Hong Kong's Rising Affluents Focus on Diversification and Advice as Macro Challenges Weigh on Overall Financial Confidence

Hong Kong's rising affluents look for greater financial advice and overseas investments as inflation concerns and volatile markets weigh on overall financial confidence, according to Charles Schwab's latest survey

HONG KONG, Dec. 13, 2022 /PRNewswire/ -- Charles Schwab, Hong Kong, Ltd. today announced the findings of its "Hong Kong Rising Affluent Financial Well-being Index 2022". Hong Kong's rising affluents' sense of financial wellbeing are most impacted by current macroeconomic conditions as this year's study revealed a broad-based decline in sub-index scores against a backdrop of rising inflation and market volatility.

The "Hong Kong Rising Affluent Financial Well-being Index 2022" is the 5^th edition of Charles Schwab's annual survey that explores shifting perceptions and investment behaviours of rising affluents in Hong Kong, aged between 18 and 65 with a monthly income of HK$20,000 to HK$80,000. From September 7 to September 22, 2022, the survey interviewed 1,048 respondents. This year's overall financial well-being score came in at 56.43 out of 100, a 2.70-point decrease from last year's results. Calculated by the Structural Equation Model (SEM), 16 indicators were designed to formulate the financial well-being index which consists of four sub-indexes, including:

• Confidence sub-index (53.40, -3.76) studies investors' satisfaction towards their personal financial status, their level of confidence towards their personal financial growth prospects as well as preparation for issues that impact their personal financial status
• Planning sub-index (26.15, -0.30) reveals whether investors have and regularly review their financial plan, set timelines for financial goals, and have a sense of possibility on achieving financial goals
• Management sub-index (71.58, -1.52) demonstrates investors' sense of risk, attitude towards portfolio management, and sensitivity towards fees
• Engagement sub-index (60.79, -2.86) determines investors' usage of financial services, trust towards professional financial advisors and digital financial advisory platforms

Uncertainties cloud investor confidence, but overseas investments hold key to financial well-being

Hong Kong's rising affluents' financial confidence fell by 3.76% from last year in the current volatile macro environment. Concerns over inflation rose most significantly from last year (+8.2% versus 2021) and Hong Kong rising affluents are increasingly worried about the rising cost of living, particularly the impact on personal debt (+3.7% versus 2021) and children's education (+3.5% versus 2021).

Personal professional income (49.4%) and a stable household income (46.3%) are the top sources of confidence for Hong Kong's rising affluents. However, the survey findings showed that adequate retirement preparation becomes a more important source of confidence especially with age. More than half (55.1%) of older rising affluents, aged between 55 to 65 years old, indicated adequate retirement preparation as their No. 1 source of confidence compared to 24.3% of young rising affluents aged 18 to 34 years old and 29.5% aged between 35 to 44 years old.

Across the board, Hong Kong's rising affluents with overseas investments are more financially confident than their peers. About 15.0% of overseas investors (+3.2% versus 2021) feel more satisfied with their personal financial status compared to 8.9% of non-overseas investors (-7.3% versus 2021). More overseas investors (+7.3% versus 2021) are also optimistic about their personal financial growth prospects, believing that their financial economic situation will improve over the next 5 years, compared to a 4.1% decline among non-overseas investors.

The number of overseas investors among Hong Kong's rising affluents rose to 37% this year, a significant increase from 20% in 2021. Diversification to improve overall financial security (51.9%) and a higher return on investment (48.1%) are the top motivators for overseas investments. The U.S. remains a key overseas market for Hong Kong's rising affluents – investment allocation to the U.S. doubled from 9.7% last year to 19.7%.

Michael Fong, managing director, Charles Schwab Hong Kong, said, "Rising cost of living is clearly top of mind for Hong Kong's rising affluents this year due to the current higher inflationary environment. As a result, investors are looking to obtain higher returns and are increasingly recognising the importance of overseas investments in helping them achieve their goals in a volatile macro environment."

