Cracking the Triple Contradiction in Financial Services

The financial advisory system prioritizes the functionality of finance over profitability, representing Zhejiang's exploration into the structural reform of the financial supply side. As its influence continues to expand, this system has gradually moved from Zhejiang to the rest of the country.

The tide of digitalization is surging forward, and financial services have been endowed with new missions and connotations.

The Central Financial Work Conference held at the end of 2023 proposed to "accelerate the construction of a financial powerhouse," demanding a "profound understanding of the political and people-oriented nature of financial work." Against this backdrop, how to strengthen the functional positioning of financial services in serving the economy and people's livelihoods, and effectively put it into practice, is a must-answer question for financial institutions, including commercial banks, to achieve high-quality development.

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Financial Advisors: Triple Positioning to Resolve Triple Contradictions

For a long time, the financial ecosystem has faced three contradictions in its development process:

Firstly, there is a contradiction between the functionality and profitability of finance. For various reasons, financial institutions usually provide services around enterprises that are doing well, while enterprises with problems and relatively poor profitability find it difficult to receive adequate financial services. Often, what is done is "adding flowers to brocade," lacking "sending charcoal in snowy weather," which stems from the objective profit pressure carried by financial institutions.

Secondly, there is a contradiction between the specialized services of financial licenses and the comprehensive service needs of customers. Every financial institution operates based on licenses: banks ask customers if they need loans, securities firms ask if they need to issue bonds, and funds ask if they need investments... The essence of such service logic is not customer-centered but business-centered.

In the new era, the service industry should be customer-centered, that is, to focus on what customers really need. Following this approach, financial institutions design the most professional tools so that customers can use them well, benefit, and trust them, which reflects the value of professional talents. However, current professional talents provide services based on institutions under financial licenses, which creates a contradiction between license-centered specialized services and customer-centered comprehensive services.

Lastly, there is a contradiction between the insufficient financial professional strength of local governments and the heavy task of tackling financial risks. China's economy has not yet gone through a complete cycle, and financial risks will also be exposed one after another after the economic downturn. Local governments have relatively fewer financial professional talents, which means that the task of resolving local financial risks is heavy and the pressure is great.To address the contradictions that arise in the development of the financial ecosystem, in 2018, Yuan Jiajun, then Governor of Zhejiang Province, proposed the question "How can financial professionals be brought into enterprises to help identify and prevent risks?" during his research at financial institutions within the province. This is also the origin of the financial supply-side reform innovation measure—"Financial Advisor System"—first pioneered by Zhejiang and written into local regulations.

The Financial Advisor System is essentially professionals dispatched by financial institutions, accounting firms, law firms, equity investment institutions, and relevant industry associations, appointed by the Zhejiang Business Association Financial Services Committee as financial advisors. They use their professional knowledge and skills to provide local governments and enterprises with financial planning, investment and financing, financial risk prevention and handling, legal and financial consulting services.

The system aims to transform finance from a professional service centered on licenses to a comprehensive service centered on customers. By entering enterprises that truly need services, it better practices the political and people-oriented nature of financial work. Its positioning is actually a social role that requires doing three things well:

First, as the "Financial Family Doctor" for enterprises. Financial advisors should help enterprises solve problems, not only help them with financing but also provide intellectual support, propose solutions, consider existing issues, and become the "Financial Family Doctor" for enterprises, with a general practitioner's positioning and a public welfare nature.

Second, as the "Financial Troops" for local governments. Financial advisors should help the government draft documents on financial matters, as well as financial training, planning, and the promotion of financial work.

Third, as the "Financial Financial Planning Consultant" for residents. Financial advisors become anti-fraud "propagandists," identifying and helping with various social frauds, and conducting anti-fraud investor education.

Prioritize functionality and break through the "last mile"

Overall, the Financial Advisor System has mainly achieved three innovations:

The first innovation is that financial advisors take another step towards marketization by establishing financial advisory firms, which act as a lubricant between financial institutions and enterprises or society. That is, society and enterprises need to find what kind of financial tools they need, and they can do so through financial advisory firms, which help them find suitable financial institutions to provide services. Currently, Zhejiang has taken the lead in establishing two financial advisory firms focused on financial advisors and has clearly stated that they do not aim for profit.

The second innovation is the digitalization of financial advisors, expanding social influence by promoting online financial advisory consulting, investor education, anti-fraud propaganda, etc. Currently, ten "Gold Financial Advisors" are launched every year.The third innovation is also a crucial link, which is the construction of county-level financial ecosystems. The headquarters of financial institutions are usually located in cities, but all the issues and drivers of development in Zhejiang come from the county level. The county economy here is well-developed. If we can thoroughly study the problems existing in a county, then the "last mile" of financial supply-side reform can also be unblocked.

