A new study by St. James's Place Wealth Management Asia (SJP Asia) has revealed the impact of the COVID-19 pandemic on attitudes towards wealth management in Hong Kong and Singapore.
The report, titled “Money Relationship Monitor 2021”, found that almost half (47%) of Hongkongers and Singaporeans do not have a financial plan and over a third (36%) are not comfortable with their current amount of savings.
It also found that three in five (61%) are worried about the high cost of living in the future. This is of particular concern as many central banks continue to assess whether inflationary pressures are a transitory phenomenon due to the COVID-19 pandemic.
As rising business costs (including planned tax hikes, increasing overseas energy and commodity prices) drive up core prices, only two in five (41%) said they consider inflation in their financial plans and its impact on their savings.
SJP Asia said these concerns also manifested in the investment habits of Hongkongers and Singaporeans. Cash was the most disappointing asset class (42% were indifferent/disappointed over its performance) with one of the most popular being equities (49% would allocate more) – the only asset class that can hedge effectively against inflation.
SJP Singapore CEO Gary Harvey said, “After a prolonged period of living with COVID-19, there are still significant populations that are unprepared financially, mentally and emotionally to deal with the long-term pandemic, with its impact reaching far into their future wellbeing.
“Higher living costs and inflationary pressures also add to the complexity for many in managing their finances well post-pandemic. More financial education is required to address this wealth imbalance and ensure that no one gets left behind.”
Quality financial advice in demand
According to the report, the majority (79%) of Hongkongers and Singaporeans are likely to seek financial advice before making any financial decisions, as the COVID-19 pandemic has significantly made over two thirds (68%) more cautious with their money.
While family and friends remain top sources of financial advice, many are also increasingly turning to professionals. Almost two in five (39%) would speak to their financial adviser first, with almost half (47%) believing that they would have had a larger return on their investments in the past five years if they had engaged a financial adviser.
The top areas to be addressed with financial advice include investments (87%), and retirement planning (73%), and those who engaged financial advisers overwhelmingly found it useful (88%).
The report showed that honesty is still the most important consideration for almost half (49%) of respondents when engaging financial advisers, although considerations around fees (30%, up from 20% in 2020) have also increased. Conversely, the top reasons for why some may not want to engage a financial adviser are that around beliefs they can manage their own investments (55%, leading concern in Singapore) and that fees are too expensive (55%, leading concern in Hong Kong).
It also found that over half (54%) of the respondents have also not discussed their retirement plans with their family, but the COVID-19 pandemic has helped to slightly raise awareness around the need for protection – 86% of Hongkongers and Singaporeans now have a life insurance policy in place and 27% have prepared a will.
“The trend of more investors seeking qualified, professional advice to manage their money is encouraging,” said SJP Hong Kong and Shanghai head of business Oliver Wickham.
“The wealth management industry has done much to help individuals plan and stabilise wealth portfolios throughout the pandemic and through economic volatility and it is reassuring to see sound financial advice being valued highly by individuals who want to protect their future.
“Establishing trust and helping clients to understand their concerns around fees, investing and financial planning is highly important. While there is no one-size-fits-all approach when it comes to creating investment portfolios, it is imperative that we continue to adopt practices that adds value and helps individuals to meet their financial objectives, while collectively raising industry standards.”