs. This is why we can offer low-cost but high-quality services to customers,” Cai Hua, Lu’s chief executive, said.
The company’s charges, when they kick in, will be lower than those charged by other banks and financial firms, Hua said without giving any further details. Banks, which currently sell about 75 per cent of all mutual funds in Hong Kong, charge between 1 and 3 per cent of the cost of a transaction.
Lu’s entry will widen a price war in Hong Kong’s financial market. Some stockbrokers such as Futu Securities and Bright Smart Securities already charge a zero commission rate, while traditional brokers charge a 0.25 per cent commission.
“There are a lot of providers selling fund products in Hong Kong, so the competition is keen and that drives the commission rate for fund sales lower,” said Bruno Lee, chairman of the Hong Kong Investment Funds Association. “However, it will be difficult for companies to keep a zero commission rate for a long period. Customers check for convenience and personal services when they consider where to buy fund products,” Lee said.
Lu is aware of these requirements – its customers will spend as little as 3 minutes opening an account online, while it will use big data and other technology to offer round-the-clock fund sales and advisory services.
And while many banks have had to cut branch opening hours amid the Covid-19 pandemic, the time is right for Lu’s launch, its CEO said. “We will target our fund management products at individuals and families in Hong Kong,” Cai said. “The interest rate is now close to zero. The many wealth management products in Hong Kong, which stood at almost US$1 trillion in assets in 2018, can offer better returns to investors,” he said.
Lu is Lufax’s second overseas venture after it entered the Singapore market in 2017. Lufax, which also offers lending and financial technology services in mainland China, is reportedly planning to list in the United States.
