WIth interest rates expected to rise, notably in the US, financial advisers in Hong Kong are anxious about their clients’ intentions over the next few months and downbeat about business prospects.
Over the next 12 months, respondents expect only 0.5% revenue growth, significantly lower than the forecast 12.3% globally and 18% in Hong Kong a year ago.
When it came to investment approach, 83% of Hong Kong advisers said traditional portfolio allocation was not the best way to pursue returns and manage investment risk.
The results form part of the Natixis Global Asset Management financial adviser survey, a global poll including responses from 150 advisers in Hong Kong and 150 in Singapore. The overriding sentiment is that volatility in the market is the leading challenge to the growth of their businesses.
Advisers said investors should avoid making sudden changes to their portfolios in the next few months, with interest rates likely to rise, but the fear is that clients will pull money from the markets.
“We’ve been expecting higher rates for a long time and, for some investors, anxiety is high,” said John Hailer, chief executive for Americas and Asia at Natixis Global Asset Management.
“They might find it difficult to resist changing their investment portfolios. But we’ve often found that unguided, emotional investment decisions don’t work out as intended."
Singapore advisers agreed that inconsistent views on risk and returns among investors further compounded the problem of emotional investment decision-making, with 73% of advisers in the Lion City reporting that clients were conflicted between obtaining returns and preserving capital.
More than two-thirds (68%) of Hong Kong advisers believe there is a need to replace traditional diversification and portfolio construction techniques, compared to the global figure of 63%.
Among all advisers surveyed, actively managed assets received higher marks than passive investments for generating alpha (92% in Hong Kong and 85% globally), for accessing emerging market opportunities (84% and 79%), for obtaining exposure to non-correlated asset classes (77% and 23%) or and taking advantage of short-term market movements (71% and 73%).
“Hong Kong advisers lead their global peers when it comes to looking to gaining exposure to non-correlated asset classes,” said Madeline Ho, head of wholesale distribution for Asia Pacific at Natixis Global Asset Management.
While 61% of Singapore advisers (and 63% globally) said clients were more interested in discussing risk than they were in 2014, only 49% (57% globally) claimed their clients’ level of investment risk is increasing.
In terms of asset allocation, more than half of advisers in Hong Kong (55% versus 60% globally) said they would advise clients to shorten the duration of their bond portfolios as rates rise. And 45% said they would recommend reducing bond holdings (versus 46% globally).
Four in 10 Hong Kong advisers (43%) said they would boost allocations to stocks (46% globally), while one-third (32%) would increase exposure to alternative assets (37% globally).