Comparative Markets

Charles Schwab: Hong Kong Rising Affluent Need a Modern Approach to Financial Planning to Achieve Their Goals

Affluent financial well-being index finds only 3% have a modern financial plan

HONG KONG, Oct. 29, 2019 /PRNewswire/ — Charles Schwab, Hong Kong, Ltd. (Charles Schwab Hong Kong) today announced the findings from its first Hong Kong Rising Affluent Financial Well-being Index.

The study revealed the strong pressure that the rising affluent in Hong Kong are facing to support themselves and their family, as well as the need to have a comprehensive understanding of global diversification coupled with a modern approach to financial planning to meet their financial goals. For Charles Schwab, this modern approach includes a financial roadmap based on their age, asset, risk tolerance, life goals and timeframe.

Charles Schwab, Hong Kong, Ltd. today launched its first Hong Kong Rising Affluent Financial Well-being Index. Michael Fong, Managing Director at Charles Schwab Hong Kong, mentioned that only 19% of Hong Kong rising affluent thinking their portfolio is diversified and financial advisers should help them with a comprehensive understanding of diversification.

Charles Schwab, Hong Kong, Ltd. today launched its first Hong Kong Rising Affluent Financial Well-being Index. Michael Fong, Managing Director at Charles Schwab Hong Kong, mentioned that only 19% of Hong Kong rising affluent thinking their portfolio is diversified and financial advisers should help them with a comprehensive understanding of diversification.

The study engaged 1,010 of Hong Kong’s rising affluent which represents Hong Kong citizens aged 18 to 65 with a monthly income between HK$20,000 and HK$80,000. Between June 21 and July 3, 2019, the survey studied Hong Kong rising affluent’s perception towards their financial well-being, resulting in an overall financial well-being score at 53.82 out of 100.

19 Indicators of Financial Well-Being

Calculated by Structural Equation Model (SEM), 19 indicators were designed to formulate the financial well-being index which consist of four sub-indexes, including:

  • Confidence sub-index (52.15) studies investors’ satisfaction towards their personal financial status and their confidence level in personal financial growth prospects
  • Planning sub-index (27.84) reveals whether investors have and regularly review financial plan, setting timelines for financial goals, and have a sense of possibility on achieving financial goals
  • Management sub-index (73.53) demonstrates investors’ sense of risk, attitude towards portfolio management, and sensitivity towards fees
  • Engagement sub-index (55.91) determines investors’ usage of financial services, trust towards professional financial advisers and digital financial advisory platforms

Key findings of the study include:

  • Nearly 2/3 felt challenged about their personal financial growth while the majority of them are facing financial pressure to support themselves and their families
  • 4 in 5 are influenced to buy or own if their family or friends share investment/savings related topics on social media. Savings (67%), monthly income (62%) and investment products (61%) are among the top five topics that can strike their interest
    97% have a sense of risk consideration. Meanwhile, nearly half consider themselves progressive[1] (26%) or aggressive[2] (19%) risk takers. With more than half of them lacking comprehensive knowledge on global diversification, only 19% claimed that their financial portfolios are well-diversified
  • Only 3% think they have a modern financial plan, which makes them less confident in achieving their financial goals
    1 in 3 think their investment value is not significant enough to engage with a financial adviser. At the same time, there is a strong demand for more professional recommendations (49%) and better knowledge in financial investments (50%) from trustworthy financial advisers

Michael Fong, Managing Director, Charles Schwab Hong Kong, said, “Hong Kong’s rising affluent have high expectations for financial returns and are under great pressure to change their unsatisfying financial status. This is mainly from the pressure to support themselves and their family in this aging society. However, there is a gap in having a comprehensive understanding of global diversification and modern financial plan to make the change happen, which means more investment education will be needed to improve their financial well-being.”

Facing great pressures in changing unsatisfying personal financial status

Hong Kong’s rising affluent are relatively less optimistic about their personal finances, with only 41% feeling satisfied with personal financial status, 35% feeling financially prepared, and 28% believing that they have the opportunity for better financial growth in the future. This sentiment can be attributed to the great financial pressure they face when supporting themselves and their families, especially in preparation for retirement (66%), future healthcare expenditure (62%) and saving sufficient money for possible emergencies (56%).

