Earnings Call Transcript - NOAH Q1 2020

Operator, Operator

Good evening and welcome to Noah Holdings' first quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to Mr. Grant Pan, CFO. Please go ahead.

Grant Pan, CFO

Thank you, operator and good morning and good evening to all the investors and analysts on the call. Chairlady Wang and I are very happy to report to you about our first quarter performance. First let me hand it over to Chairlady Wang to share with you the performances of Noah for the first quarter in 2020.

Jingbo Wang, Chairlady

For today's agenda, I will first share my views on the micro economy and briefly summarize Noah's overall performance in the first quarter of 2020, the developments of our business segments and the achievements and challenges during our transformation. Our CFO, Mr. Grant Pan, will follow with a detailed discussion of Noah's financial performance in the first quarter. We will conclude the call with a question-and-answer session. It is fair to say that the COVID-19 pandemic since 2020 has pushed wealth management institutions in China to accelerate the transition to provide more proactive and customized asset management services and expedite the supply of net value-based products. Our industry is constantly transitioning from product-driven and product sales oriented to investment advisory oriented, providing clients with effective asset allocation services. The COVID-19 pandemic started wealth management industry with new methods and approaches, contactless services, live streaming, online solutions, and intelligence processing have become critical elements for every institution. As Noah has shifted our focus from providing private credit funds to more standardized products, we're able to enhance technology and innovation in our wealth management business and empower different operational aspects including new client development in China, product services, investment research services, and in risk management with digital technologies such as big data and artificial intelligence. During the COVID-19 pandemic, over 99.5% of Noah's clients have been completing their transactions entirely online. Next, I will go over our wealth management segment, asset management segment, and operational efficiency in the first quarter. Starting from the first quarter of 2019, Noah ceased the distribution of single counterparty non-standardized private credit products and fully entered the field of standardized products. Now I'm delighted to report that our transaction value has reached RMB23.19 billion in the first quarter of 2020, up 76.1% quarter-over-quarter. The transaction value of standardized products including mutual funds, equity, and bond funds achieved an increase of 496.3% year-over-year and was up 96.9% quarter-over-quarter. Excluding single counterparty non-standardized private credit products, the transaction value has increased by 287.5% year-over-year and was up 88.3% quarter-over-quarter. We're pleased to see that standardized products are well received by our clients. Thanks to their continuous trust, the gross of the AUM of standardized products at Noah has exceeded our expectations, especially considering the severe impact of the COVID-19 pandemic in China, we're quite satisfied with our achievements so far. In the first quarter of 2020, Noah's net revenues reached RMB746 million down 5.4% quarter-over-quarter and our GAAP income attributable to shareholders reached RMB256 million up 119.6% quarter-over-quarter. The reason for the slight decrease in our net revenues was due to the decline of revenues from other businesses under the impact of COVID-19. In the first quarter, net revenues from our overseas segment reached RMB208 million down 16.1% year-over-year and down 12.7% quarter-over-quarter accounting for 27.8% of the group's total revenues. In the first quarter of 2020, the number of our active clients reached 15,831, up 4% quarter-over-quarter. Among the active clients, 12,756 were mutual fund clients up 9.2% quarter-over-quarter. In the meantime, by the end of March this year, the number of black card clients reached 880, up 16.1% year-over-year. In the first quarter, the transaction value from black card clients increased by RMB4.25 billion AUM, reaching RMB78.85 billion accounting for 48.8% of the group's total AUM. Noah's clients generally have high incomes or have the potential to earn high incomes with excellent educational backgrounds and a dedication to long-term study of investment and wealth management. Their reception to our transformation to standardized products has far exceeded our expectations in the past several months. They understand the micro cycles, accept the concept of asset allocation, and are willing to increase the proportion of standardized products in their portfolios. Changes in the industry and client demands are also driving the development of our relationship manager team. Starting from this first quarter, we have been applying a new relationship manager compensation scheme, comprehensively relating relationship managers bonuses to clients. This policy demonstrates the shift from a sales-driven approach towards focusing on maintaining outstanding AUM and highlights the consultancy value provided by relationship managers. In the first quarter of 2020, the turnover rate of our elite relationship managers dropped to 1% from 4.1% in the fourth quarter of 2019. Faced with new market conditions, relationship managers need support from a professional one-stop service platform. We have formed a skilled triangle asset allocation team, consisting of product experts and services providers to support our relationship managers with strong middle office support in various key aspects of their business activities. Affected by the global pandemic and mandatory travel restrictions overseas, in the first quarter of 2020, revenue from our insurance business decreased by 51.8% year-over-year and was down 22.5% quarter-over-quarter. We're currently actively planning for the upcoming quarters. On one hand, we have launched the service reservation system and on the other hand, we have initiated the mode of providing integrated services online. Since the last Chinese New Year, we have conducted over a hundred online courses and roadshows as well as a considerable number of high-quality live streaming sessions online. For example, the Noah at-home initiative has helped to acquire nearly 1600 new high-net-worth clients for our mobile app Micro Noah. In terms of asset management, as of March 31, 2020, Grofers AUM stood at RMB161.7 billion down 5% quarter-over-quarter and down 5.5% year-over-year. As a result of our voluntary early redemption of private credit funds resulted in a net decrease of RMB971 million in AUM. If we exclude the impact of private credit assets, the AUM of private equity, public securities, real estate, and multi-strategy funds increased slightly up 0.8% quarter-over-quarter and up 7.1% year-over-year. The AUM of our overseas segment reached RMB26.4 billion up 6.9% year-over-year and up 6.5% quarter-over-quarter