Taking the Hangzhou Linping District, which is currently engaged in financial ecosystem construction, as an example. By establishing a "double leadership system," the "county comprehensive financial ecosystem construction pilot work" has been carried out, and 79 financial advisors have been deployed in this area over two years, mainly carrying out three tasks:

1. Optimizing government platforms. By establishing an investment banking team of about 10 people, we have targeted the resolution of government platform issues. For instance, financial advisors will assist the government in analyzing how the platform can better issue bonds and better utilize local resources to do more for local employees. At the same time, we have considered potential future issues that the government platform may face and formed a set of indices for "healthy operation of government platforms."

2. In terms of enterprise services, by connecting relevant regulatory departments at the county level, we have built a digital "JinFuBao·Micro" platform for small and micro enterprises. The goal is to significantly increase the financing acquisition rate and promote an absolute annual decrease in financing costs. This part of the work has taken a lot of effort but has yielded results: in 2023, the corporate financing cost decreased by 23 basis points. It is worth mentioning that, empowered by digital technology, the operational costs of enterprises will also achieve iterative reductions in the future.

3. More than 200 investment exchange meetings have been held in a county, with each of the 79 financial advisors conducting at least two sessions. As a result, 35 different scenarios of anti-fraud publicity have been developed. Thanks to the efforts of financial advisors, the proportion of local residents being deceived has significantly decreased. At the same time, by following up on services such as local enterprise listings, finding industrial parks, and attracting investment, the financial ecosystem at the county level has been greatly improved.

In fact, in the process of promoting the implementation of the financial advisor system, there is usually such a doubt: financial professionals themselves need to make money, can these things make money? In response to this, Zheshang Bank has clearly proposed the concept of "benevolent capital finance," which means that finance must prioritize functionality rather than profitability.

The consideration behind this concept is that we are arranged by the government to do these financial tasks, and more often than not, we share the same positioning as schools and hospitals, possessing social functions, so we cannot consider profitability entirely. Based on this positioning, the stance of financial institutions has been further elevated.

Starting from Zhejiang and extending to the whole country, from the issuance of the "Pilot Work Plan for Establishing an Enterprise Financial Advisor System" at the end of 2018, to the explicit promotion of the "Financial Advisor System" throughout Zhejiang province in 2019, and then to the formal inclusion of the financial advisor system in the "Zhejiang Province Local Financial Regulations" in 2020...

At present, Zhejiang Province has more than 4,200 financial advisors, and local governments have established 146 financial advisor studios, with one financial advisor studio in each county, solving all financial-related issues. More importantly, with the implementation of the financial advisor system in Zhejiang, the mindset, stance, and vision of financial institutions have been significantly enhanced.The practice and model of financial supply-side structural reform in Zhejiang are being promoted to more places. In 2021, the first batch of financial advisors entered Xinjiang to carry out support work, communicated and connected with local government platforms, party and government representatives, and state-owned enterprises, ultimately forming a set of mechanisms. In 2023, financial advisors entered Liangshan in Sichuan and the Greater Bay Area. Through exchanges with government platforms in different places, the financial advisor system has been known and promoted by more and more places.

At present, there are 16 provinces including Beijing, Shanghai, Shandong, Sichuan, etc., actively promoting the financial advisor system. The financial advisor system has developed slowly under such a background and has been promoted nationwide.

Recently, the "Financial Advisor System" has entered the Haixi Prefecture of Qinghai Province. On the one hand, it hopes to implement the concept and methods of "Good Financial" here; on the other hand, it also hopes that financial advisors will play an important role in assisting the development of Qinghai.

Specifically, by establishing such a mechanism, in the future, whether it is Haixi Prefecture or other places in Qinghai Province, as long as there are specific financial needs, including business docking or professional consultation, etc., there is a mechanism and platform that can be contacted. Specific exploration can be conducted from three aspects:

First, establish a mechanism. Exchange and train the financial innovation concepts and awareness of the eastern region, such as organizing party and government, enterprises, and financial institutions in Qinghai to study in Zhejiang.

Second, communicate with local government platforms, state-owned enterprises, Zhejiang merchants, and other enterprises to understand the current financial needs. Financial advisors are professionals, and behind the financial advisor system are various financial institutions, financial tools, and licenses, which can achieve effective docking of needs and services.

Finally, establish a financial advisor studio in Haixi Prefecture. Communicate regularly and irregularly to form strategic planning to promote local economic development and establish a positive interaction mechanism. In short, by cooperating with the financial industry, a new development path can be taken.