“Hong Kong’s rising affluent have high expectations for financial returns and are under great pressure to change their unsatisfying financial status,” according to Michael Fong, managing director, Charles Schwab Hong Kong at a media briefing last week.
“However, there is a gap in having a comprehensive understanding of global diversification and modern financial planning to make the change happen, which means more investment education will be needed to improve their financial well-being,” he added.
The US-based firm announced the findings from its first “Hong Kong Rising Affluent Financial Well-being Index” last week.
It surveyed 1,010 of the territory’s “rising affluent”, representing citizens aged 18 – 65 with a monthly income between HK$20,000 and HK$80,000 ($2,550 – $10,200) , between 21 June and 3 July — three weeks into the five-months’ long period of political protests.
Calculated by a “Structural Equation Model”, 19 indicators were designed to assess their satisfaction with their financial status and growth prospects, whether they have financial plans, their attitude to risk, portfolio management and fees, and their usage of and confidence in the financial services industry.
The result was an overall financial well-being score of 53.82 out of 100. Nearly two-thirds of respondents felt “challenged about their personal financial growth” while the majority of them are facing financial pressure to support themselves and their families.
The findings among Hong Kong’s aspiring salary earners come on the heels of other recent studies that indicate a decline in the wealth of the ultra-rich and also in the confidence of wealth managers.
Hong Kong’s ultra high net-worth population — people with a minimum of $30m of assets — slumped 10.6% to 6,270 and its net wealth fell 9% to $1.18trn, according to Wealth-X’s World Ultra Wealth Report 2019.
Separately, a joint survey by the Private Wealth Management Association of Hong Kong and accountants KPMG, found that deteriorating geopolitical and economic trends as well as volatile markets will lead to a fall in the growth of assets under management in Hong Kong over the next five years.
Pessimism and distrust
The Charles Schwab survey found that Hong Kong’s rising affluent are pessimistic about their personal finances, with only 41% feeling satisfied with personal financial status, 35% feeling financially prepared, and just 28% believing that they have the opportunity for better financial growth in the future.
However, rather than turn to professional financial advisors, four out of five respondents said that their investment decisions are influenced by recommendations from family or friends on social media.
Only 16% of respondents had consulted with professional financial management advisers in the previous 12 months and 41% of those surveyed doubted their reliability, according to the study. Yet, just 3% of respondents had a financial plan, with 72% having difficulty in setting a timeline for their financial goals and 82% not believing they can achieve their goals.
Cash or liquid assets (32%) and stable income (31%) ranked as the most important types of wealth among respondents, with 97% of respondents concerned about the risks of investment.
Meanwhile, only 19% of the rising affluent claimed to have a diversified portfolio, but the majority of those who do (78%), believe that they will enjoy growth of their investment returns. Favoured markets included the US and mainland China.