"The US market in particular offers Hong Kong investors serious portfolio diversification opportunities given its size, liquidity and transparency, all of which are critical in helping deliver risk-adjusted returns during periods of high market volatility," Fong added.

Financial planning and advice more important than ever

With the current challenging macro environment, rising affluents in Hong Kong are investing less as personal liquid assets shrink, coupled with rising living costs, affected their overall savings and investments rate. Respondents' personal liquid assets of shrank by 11.9% year-over-year, while regular monthly savings and investment in financial products fell by 4.8% and 8.0% respectively.

However, despite the decrease in personal assets and investments, a greater number of rising affluents believe that they need a financial plan (+6.9% versus 2021) as well as a clearer and longer timeline to achieve their financial goals (+6.4% versus 2021).

The desire for financial advice remains high across the board among respondents, particularly for those who manage their family's money. Among the rising affluents who have a financial plan, more than 1 in 5 (23.7%) hired a professional financial advisor. Meanwhile, 41.3% of rising affluents who manage family's money have consulted a financial advisor, compared to 25.1% of those who manage their own money only.

Rising affluents who received professional financial advice also tend to be more notably satisfied with their financial planning (47.7% versus 38.7% for those who made their own plans). In terms of age groups, the younger rising affluents aged between 18 to 34 years old are more likely to be dissatisfied with their financial plans due to a lack of professional suggestions (52.8% compared to 27% of older rising affluents aged between 56 to 65 years old).

When it comes to professional financial planning, more than a third of rising affluents (37.7%) believe that their financial advisors can provide the most help when it comes to the development and optimization of their financial plan. A much greater number of rising affluents this year (+8.1% versus 2021) also believe that professional financial advice can help to develop a reliable investment plan for them.

Fong said, "It is heartening to see a significant rise in the number of rising affluents in Hong Kong agreeing that financial planning is important in keeping them financially prepared to achieve their life goals. Having access to professional insights and advice are more critical than ever to help investors stay on track with clarity for long-term and overseas investments under volatile market conditions. This closely aligns with our commitment to actively engage with our clients on their financial goals and to provide disciplined financial advice to help them take advantage of the global market opportunities that may help them to achieve their financial goals."

About Charles Schwab Hong Kong Rising Affluent Financial Well-being Index

Charles Schwab Hong Kong appointed Nielsen, an international research organization to conduct the Charles Schwab Hong Kong Rising Affluent Financial Well-being Index. The online survey took place between 7 September 2022 to 22 September 2022, among 1,048 people in Hong Kong aged 18 to 65. Survey participants have a monthly income between HK$20,000 and HK$80,000.

About Charles Schwab Hong Kong

Charles Schwab, Hong Kong, Ltd., is a subsidiary of Charles Schwab Corporation and is registered with the Securities & Futures Commission ("SFC") to carry out the regulated activities in dealing in securities and advising on securities under CE number ADV256. The company currently provides services via its Hong Kong office, its telephone system (+852 2101-0511) and web site (www.schwab.com.hk). 

About Charles Schwab Corporation

The Charles Schwab Corporation ("Charles Schwab," NYSE: SCHW) is one of the United States' leading providers of financial services, with more than 400 offices and 35,200 employees as of October 31, 2022. Charles Schwab manages 33.9 million active brokerage accounts, 4 million corporate retirement plan participants, 1.7 million banking accounts, and USD 7.00 trillion in total client assets as of October 31, 2022. Through its operating subsidiaries, Charles Schwab provides a full range of wealth management, securities brokerage, banking, asset management, custodial, and financial advisory services to individual investors and independent investment advisors in the United States.

Important Disclosure

Investment involves risk. Past performance is no indication of future results, and values fluctuate. International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets. Investing in emerging markets can accentuate these risks.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market, economic or political conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Diversification and rebalancing a portfolio cannot assure a profit or protect against a loss in any given market environment. Rebalancing may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events may be created that may affect your tax liability.

Past performance is no guarantee of future results. Forecasts contained herein are for illustrative purposes only, may be based upon proprietary research and are developed through analysis of historical public data. 

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(1222-20HS)