accounting for 16.3% of the group's total AUM. We understand that our high-net-worth clients are paying increasing attention to asset allocation. We have officially taken into consideration this diversified growth of Grofers' AUM when implementing the strategic targets of the group. In the era of standardized assets, the wealth management industry has embraced a new paradigm driven by asset allocation. Under such circumstances, Grofers positioned itself as an asset management company that focuses on multiclass asset allocation and pursues absolute returns. On the public securities front, its flagship fund reported an excess return of 30.31% by the end of the first quarter since its launch. The absolute return of Grofers' flagship private equity fund was 17.16% by the end of the first quarter, which was 5.72% higher than its market benchmark. In terms of the ECPE and real estate funds, our focus for 2020 will be on secondary PE fund Series 5 co-investment PE fund, US funds investing in the data industry, real estate flagship funds and US rental property funds. We will continuously improve our management and the capability of direct investment. Wealth Management is gradually shifting from product-driven to AUM and asset allocation driven. To adapt to this market change, we have more detailed requirements for the services our relationship managers provide. We have administered responsive mechanisms and organizational policies to ensure the quality at each step of our operations. When serving clients, we have always adhered to the principle of being kind, responsible, and reasonable, helping them retain their asset value more scientifically based on our understanding of their needs. The way we understand our clients is to put ourselves in our client's shoes and prioritize their interests. Following the market moves and acting in accordance with rules, laws, and regulations, in 2020 Noah has established a client-anxious committee to evaluate any new project before its launch from the client's perspective based on their needs and long-term interests. In the case of client complaints and disputes, the committee will make impartial judgment. For the asset allocation of high-net-worth clients at Noah, there will also be a professional team to review the portfolio and remind relevant relationship managers and clients of any issues. As we enter the era of standardized products to better serve our clients, we must improve their online and offline experience. I believe that technology will fully empower and support the wealth management industry in the coming years. As such, we will conduct more data research and utilize AI-based investment advisory and open product platforms to unlock more channels for portfolio management, cost reductions, and efficiency improvement. Therefore, Noah has been actively improving the user experience on our mutual funds app Fund Smile and establishing an AI-based investment advisory system. In the second quarter of 2020, we also plan to launch the new version of I-Noah which will be our standardized product platform overseas. Based on the existing model of relationship managers providing consultation services, we will further develop our business layers. This means serving ultra-high-net-worth clients via the VIP center and investment advisory while reaching more potential clients online by optimizing payment efficiency, offering more high-quality content, and supplying diversified products, dedicated to constantly improving our client experience with us. The wealth management industry is quite special. When the returns of our product or investment don’t meet a client's expectations, even if the investment accounts for less than 1% of our RMB700 billion accumulated transaction value, for those clients affected, it's 100%. Therefore, we fully understand when clients complain and voice their dissatisfaction. Compliance and risk management are the lifelines of wealth management institutions. Noah will always keep this in mind and behave prudently to ensure the compliance of transactions and diligence in risk management. For some assets occurred in the past, we have established a special nonperforming asset team to deal with them through market forces and by normative and legal means. In this process, we have been constantly communicating with our clients and providing updates on the progress. This process has turned out to be quite effective and now a majority of the risky projects have been successfully managed. At the same time, we're continuously working on investor education and promoting the formation of a more mature market, letting clients understand that investments are not deposits, and they carry risks. While we don't offer implicit guarantees, it does not mean that we're irresponsible. We adhere to the principle of being kind, responsible, and reasonable, and are committed to creating value for our clients. We're grateful for the trust of our clients. Now, what transformation means is that we're returning to the mindset of respecting common sense in the market as well as raising our awareness of potential risks. Looking back, we have experienced several economic cycles in the past 15 years, especially the COVID-19 pandemic makes us realize more than before that we're now in an era characterized by volatility, uncertainty, complexity, and ambiguity. It requires more wisdom to secure certainties among so many uncertainties. For Noah, it means we must pivot around our high-net-worth clients and provide them with integrated services including wealth management, asset management, and other services such as insurance and lending. In 2020, Noah has launched a new governance structure and process system aiming to create a new corporate culture and incentive plan. In addition, we will focus more on monitoring the market, developing insights, reaching strategic consensus, and implementing strategies. We have given up the previous management meeting decision-making mechanism and fully adopted a committee-based decision-making mechanism. We have set up committees focusing on strategy, technology, human resources, client interests, auditing, and discipline, etc. Employees at the execution level who are not members of our committees are also invited to join, ensuring a more comprehensive review of our operations and improving the quality of decision-making. The appointment of management is subject to their qualification and KPI performance. We have also formed a multilayer relationship manager compensation scheme based on clients' different behavior patterns to promote the development of the VIP center and self-service investment platform. 2020 marks the 10th anniversary of Noah Holdings listing on the New York Stock Exchange and the 15th anniversary since Noah's establishment. I'm really grateful for the trust and support our clients and shareholders have placed with us, allowing us to come such a long way with all of you. In the future, the team and I will continue to do our best to honor the trust given to us and to create value for our clients, shareholders, employees, and society.

