A new study by St James's Place Wealth Management Asia (SJP Asia) has revealed the impact the COVID-19 pandemic has had on Hong Kongers' and Singaporeans' approach to financial management.
Over one year on from when most of Asia first implemented social distancing policies in response to the pandemic, the study, ‘The New World of Wealth’, highlights key trends and areas of concern in managing finances for many Hong Kongers and Singaporeans as they look towards recovery and reinvesting for the future in 2021.
Increased pressure on savings and retirement
Almost half (45%) of respondents are not comfortable with their current saving and just over half (51%) said they have increased their monthly savings since the onset of COVID-19. The main barriers preventing consumers from saving more are high living costs (44%) and a lack of discipline with money (35%).
Meanwhile, 63% said the pandemic has made them much more concerned about planning for retirement. Most concerningly, over half (53%) have had to draw down on or reduce contributions to their retirement savings since the start of COVID-19, with 17% having to do so in a significant way.
Over half (54%) said they are not on track to have enough saved for the lifestyle they want to live in retirement. Respondents from Hong Kong specifically also believe they will have to retire later, with 48% saying that the ideal retirement age is 60-69, a significant increase from 2020 where the ideal retirement age was 50-59.
As the COVID-19 pandemic shifts expectations of work and income stability, 76% said that it is a priority for them to grow additional income streams in the future.
SJP Hong Kong and Shanghai head of business Oliver Wickham said, “The impact of the global pandemic on exacerbating financial issues cannot be ignored. More Hong Kongers today are struggling in meeting their retirement goals and are borrowing from their future to pay for their living costs now. Whilst this may satisfy their immediate needs, it is not a sustainable solution.”
Changing attitudes to investing
With the global economic uncertainty brought about by the pandemic, over two thirds (68%) of respondents said they are now more cautious with their money. However, a “flight to safety” and withdrawing from investments towards more cash-based holdings may be the wrong long-term approach for generating value.
Many investors recognise this in terms of asset allocation, and have actually increased their investments in equities (49%), exchange-traded funds (46%) and managed funds (40%).
There has also been a significant shift in investment attitudes since the start of the pandemic – 38% of respondents intend to increase diversification in their portfolio (from 35% in 2020), while 32% have decreased their exposure to risk (from 28% in 2020) as they look for perceived safer investment options.
Positively, COVID-19 has raised the awareness of environmental, societal and governance (ESG) issues among investors, with 65% saying that the pandemic has increased their motivation to invest responsibly.
“With investors generally understanding the need to be more cautious and diversified thanks to COVID-19, there is an opportunity for many to adopt a more traditional investment approach that prioritises long-term fundamentals. An equally important part of this will be how they approach ESG issues and invest responsibly, which has grown in prominence over the past year,” said SJP Singapore CEO Gary Harvey.
Increased appetite for advice
Family (63%) remains the top source of financial advice for many respondents, but this is closely followed by independent financial advisers (39%) and friends (38%).
Over seven in 10 (72%) respondents highlighted a need for more financial advice, while less than half (47%) are currently engaging a financial adviser.
In spite of the many restrictions on physical meetings and gatherings, face-to-face communication is still highly sought after by respondents – 70% said that this was important to them when engaging financial advice, highlighting investors’ needs for consistent engagement and re-evaluation of their financial situations amid a period of high uncertainty.
“There has never been a more imminent need for well-grounded, trusted and credible financial advice, given the uncertainty in the world. Investors in the new world of wealth will face many challenges, but they will need to stay the course on the road to success – it is important to exercise robust financial planning to realise the potential of a long-term wealth strategy,” said Mr Wickham.
“With more investors seeking out safety, the need for solid financial advice grounded in experience is greater than ever. There are many new challenges for investors in the new world of wealth, but the guiding principles for success are still the same. Investors must be prudent and undertake robust financial planning to understand what gaps they have in their long-term wealth strategy,” added Mr Harvey.
More on Singapore and Hong Kong:
Singaporeans taking better care of their finances
Hong Kong: Key considerations people take into when buying a CI plan
Majority of Singaporeans still struggling with their mental health
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