Hong Kong retail investors need to move from a speculative, short-term mindset to a more long-term approach, especially in light of the likely impact of the impending employee choice arrangement (ECA) on the Mandatory Provident Scheme, argues MPF provider BCT.
"That mentality needs to shift," says Ka Shi Lau chief executive of BCT in Hong Kong. She hopes MPF members will acquire acumen in making better informed investment decisions when changes to the retirement-scheme regime take effect in 2011.
BCT is one of Hong Kong's biggest providers of MPFs, which Hong Kong workers pay into for their retirement. To date, the equivalent of 10% of an employee's salary is invested in an MPF scheme nominated by their employer. Under the new arrangements, employees will be allowed to move the mandatory contributions made under their current employment to any schemes in the market.
Official figures reveal that there is more than $300 billion of assets in the MPF system from an estimated number of three million workers in Hong Kong. Some are speculating there will be intense competition among the MPF providers, which are likely to try to attract new members to join their schemes.
Nearly 90% of BCT's 700,000 MPF scheme members have not switched funds or conducted rebalancing over the past decade, so Lau does not see a major increase in members paying more attention to their MPF accounts in response to the ECA. That's down to either a weak sense of engagement or a lack of financial knowledge for retirement investing.
Citing examples of countries, such as Australia, that have made similar policy changes, Lau says the industry does not expect a lot of scheme switching initially.
Nevertheless, BCT has made upgrades to cope with next year's changes. These include enhancing its systems, beefing up its call centre, changing documentation, devising new marketing strategies, expanding its product range and further promoting investor education by, for example, providing more member briefings and investment seminars. Additionally, it plans to update clients on transaction-related matters by email and SMS.
BCT is a wholly owned subsidiary of Bank Consortium Holding, which was founded in 1999 by a shareholder group comprising a consortium of local banks in Hong Kong -- Asia Financial Group, Chong Hing Bank, Dah Sing Bank, Fubon Bank, Industrial and Commercial Bank of China (Asia), Shanghai Commercial Bank, Wing Hang Bank and Wing Lung Bank.
In addition to acting as sponsor, trustee, custodian and administrator to its own sponsored schemes, BCT also provides trustee and administration services to third-party MPF schemes (including those from Invesco, RCM and AMTD), Hong Kong's Occupational Retirement Schemes Ordinance schemes, international pension plans and global investment funds.
At this stage, Lau says, there are no plans to outsource as a result of the upcoming ECA change.