A study raises some challenges for the wealth advisory business to prove its value.

A study of affluent Hong Kong citizens shows that a significant number are not happy with their financial status and a third don’t see the value of getting professional advice, raising a challenge for the industry to prove that it matters.

The report was produced by Charles Schwab Hong Kong, part of the US-listed brokerage and wealth management house Charles Schwab. The study, carried out between 21 June and 3 July, was based on 1,100 citizens aged 18 to 65 with a monthly income of between HK$20,000 ($2,550) and HK$80,000. Ranking citizens’ perception of their financial wellbeing, led to an overall score of 53.82 out of a maximum 100.

Nearly two-thirds of those questioned said they were challenged about their personal financial growth while the majority of them are facing financial pressure to support themselves and their families. Some four out of five are influenced to buy or own if their family or friends share investment/savings-related topics on social media. Savings (67 per cent), monthly income (62 per cent) and investment products (61 per cent) are among the top five topics that can strike their interest.

The study also showed that the overwhelming majority – 97 per cent – consider risks and nearly half consider themselves progressive (26 per cent) or aggressive (19 per cent) risk takers. With more than half of them lacking comprehensive knowledge on global diversification, only 19 per cent claimed that their financial portfolios are well-diversified.

Calculated by Structural Equation Model (SEM), 19 indicators were used to create the index.

Schwab said its findings showed the “strong pressure that the rising affluent in Hong Kong are facing to support themselves and their family, as well as the need to have a comprehensive understanding of global diversification coupled with a modern approach to financial planning to meet their financial goals.”

Advice: is it worth the money?
One of the most eye-catching findings was that one in three of those questioned think their investment value is not significant enough to engage with a financial advisor. At the same time, there is a strong demand for more professional recommendations (49 per cent) and better knowledge of financial investments (50 per cent) from trustworthy financial advisors.

Michael Fong, managing director, Charles Schwab Hong Kong, said: "Hong Kong's rising affluent have high expectations for financial returns and are under great pressure to change their unsatisfying financial status. This is mainly from the pressure to support themselves and their family in this aging society. However, there is a gap in having a comprehensive understanding of global diversification and modern financial plan to make the change happen, which means more investment education will be needed to improve their financial well-being."

Personal
Hong Kong's rising affluent are relatively less optimistic about their personal finances, with only 41 per cent feeling satisfied with personal financial status, 35 per cent feeling financially prepared, and 28 per cent believing that they have the opportunity for better financial growth in the future. Again, this sentiment can be attributed to the great financial pressure they face when supporting themselves and their families, especially in preparation for retirement (66 per cent), future healthcare expenditure (62 per cent) and saving sufficient money for possible emergencies (56 per cent).

High financial pressures have led to a material understanding of wealth among the rising affluent. Money or liquid assets (32 per cent) and stable income (31 per cent) rank the most important types of wealth among respondents over happiness and contentedness (24 per cent), the study said. 

A survey such as this would not be complete without a reference to social media. The study said that social media is making people more anxious financially by raising expectations, or the “fear of missing out”.