A new study has found that most Singaporeans and Hongkongers approaching retirement welcomed professional financial advice, with 76% saying they have sought this out before making major financial decisions.
This is especially pertinent as the study by St James’s Place Asia also showed that 58% of Singaporeans and Hongkongers aged between 45 and 64 have not considered planning for their retirement, and 64% have not accounted for inflation in their financial planning.
Investments (85%), followed by retirement planning (73%) and insurance (72%), are the areas indicated of highest need for receiving better professional financial advice.
While 90% say the professional financial advice they have received is useful, currently only 53% engage a financial adviser to help manage their investments. The main reasons cited for not doing this is a belief that they can sufficiently manage their own investments (36%), concern about fees (26%) or lack of trust in a third party (16%). However, 55% also believe they could have achieved larger returns on their investments in the past one to five years if they had engaged a financial adviser.
Top sources of financial advice for Singaporeans and Hongkongers over 45 years of age are now independent advisers and banking relationship managers, surpassing family as the leading source of advice for almost every investment type. Receiving advice face-to-face is critically important to 76% of this age group.
For long-term planning, most would prefer to visit a financial adviser (42%) or their bank (38%) over engaging with a robo-advisory platform at just 20%.
Growing concern about retirement preparations
The study also found that 66% of Singaporeans and Hongkongers in this age range say the fallout of the pandemic has made them more concerned about planning for their retirement. As a result, 67% are worried about their ability to cover healthcare costs in their retirement with 64% expressing concerns about being a financial burden to their families.
This inaction may be due to a lack of awareness, with 59% saying they do not fully understand the financial products and services available to help them plan for retirement, as well as managing immediate financial issues spurred by the pandemic – with 46% needing to draw down from or reduce retirement contributions since the start of the pandemic.
Owing to this uncertainty, 72% of those surveyed in Singapore and Hong Kong are making lifestyle sacrifices now in the hope they can enjoy a better retirement. In retirement, most anticipate they will need to make further spending cuts, including reducing expenditure on luxury goods (46%), social life (35%), and travel (33%).
Wealth transfer placing pressure on family relationships
The study further found a high level of uncertainty around wealth transfer, with 64% of Singaporeans and Hongkongers in this age group saying they lack understanding about how to manage intergenerational wealth transfer effectively, and 65% do not understand the tax implications they may face.
As a result, 57% say wealth transfer and succession planning is a source of stress in their life, and 50% say that it is causing disharmony among their family members.
A low level of action is also seen, with 60% saying they do not have a will, while a far higher number (83%) have life insurance. Close to half (46%) have not made any plans to transfer their wealth or assets to family members, but 44% of these people say they plan to do this within the next five to 10 years.
A strong trend is also seen in donating wealth to philanthropic causes, with 42% planning to do this. While 84% say their family members are aware of these wishes, having a will in place can ensure that the distribution of assets is managed according to the person’s wishes while minimising the possibility of disputes arising amongst family members.
The study, titled Never Too Late to Plan: Preparing for the Golden Years, looked at the financial hurdles faced by those in the later stages of their lives and careers, aged between 45 and 64 years.