St. James’s Place reveals that 78% of Hong Kongers lack a Financial Plan

A new report launched by St. James’s Place Wealth Management Asia (SJP Asia) has revealed that that more than three-quarters of Hong Kongers say they do not have a financial plan (78%).

SJP Asia’s inaugural Money Relationship Monitor for Hong Kong looks at the relationships of local mid to high-income retail investors with their money, including their approaches to investing, spending, and saving, the firm elucidated in a press release.

As a result of a lack of financial planning, Hong Kongers are falling short in their wealth creation goals. When looking at budgeting habits, the report finds that almost three-quarters (74%) of Hong Kongers aspire to save more than 16% of their annual income each year, and close to one-third (32%) are either dissatisfied with their current savings levels or unsure if they have enough.

Among the reasons cited by Hong Kongers for not committing more to savings, high living costs (40%) and not knowing how much they should be saving to achieve their future goals (35%) ranked highest. 30% also said they lack discipline in their spending habits.

Matthew Deeprose, Head of Business, Hong Kong, SJP, said: “The perceived trade-offs between wealth and happiness is a classic dilemma that can be solved with proper financial planning. Many Hong Kongers do not recognise that pursuing financial freedom through salaried income alone is no longer sufficient, especially in the current low-interest-rate environment combined with market uncertainty. Hong Kongers will need to invest prudently, expand income streams and save better to accumulate wealth and enjoy a balance lifestyle simultaneously.”

Investing Amid Uncertain Times

Outside of cash (89%), the report finds that Hong Kongers have the most exposure to equities (87%), insurance (investment-linked policies or ILPs, 53%) and property (49%).

Pre-Covid-19, respondents were most satisfied with the performance of property (77%) and fixed income products (75%), while the most disappointing asset classes were cryptocurrencies (19%) and equities (19%). Hong Kong investors feel the least confident investing in cryptocurrencies (63%) and managed funds (48%) during this period.

When looking at portfolio management, diversification (29%), risk levels (25%), and liquidity (21%) are the three most important considerations for Hong Kong investors, which is reflected in how they intend to adjust their portfolios in the future.

Hong Kongers are also quite risk averse overall and quick to divest to try limit short-term losses. When asked how they would react to adverse performance across different asset classes – outside of cash, insurance and pension assets – the top three asset classes that investors would divest within 24 hours are equities (34%), cryptocurrencies (29%), and ETFs (28%).

“Investing with consideration is essential in the current economic climate. Hong Kong investors must try to remain focussed and look towards longer-term investments outcomes even when faced with short-term volatility in investment performance and economic down-turn, and understand the need for a strong robust investment mandate, especially in the current economic climate,” said Deeprose.

Increasing Appetite for Sustainable Investing

The report also reveals that for 60% of Hong Kongers, ESG factors are a priority consideration in the investments they select, with 43% saying their interest in ESG investing is increasing. Despite this trend, misconceptions persist. Three in five (60%) in Hong Kong still believe they need to compromise on returns in order to invest responsibly. When it comes to the issues that are important to investors, social issues are the top concern for investors in Hong Kong, with 40% identifying this as the most important matter, followed by environmental issues at 38%, and governance at 22%.

A Balancing Act

The report finds that the majority of Hong Kongers (89%) believe being wealthier would make them happier, with more than two-thirds (69%) citing a lack of money as a source of stress in their family relationships.

It finds that in the pursuit of wealth, 69% of Hong Kongers would work longer hours, even at the expense of personal relationships, and for close to three-quarters (72%), generating alternative sources of income is a priority in the next 12 to 24 months.

However, conversely, 86% say having a balanced lifestyle is still more important than a higher income, with 80% believing that being wealthier will allow them to have better work-life balance.

“It is worrying to see that a huge proportion of Hong Kong investors do not currently have a financial plan to help them plan for the future. Amid the current economic uncertainty and Covid-19, it is critical for Hong Kongers to put in place a sound financial plan to ensure that they have sufficient asset liquidity to protect themselves against unforeseen circumstances,” Deeprose concluded.