Michael Fong, Charles Schwab
According to Schwab’s recent Hong Kong survey, only 34% of the rising affluent work with a financial advisor when making investment decisions. Almost half of those surveyed said they have had a bad experience with an advisor, without elaborating, said Fong, speaking at a media briefing in Hong Kong last week.
He added that only a few work with financial advisors because around 60% do not know where to find information on trustworthy firms. In addition, almost 80% of them believe that they are more knowledgeable than a financial advisor.
“The strong appetite of rising affluent for obtaining trustworthy information when they make investment decisions reflects a growing opportunity for investment experts and financial advisors to close the gap and take concrete steps to provide reliable information and advice to this group of people,” Fong said.
“The key is to provide transparent information to investors.”
He added that the advisor’s task is to go beyond standard transparency to include the sharing of research and an explanation of how an investment decision is made. Further, advisors should be clear about how they are compensated, particularly on their charges to clients as well as the rewards they get from selling products from third-party providers.
The survey included 1,000 investors in Hong Kong with an annual income between HK$600,000 ($76,468) and HK$1.2m and own liquid assets between HK$600,000 and HK$5m.
The results were supported by a separate survey of retail investors. Only 7% of retail investors in Hong Kong believe that their financial advisor puts client interest first, the lowest score in 12 markets surveyed in a study published in April commissioned by the CFA Institute.
Will online platforms help?
A majority of Hong Kong’s rising affluent heavily rely on their family and friends (71%), as well as media and social media (70%) for investment decisions.
“Hong Kong’s rising affluent are three times more likely to use social media than in the US as a source of investment decisions,” Fong added.
Although he believes that face-to-face interaction is important to build trust with investors, he said that having an online platform will keep them more engaged with advisors.
“The rising affluent is tech savvy,” Fong said. “Having a technology-driven platform, coupled with the human interaction with the investor is actually key to building the trust between the investor and the financial advisor,” he said.
The use of technology has become a trend among Asia-Pacific’s high net worth individuals. According to a study conducted by Scorpio Partnership and BNP Paribas, HNWIs in the region already spend an average of 5.3 hours per week managing their wealth online, adding that 83% of investors say they would leave their wealth manager if they were dissatisfied with the online platform experience.