Chinese acquisition of AssetMark raises questions

The Chinese are coming! The Chinese are coming! They’re coming to the U.S. investment advice market, as reported by Alessandra Malito.

Huatai Securities Co., a Nanjing, China-based securities firm, has acquired AssetMark Inc., a Concord, Calif.,-based technology firm, for about $780 million. AssetMark provides analytical, portfolio and custodial services to financial advisers, brokers and investors, and its customers advise on $29 billion in assets.

AssetMark offers a service called eWealthManager that advisers can use to research investments, develop portfolios, create and maintain client accounts, view current portfolio details, and access custodial resources. An affiliated company, AssetMark Trust, had approximately $16 billion under custody.

FOOTHOLD IN U.S.

Huatai provides financial services to individual, institutional and corporate clients in China, such as brokerage and wealth management, including stock, bond and futures trading. It also engages in investment banking and asset management. It is China’s fourth-largest brokerage firm, and in 2015 it went public in a $4.5 billion initial public offering.

Huatai likely wishes to establish a foothold in the U.S. wealth management market and also likely wants access to AssetMark’s technology. It is unlikely to pose a threat to U.S. advisers for the foreseeable future even if it should want to compete with them eventually.

Huatai also might want to serve as an access point for advisers wishing to invest client assets in China and other parts of Asia. These are legitimate business motives.

ACCESS POINT

But a few questions loom. First, does Huatai have any connection to the Chinese government and its security forces? Will the acquisition give Huatai access to the private information of U.S. investors that could be used for ill? Could its acquisition of AssetMark’s technology provide a new access point for Chinese hackers into U.S. systems?

We hope the responsible U.S. authorities have considered these questions and satisfied themselves that the answer to each of them is no.