Shang Chuang, CFO

Thank you, Noah for sharing and let me walk you through the more detailed financial performances for the first quarter. We entered the year 2020 with a strong start despite the COVID-19 situation that has literally shut down the nation for an extended period of time. Especially as part of the transformation strategy, we see very positive signs and strong growth in the distributions of standardized products. First of all we are on track to meet our guidance of $8900 million profit target for the year. As we ended up with a non-GAAP profit of $256 million, reaching the milestone one-third of the way. Operating profit margin improved to 34.3% as a result of scrutinized management of total costs and expenses. Against all odds, the transformation and the pandemic situation made the first quarter seem like a very difficult quarter for sales. I’m most proud of, which is also the biggest highlight of this quarter, that total transactions distributed in this quarter went up strongly to $23.2 billion or 76% growth from the last quarter. Driven by a resilient group of Noah team members and relationship managers, we showed signs of resilience in our investors even during a very difficult quarter. Let me caveat here that our first quarter is usually strong. We’ll continue to face challenges caused mainly by travel bans and economic pressures that gradually affect us as the year progresses. Revenue-wise, considering the major disruptions to the overall economy by the unprecedented pandemic situation, we're also delighted to see a recovery in one-time commission from last quarter that went from $160 million in the fourth quarter of 2019 to $211 million in this quarter, increasing by 33.1%. The growth can be attributed largely to the increase in total transaction value as mentioned previously. Comparing to the first quarter of 2019, one-time commissions were down by 34.7% as the travel restrictions hindered the sales of higher-margin overseas insurance products, which in turn affected the total CAGR rate of the revenue. At the same time, 46% of the total standardized products, about $10 billion, had durations longer than three years, which provides our clients a healthier allocation of assets that would offset short-term fluctuations from the volatile stock market, and at the same time provides us with assets that would generate more recurring fees for longer periods. But then again, like everybody else, the COVID-19 situation, especially restrictions on traveling and offline gatherings, did have and will continue to impact part of our business, especially the overseas segment where some of the service products require clients' physical presence. For example, the overseas insurance products, as we have mentioned earlier. More important to quantity and distributed transaction values, we’re excited to see a clear switch in product mix that’s in line with our transformation to standardized products. In the first quarter last year, $22.1 billion out of the total transaction value of $28 billion, about 79%, was from single counterparty credit products, and standardized products at that time only accounted for about 11%. Now, after two quarters of transformation, the mix has cleared to standardized public products which now account for about 82% of the total financial products distributed this quarter. Obviously, we cannot yet claim final victory in terms of strategic transformation, as distributions in public securities had a lot to do with the stock market performance this quarter which may not sustain for the rest of the year, but apparently, we are very encouraged to see that initial sign of success that indicates our clients' confidence and increased activity level from our clients. We’ll continue to feel the pressure in the following quarters depending on the timing of the relaxation on the travel bans. For example, the originally scheduled May 8th lifting of mandatory quarantine upon arrival in Hong Kong area has been extended for another month, now scheduled for June 8th. Obviously, we didn’t just sit around waiting for miracles to happen; our team are actively helping our clients to plan ahead and have several hundreds of orders prepared that would be readily converted once travel is allowed for the overseas insurance products. Management fees increased slightly year-over-year based on the growth of AUM, comparing to a year-ago amount that went from $419 million to $450 million, a 7.3% growth year-over-year. Although we had a 3.4% decrease sequentially from the last quarter in 2019, mainly due to the generation of some backend loaded management fees from the exiting single counterparty credit products in the last quarter. We also recorded another $20 million of performance fees in this quarter, mostly arising from public security funds. This is the 23rd consecutive quarter