Small and Medium-sized Banks Expand Wealth Management Distribution Channels

This article is reprinted from: Economic Daily

Staff Reporter Wang Baohui

Recently, China Post Wealth Management announced the signing of a distribution cooperation agreement with its partner institutions. As of February 26 this year, among the 62 financial institutions involved in distribution cooperation, many small and medium-sized banks such as Meizhou Rural Commercial Bank, Fudian Bank, and Weihai Bank participated in wealth management distribution. Not only China Post Wealth Management, but also other wealth management companies like Bank of China Wealth Management, Xingyin Wealth Management, and Suzhou Wealth Management are continuously deepening their distribution cooperation with small and medium-sized banks. Among the new distribution partners of several wealth management companies, city commercial banks and rural commercial banks account for a larger proportion.

Researcher Qu Ying from Puyi Standard stated that the channel collaboration and resource complementarity between wealth management companies and small and medium-sized banks are continuously advancing. In recent years, the distribution model of small and medium-sized banks has gradually evolved toward more refined and systematic approaches. Relying on their own regional and customer base, these banks are continuously optimizing their distribution business layout within a compliance framework, promoting a positive interaction between wealth management distribution, regional financial services, and inclusive finance development. Overall, the industry is showing a pattern of structural optimization and deeper collaboration.

The cooperation between wealth management companies and small and medium-sized banks is a “two-way effort.” Currently, under the dual influence of industry transformation and regulatory guidance, the wealth management distribution business of small and medium-sized banks is showing steady development, with expanding coverage, more diverse cooperation entities and product offerings, and increased channel penetration and regional outreach. This has become an important direction for small and medium-sized banks to optimize their business structure and expand intermediary business income.

In terms of distribution channels, the trend of cross-bank distribution by wealth management companies has significantly strengthened. The China Banking Wealth Management Registration and Custody Center’s “Annual Report on the Chinese Banking Wealth Management Market (2025)” shows that by 2025, wealth management companies will continue to expand distribution channels beyond their parent banks. Of the 32 wealth management companies operating, one company’s products are only sold through its parent bank, while the other 31 have also established distribution channels with other banks. By December 2025, a total of 593 institutions in the market engaged in cross-bank distribution of wealth management products, an increase of 31 from the beginning of 2025.

Meanwhile, the overall scale of self-operated wealth management by small and medium-sized banks that have not established their own wealth management subsidiaries is generally declining, as they actively explore distribution channels for wealth management products. This reflects an important feature of current market segmentation. For example, Jiaxing Rural Commercial Bank, under Zhejiang Rural Commercial Bank, is accelerating the deployment of licensed wealth management companies like Xingyin Wealth Management and Hang Silver Wealth Management to provide more diverse and stable wealth management services for local investors. Additionally, Guangzhou Bank and Gansu Bank are also focusing on flexible subscription and redemption, steady returns, and promoting distribution cooperation.

Qu Ying pointed out that self-operated wealth management is closely related to the main banking business, with significant risk transmission potential. Transitioning to distribution of wealth management products allows small and medium-sized banks to isolate risks from their main banking operations and avoid becoming shadow banking activities. In a low-interest-rate environment where profit margins are continuously compressed, distribution business has lower operational costs and capital requirements, making it more suitable for the resource endowments of small and medium-sized banks. As customer demand for diversified asset allocation increases, a single self-operated product can no longer meet needs, and focusing on distribution has become an important direction for the transformation of wealth management business in these banks.

However, considering current operational resources and costs, small and medium-sized banks still face certain challenges in product adaptation and risk control when developing distribution wealth management. Zeng Gang, Deputy Director of the National Financial and Development Laboratory, believes that the transformation of small and medium-sized banks into distribution of wealth management products still faces many structural difficulties. First, these banks have shortcomings in professional capabilities, with weak investment research abilities and deficiencies in financial technology application, risk control systems, and professional talent reserves. Second, high compliance costs have become a new pressure, especially under stricter policies like the “Measures for the Administration of Commercial Bank Agency Sales Business,” which impose higher compliance requirements. Small and medium-sized banks face challenges such as high compliance costs, weak technological systems, and insufficient financial literacy education for customers. Lastly, to achieve profitability, distribution business needs to reach a certain scale, but current pressures include narrowing net interest margins, limited returns from self-investment, stricter regulation of wealth management, delays in licensing approvals for wealth management companies, and widening gaps in intermediary income.

Transforming into distribution of wealth management products is not an overnight process for small and medium-sized banks. They should tailor their strategies based on their own realities and address bottlenecks from multiple dimensions. Xue Hongyan, a special researcher at the Su Commercial Bank, suggested that first, these banks should focus on cultivating high-net-worth clients in their regions, establishing precise profiles of local high-net-worth individuals, and leveraging local branches and government-enterprise cooperation channels to explore personalized needs such as wealth inheritance and cross-border asset allocation. Second, they should develop localized exclusive service matrices, forming specialized teams of wealth advisors, legal consultants, and tax experts to provide customized asset allocation plans. Third, they should optimize digital service support by building dedicated online channels that balance offline in-depth services with online convenience. Additionally, it is essential to strengthen the localization of talent teams, focusing on cultivating versatile professionals with both wealth management expertise and resource integration capabilities to provide core support for regional wealth management operations.