High financial pressures have led to a material understanding of wealth among rising affluent. Money or liquid assets (32%) and stable income (31%) rank the most important types of wealth among respondents over happiness and contentedness (24%).

there is a gap in having a comprehensive understanding of global diversification and modern financial plan to make the change happen, which means more investment education will be needed to improve their financial well-being...

Fear of Missing Out (FOMO): social media is fueling financial anxiety

Social media updates on investment or savings related topics also create strong influence on the rising affluent’s financial behavior, with 4/5 of them reporting that their purchases are influenced by social posts from family or friends.

The survey results revealed that Hong Kong rising affluent envy others’ financial situations, with a strong desire to know their family or friends’ status on savings, incomes and investment products, even more than updates on international leisure travel. However, only 27% of them are willing to share their investment products on social media.

A strong sense of risk management yet a misperception on diversification

Although 97% of the rising affluent claimed that they have a risk consideration, with strong financial pressures and anxiety, 45% of them consider themselves progressive or aggressive risk takers who are willing to take greater risks for higher returns.

The survey found that only 19% of rising affluent claimed to have a diversified portfolio, who are 15 points higher in both financial well-being score and confidence level in personal finances than those without diversified portfolio. Further, 78% of rising affluent who have diversified portfolio believed that they will have positive growth in their investment returns, while 42% of those without diversified portfolio forecasted negative growth or no growth at all.

However, the survey revealed that 56% of rising affluent do not have comprehensive knowledge on global diversification, which is believed to cause nearly 3/4s to be unsure about or not willing to diversify globally.

Financial adviser support is needed to assist with financial planning

The survey indicated that the rising affluent are lacking a modern approach to financial planning with just 3% having such plan, Additionally, 72% of respondents are having difficulty in setting a timeline for their financial goals and 82% don’t believe they can achieve their goals.

Furthermore, only 16% have consulted with a professional financial management consultant in the previous 12 months. This is mainly because 1/3 of them think they don’t have to consult a financial adviser as their investment value is not significant, while 1/5 do not know where to find a reliable investment adviser.

“With 41% Hong Kong rising affluent thinking financial advisers are not reliable, there is still huge room for financial advisers to build up their trust,” concluded Fong. “Besides that, there is a common misperception that only the wealthy deserve assistance from a financial adviser or warrant a financial plan. At Schwab, we believe the truth of the matter is that every investor, regardless of their income, savings or investing levels, should have a financial plan. Writing down your financial goals and a path for achieving them will not only set you up for longer-term financial growth, it will also give you piece of mind. And an adviser can help guide investors through the process and get you started.”

 

 

 

 

 

[1] A progressive risk taker is described as “Diversified investment products, able to take on greater risk when market fluctuates in order to obtain higher returns”
[2] An aggressive risk taker is described as “Invest in products with large fluctuations in price and high risk in order to gain the highest returns possible”
About Charles Schwab Hong Kong Rising Affluent Financial Well-being Index
Charles Schwab Hong Kong appointed Nielsen, an international research organization to conduct the Charles Schwab Hong Kong Rising Affluent Financial Well-being Index. The online survey took place in June 2019, among 1,010 people in Hong Kong aged 18 to 65. Survey participants have a monthly income between HK$20,000 and HK$80,000.
About Charles Schwab Hong Kong
Charles Schwab, Hong Kong, Ltd., is a subsidiary of Charles Schwab Corporation and is registered with the Securities & Futures Commission (“SFC”) to carry out the regulated activities in dealing in securities and advising on securities under CE number ADV256. The company currently provides services via its Hong Kong office, its telephone system (+852 2101-0511) and web site (www.schwab.com.hk).
About Charles Schwab Corporation
The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with more than 365 offices and 12.1 million active brokerage accounts, 1.7 million corporate retirement plan participants, 1.4 million banking accounts, and US$ 3.77 trillion in client assets as of September 30, 2019. Through its operating subsidiaries, the company provides a full range of wealth management, securities brokerage, banking, money management, custody, and financial advisory services to individual investors and independent investment advisers. More information is available at www.schwab.com and www.aboutschwab.com.