that we have recorded such fees, and we anticipate more to come in the following quarters. Another area that sees a more direct impact from the COVID-19 situation is revenues arising from lending and other services that decreased 71.5% year-over-year and 50% quarter-over-quarter. The operations of which typically require interactions with governmental branches, such as notarization services and administrative services, which were not functioning fully during the quarter. Revenues from offline classes offered by education have also seen greater challenges during this quarter. Our operating expenses in the first quarter exhibit significant improvement both from a year-over-year and quarter-over-quarter perspective. Year-over-year it went down about 28.1% and quarter-over-quarter down by 52.1%. These results are due to two reasons: first, both internal and client-oriented conferences have been moved online through web-based platforms that led to less travelling and lodging expenses. Although we anticipate that these expenses will increase in the future once the restrictions on traveling and gathering are relaxed, we’ll continue to explore and invest in our IT infrastructure to post more client events online. Second, anticipating a challenging year ahead of us, we also implemented several cost-cutting measures in non-essential areas proactively. For example, we temporarily implemented a two-week unpaid leave in the first quarter, resulting in nearly a 10% swap in compensation and benefits. Although the non-permanent leave was a temporary measure and has been restored to normal levels by now. We’ll continue to closely monitor expenses and costs to prepare for windy days ahead. In addition, we have also asked our regional heads to apply for relief on rental expenses throughout the nation, thereby cutting our overall rental expenses for office space by several millions. When it comes to our balance sheet, we continue to strive for a leaner balance sheet and have further improved our asset debt ratio to a record low of 18.3% while maintaining a 4.8 multiple current ratio. We believe that maintaining a healthy liquidity level will allow for a strong recovery during this difficult time, which also gives us the capability to further invest in longer and strategic initiatives such as technology and online platforms and explore new business opportunities. The wealth management segment realized a good recovery in this quarter, contributing $166 million to almost 65% of the total operating profit this quarter. Stronger profit this quarter also comes from our asset management segment, which recorded $93.5 million, showing 37.8% growth year-over-year and 3% quarter-over-quarter growth. The increased level of profit margins for that segment also demonstrates disciplined operations. However, in terms of the asset management segment, we do see a decrease in the total of about $8.5 billion, but if we take into consideration the substantial execution of single counterparty credit products of about $9.7 billion, the rest of the asset classes recorded a total increase of nearly $1 billion that’s mostly driven by private equity and real estate products, which remains conventionally strong. However, the growth in standardized products manufactured by Grofers was disappointing in the first quarter as few of the standardized and balanced fund products did not launch as scheduled. We expect improvements in the following quarters as these products have already been manufactured, packaged, and scheduled for distribution in the second and the following quarters. As mentioned earlier, the lending and other business segments experienced a direct hit from the COVID-19 situation and recorded an operating loss for the first time since achieving profitability in the third quarter of 2018. We’ll continue to seek ways to improve the sector, most likely conducting more fee-type business assisting banks and trust companies using the technology, experiences, and know-how that we have developed in this sector. All in all, we're pleasantly surprised by the start of this quarter, and we should really thank our clients for their confidence in us, as evidenced by the growth in the number of active clients, the number of black card AUM, and the macro transformation towards standardized and diversified asset management. Thank you to our team for their resilience and courage shown during this global pandemic. We’re obviously fully aware of the challenges ahead due to the delayed effect on the economy, rising unemployment rates, and impacts on exports that may affect many of our clients engaged in the export manufacturing businesses. But we’re also confident that we’ll continue to drive our transformation into modern financial institutions, best equipped with technology as well as great products and services for our clients.

