Hong Kong’s financial advisory industry has a long way to go to catch up with its global and Asian peers in terms of customer satisfaction, found a new survey conducted by BlackRock.*
Investors in the city that seek advice had greater confidence in their finances and more diversified portfolios than those that don't use advisers, but reliance on advisers was comparatively very low.
While globally and in Asia around a fifth of investors rely on advisers for all their decisions, only 8% in Hong Kong do. (No income or asset qualifications were used in selecting the survey's participants.)
And investors in Hong Kong were much less satisfied with their advisers than peers elsewhere. Some 15% investors in the city were 'very satisfied' with their financial advisers, while double that proportion in Asia and triple that figure globally reported the same level of satisfaction.
Of course, one issue here could be one of Hong Kong investors' high expectation about the returns they can achieve, as much as about the professionalism or abilities of their advisers.
In any case, "more and more investors [in Hong Kong] are going online to do their own research", said Damien Mooney, BlackRock’s Asia-Pacific head of retail, "That’s a good thing if it helps educate and empower people."
This is seen as a growing trend. Both fund managers and banking executives pointed to the growing importance of digital resources and distribution at AsianInvestor's Fund Selectors Forum last week.
Specialist finance and news websites and newspaper articles are investors’ top resources when it comes to trading equities. Each were cited by 48% of respondents, but less than half that proportion reported using an adviser, broker or wealth manager.
This do-it-yourself approach can be seen in asset allocations. Investors that are advised hold 45% in cash, versus 37% for the unadvised, and hold more foreign currency (6% vs 4%), less equity (21% vs 25%), more fixed income (9% vs 7%), more investment property (9% vs 7%), more alternatives (3% vs 2%) and more insurance-linked investments (14% vs 8%).
As a benchmark, the global average allocation to cash is 20%, while in Asia it’s 27%. “More investors need to seek advice, and the more they do it the better they will manage their cash,” said Mooney.
But he saw that high allocation to cash changing as investors became more educated. “If you are saving for retirement, staying in cash is not a long-term decision.”
While two-thirds of investors that seek advice felt confident in their decision-making and had a sense of control of their financial futures, just over half of those that do not receive advice reported the same perceptions.
Hong Kong investors had a higher average allocation to equities (24%) than their Asian (19%) and global peers (16%). They were also positive about the equity market with 48% of respondents optimistic, compared with 44% globally.
(However, the survey was conducted in July and August, before pro-democracy protests prompted some observers to turn less positive on Hong Kong’s future prosperity.)
However, overall net flows into equities have been quite small, Mooney noted.
Where investors have been buying equities, added Mooney, it had been in very specific areas – such as European equities in the early part of the year and Asian stocks in more recent months.
Nevertheless, income-generating products will remain a dominant theme this year, said Mooney. He saw the growing take-up of such strategies encouraging longer holding periods, which has been a perennial issue in Asia.
Other key findings included:
- Hong Kong investors’ top five financial priorities were growing wealth (49%), saving money (46%), saving for retirement (43%), being able to earn an income (34%) and preserving wealth (28%).
- The top financial concerns were the state of the economy (53%), high cost of living (46%), inflation (41%), healthcare costs (38%) and political instability (35%).
- Thirty-nine percent of Hong Kong investors re-invested income from their investments, whlie 61% used it for everyday expenses or to help family members.
*BlackRock’s second annual Investor Pulse Survey polled 27,500 investors aged 25 to 74 years old across 20 markets in July and August. Of those, 1,000 were in Hong Kong. In Asia, the survey was conducted in China, Hong Kong, India, Taiwan and Singapore.