The Research Of Incentive Mechanism Of Personal Finance Business In China

Personal Finance aims at reasonable arrangements for household and personal wealth as well as private consumption. It is a comprehensive wealth management for individuals and households that involve establishing a private financial plan with good knowledge of the individuals’ or households’ risk appetite, financial needs, target return and so on where investments are made. Personal finance is a typical agency by agreement which contains much moral risk such as work sloth. There might be situations where the wealth manager tends to choose those with higher rebate instead of the ones that best suits his or her clients, or where the manager conducts the wealth management in accordance with his own risk appetite rather than the principals’. Therefore, it is necessary to make an in-depth analysis on the formation mechanism of moral risk in personal finance and discuss the counter-measures in preventing it, thus conducting a study of incentives in this respect.This paper adopts both theoretical analysis and case analysis. From the perspective of the Game Theory, it conducts the theoretical analysis targeting the moral risk in personal finance. In theoretical analysis, both static and dynamic game analysis are adopted to establish static principal-agent model and dynamic principal-agent model accordingly so as to further explore the formation and incentive mechanism of moral risk in a more comprehensive manner.First in the static principal-agent model, the analysis is conducted on the formation and relevant incentive mechanism of moral risk where the wealth manager is hired for once. Then in the dynamic principal-agent model, the analysis is made on the formation and relevant incentive mechanism of moral risk where the wealth manager is hired for a relatively long span of time. The conclusions are as follows:1. the extent of moral risk of a wealth manager is inversely correlated with the degree of supervision on him or her;2. the extent of moral risk of a wealth manager is inversely related to the level of incentives on him or her;3. the extent of moral risk of a wealth manager is inversely correlated with the level of punishment on him or her.In this paper, the innovation are made as follows:1. combination of theories and practice;2. aiming at solving problems concerning moral risk;3. analysis with both static and dynamic game theory models.Applying the conclusions of the theoretical analysis into Personal Financial service, we have the following policy recommendations to prevent the formation of moral risk behavior:1. explore new Personal Financial services pattern, through binding the gains of wealth managers and the principal to enhance the excitation of wealth managers;2.improve the financial manager performance appraisal system, and establish credibility evaluation system for financial managers, so we can form a kind of moral hazard monitoring and punitive measures;3. strengthen the construction of personal financial supervision mechanism, and supervision mechanism involves internal supervision and external supervision;4. improve the quality of professional financial managers.The whole thesis is divided in to six parts, which consists of both the introduction and the body of five parts.The first part:By summarizing the research results on personal finance to find the research need to be study in this article.The second part:the paper introduces the development and present situation of personal finance market at home and abroad, and, three aspects of personal finance service which are the financial manager’s source of income, employment mechanism and personnel quality have been comparative analysis at home and abroad.Besides, the paper analyzes the causes and the damage of moral hazard behavior of the personal finance service.The third part:establish a principal-agent model under the static game and the dynamic game, and get the conclusion of the reason and influencing factors of moral hazard behavior in personal finance market, and form the Mechanism construction direction to prevent moral hazard behavior.The fourth part:form the countermeasure of how to prevent moral hazard behavior in the personal financial markets based on the model research conclusion.The fifth part:the conclusion part, this part summarizes the main points involved in the article, and the innovation and shortage of the article.