Operator, Operator

Thank you. Your first question comes from Stephanie Poon from City. Please go ahead.

Unidentified Analyst, Analyst

Hi, good morning management, thanks for taking my questions. A couple of questions for me. The first is regarding your transaction volume of the public securities. Clearly, it’s a very strong rebound to your Q1 results. I just want to understand what the key drivers are here. Will you be able to provide us a breakdown by the catalog products for something like mutual funds and hybrid funds, and how are they doing respectively in Q1 compared to the previous quarter? Also, I want to check on the trend in Q2 so far, as you also mentioned earlier it depends on the Asian market performance. So we do see the Asian market recording a kind of normalizing trend in terms of GDP. How is the trend in Q2 so far; how sustainable do you think this strength in Q1 would be? The second question is – I see on your registered high-end growth. So we see a very strong number of new registered clients in the first quarter, which was strong by four times Q-on-Q. Can you provide more details on the underlying risk that represents the IPO as some organic growth? How sustainable do you think that is? And lastly, I want to check on the lending business. We see there’s a provision for recorded loss in the first quarter. So can I check on what the number was in the fourth quarter last year? Apparently, it's a big increase on a year-over-year basis. I want to understand the drivers and maybe the underlying NPL trend of the lending business that you're having here. That’s all my questions, thank you.

Shang Chuang, CFO

Thank you, Stephanie. Give me a second to translate your question and share with management.

Yi Zhao, Analyst

Okay, thanks, Stephanie. For the first quarter, yes, we actually hosted quite a bit of online conferences, especially during the shutdown period. We actually had several live sessions for our clients that got online, and we were able to experience a higher level of interaction with clients compared to the conventional way. During those several weeks, we probably had close to 600,000 hits and visits during those sessions. We’re able actually to launch quite a bit of standardized products with the backing of good performance from strong fund managers that were actually able to package products with longer durations, about RMB10 billion out of the total RMB23 billion with durations longer than three years. So in terms of Q2 trend so far, I think you brought up a valid point. The standardized products do have a little bit of correlation with the Asia stock market, but we are also offering more balanced funds and various types of products for our clients. We’re not just pushing the clients to the equity market, but also providing a more balanced allocation of the products. So while we’re watching how Q2 unfolds, we do have good alternatives for our clients other than just equity securities that tie to stock market performance.

Unidentified Analyst, Analyst

You raised a good point. The standardized products have some correlation with the Asia stock market, but we are also offering more balanced funds and different types of products for our clients. We’re not solely steering clients towards the equity market; we're also providing a balanced allocation of products. As we monitor how Q2 develops, we have solid alternatives available for our clients beyond just equity securities that are linked to stock market performance.

Grant Pan, CFO

Yes, just a few more comments from our Chairlady. First of all, not just because of the stock market performance, we did quite a bit of preparation ahead of time. So we were able to put together a good roster of outstanding fund managers. We also moved a lot of offline conferences online, including our traditionally held offline Diamond Conference in hotels, and we managed to reach a lot of new clients through those sessions. Thirdly, the change in demand from our clients is evident; many have experienced risks or non-ideal experiences from so-called non-standardized credit products across the industry. Their demand and appetite are switching to a more balanced allocation of assets instead of concentrating solely on volatile classes. We want to stress that other than in addition to standardized products, we're still maintaining a good distribution level for the BCP products, with RMB10 billion coming from longer duration options, which allows clients to process their allocated assets over a longer period. We’ll see a slight depression in one-time commissions, as standardized products generally carry lower fees than overseas insurance products. However, we believe the longer-duration pipeline will generate recurring fees. Regarding the growth in registered client numbers, we do have strong traction from moving our conferences and interactions online, allowing us to see a higher level of activity interacting with our clients. The help of enhanced IT infrastructure also allowed us to better track and retain client traffic than we did before. This has contributed to the number of new registered clients and helps new clients reach us more easily. For the third question related to the lending business, we do have a statutory provision required by auditors when you have that lending piece on your balance sheet. In terms of that particular business, we see a transition, particularly from industry and regulators, encouraging a lighter touch approach in operations. We mostly use technology and databases in open banking and trust companies to assess the quality of collateral, particularly properties for clients. We've been experimenting and seeing some initial cooperation with a couple of trust companies to provide basic service-type fee support for these institutions instead of servicing the loans ourselves. Thus, we expect slight changes in business models in that area.

Unidentified Analyst, Analyst

Thanks for the very detailed answer. I want to follow up on the last question. In terms of provisioning level, is that stable versus the previous quarter? Do you see any increase in the underlying risk because of the more challenging macro environment here? And as you mentioned, regarding the shift in the business model, how would the revenue model look going forward? How would the future revenue model differ from the previous model? Additionally, I want to go back to the first question where you mentioned over RMB10 billion of transaction value that is coming from the three-year duration process. Can I assume that is all from the hybrid funds that you’re stepping up efforts on selling more of this quarter, which has a more favorable fee rate? I just want to confirm that.

Yi Zhao, Analyst

Okay. For the lending piece of provision, it was quite stable. Obviously, the shutdown of the nation actually delayed a little bit the loan refunding, as some administrative branches were literally shut down for a few weeks. But we don’t see massive worsening of provisions from the particular assets. In terms of transitioning the fee, it will be around 1% to 2% on the service fee that will be charged based on the loans that the trust companies or banks issue to the investors. Our service will involve helping them screen these investors and assess collateral quality. I would like Noah to supplement your question on the hybrid funds or the longer-duration funds.

Shang Chuang, CFO

Yeah, so the majority of the first quarter is still equity-type funds. The hybrid fund, as I mentioned before, is mostly manufactured by Grofers, and will be launched in the second quarter and subsequent quarters.

Operator, Operator

Thank you. The next question comes from Ethan Wang from CLSA. Please go ahead.

Ethan Wang, Analyst

Hi management. Thank you for taking my question and congratulations on the first quarter results. I have two questions. The first is on the competition landscape of mutual funds specifically. We know that Noah performed well in the first quarter, but actually this space was quite crowded with financial institutions and players like Ali and Tencent. When clients stay at home during COVID-19 and they open their apps, they have many choices. I want to understand your position and strategy in this space. My second question is regarding the one-time commission rate of the wealth management segment. Chairlady just mentioned that the one-time commission rates went down because of the standardized product, which had lower rates. However, I remember from the last call that when we were shifting to bond or hybrid standardized products, the one-time commission rate was lower, but for equity types, it was higher. We saw a good blended one-time commission rate in the third and fourth quarters last year. So I want to understand the reasons behind that dip in the first quarter. Are we returning to lower commission rates with this kind of mutual fund product? Finally, I want to inquire about the general and admin expense for the wealth management segment. We understand that last year, especially in the third and fourth quarters, we booked some legal fees related maybe to the Camsing incident in this segment. We saw those expenses come back to normal levels in the fourth quarter. Can we assume that the legal expenses are behind us or will this be a recurring seasonal thing we should expect in the fourth quarter every year? That’s my question. Thank you.

Yi Zhao, Analyst

Thank you, Ethan. Give me a few seconds. In the past, obviously, our firm specialized in alternative products, such as VCMP, along with some single counterparty credit products, but still credit alternative products. In the future, we believe our positioning will be about an 80/20 allocation between standardized products and alternative investments. We are entering a bigger playing field, which will have more competition. However, we're in a very different competitive position compared to Ali, Tencent, and other retail fund platforms. For example, the starting investment thresholds for clients are mostly around RMB1 million, whereas the average AUM for our clients in mutual funds is about RMB310,000. Compared to a few thousand on the retail mutual fund apps you mentioned, even for mutual fund purchasers we serve, they are mostly professionals and have a disciplined investment in mutual funds as part of their allocation strategy. Even if they purchase mutual funds from other platforms, they tend to return to Noah for more comprehensive and complicated products like fund-to-funds or alternative investments like VCMP products. Now, let me address the other questions you raised. Regarding the take rate, you're right that for standardized products now, the commission revenue typically falls between 100 basis points. The blended commission rate was higher in the last years when the higher profit margins came from overseas insurance products. Commissions fluctuated depending on product mixes, as illustrated this quarter where the commission rate was about 91 basis points compared to approximately 110 in previous periods. We previously indicated that blended take rates fluctuate between an 80 to 120 basis points range depending on product mix. In terms of general SG&A expenses, yes, we aim to maintain ideal profit margins and expenses for the wealth management segment. Legal fees had no seasonality in the last two quarters, especially after the Camsing incident, where initial legal fees were disproportionately higher. We believe this level of expenses for wealth management will maintain but have slight fluctuations.

Yuan Xue, Analyst

Blended take rates fluctuate between 80 to 120 basis points depending on product mix. We aim to maintain ideal profit margins and expenses for the wealth management segment. Legal fees had no seasonality in the last two quarters, particularly after the Camsing incident, which resulted in disproportionately higher initial legal fees. We anticipate that this level of expenses for wealth management will stay consistent but with slight fluctuations.

Jingbo Wang, Chairlady

Take rates fluctuate between an 80 to 120 basis points range depending on product mix. In terms of general SG&A expenses, yes, we aim to maintain ideal profit margins and expenses for the wealth management segment. Legal fees had no seasonality in the last two quarters, especially after the Camsing incident, where initial legal fees were disproportionately higher. We believe this level of expenses for wealth management will maintain but have slight fluctuations. Yuan Xue, Analyst.

Yi Zhao, Analyst

Okay, operator. Are there any more questions?

Operator, Operator

Thank you. There are no further questions at this time. I will now turn the conference back over to Mr. Grant Pan for any closing remarks.

Grant Pan, CFO

Okay, thank you, operator. And thank you to our investors and analysts. If you do have further questions, we also have scheduled one-on-one conferences; feel free to contact us if you want to speak more. Thank you very much for your time.

Operator, Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.