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The affluent in Hong Kong are re-evaluating their financial priorities as prevailing economic challenges lead many to reconsider ways of meeting their goals for long-term wealth preservation.
That is according to the “HSBC Premier 2023 Affluent Survey”, which aims to assess the financial needs and aspirations of Hong Kong’s affluent demographic, which collected responses from individuals aged between 24 and 64 years old with liquid assets of at least HK$1 million (US$129,000). It is the second study of its kind by HSBC Premier, the first being conducted last year to gain a better understanding of the demographic’s perception of being affluent and their wealth aspirations.
The perceived threshold of liquid assets of the affluent demographic in Hong Kong is HK$6.37 million (US$814,000) – an increase of 8 per cent year-on-year. The figure reflects the financial aspirations of people in that group to realise their main goals, which include wealth management, investment and planning for their children’s futures.
According to the survey, the city’s affluent become millionaires (reaching liquid assets of HK$1 million) at the age of 33, on average, and they are confident about reaching the next milestone of HK$10 million (US$1,279,000) by the age of 62. In fact, 6 per cent of the respondents had already reached the HK$10 million mark at an average age of 45.
Revealing the portfolio composition of the respondents, the survey shows they have adopted a more aggressive investment approach, with 70 per cent of their cash in financial assets. In comparison, their counterparts with liquid asset of less than HK$10 million have kept more than 40 per cent of their cash in risk-free deposits.
“The first local currency million is an important milestone that many in Hong Kong feel comfortable achieving,” says Sami Abouzahr, head of investments and wealth solutions, wealth and personal banking, Hong Kong. “Building net worth that caters for greater life ambitions is a bigger challenge. There are no proven formulas for building wealth but our experience with clients shows the tried and tested way is through early planning, regular saving, disciplined investing and diversification. These core principles continue to guide us as we develop solutions for clients across the wealth continuum.”
Recent weakness in the property market has resulted in scepticism about using property to preserve wealth. The survey further reveals just 53 per cent of respondents endorse the wealth protection power of property, down 23 percentage points from last year’s survey. Meanwhile, more than half (57 per cent) of respondents expect a correction in the city’s residential prices in the next 12 months.
As some affluent individuals are entering into different phases of life that may include planning for their children’s future, the financial goals of parents may change to include plans that will support their children through education and buying their first home.
And in line with last years’ findings most parents planned to support their children financially, up to 44 per cent of surveyed parents aim to financially support their children through property purchases, with a plan to subsidise them with HK$1.93 million (US$247,000) on average. Among parents who expressed an intention to provide financial support for their children’s property purchases, four in 10 will help their children to buy a property when they get married, while a quarter intend to do so on or before their children turn 18.
The survey also reveals a growing desire for legacy planning. Property is just behind cash as the most popular asset for wealth transfer to spouses, children and grandchildren. Most plan to leave their children at least one property, some more than one.
“Demand for inter-generational legacy planning is a growing trend. Legacy planning does not cover only immediate children but also future generations,” says Brian Hui, head of customer proposition and marketing, wealth and personal banking at HSBC in Hong Kong, who adds that 54 per cent of respondents consider their grandchildren as one of the puzzle pieces in wealth succession.
Although the affluent demographic values legacy planning, the survey finds that just 25 per cent have already started working on their plans.
“At HSBC, we listen to what matters most to our customers,” Hui says. “The survey findings reveal that affluent individuals are focusing more on the needs of their family members and succession planning as part of their overall wealth journey. It becomes important for us to put forward more family-based services and solutions to cover areas, such as health protection, international education, and cross-generation wealth transfer.”
By leveraging the bank’s wealth management products, its customers can access solutions with a lower risk to meet their financial aspirations. “The affluent class can build a diversified portfolio by using HSBC’s Future Planner, which allows clients to forecast and plan their short-term and long-term wealth goals,” adds Hui. “The feature means they can simulate their plans by using different HSBC products, allowing them to have a clearer, more targeted picture of their financial goals, so that they can plan ahead for achieving their life goals amid market volatility. Diversification is becoming an attractive alternative to solely investing in the property market.”
Read the full report here.Disclaimer by HSBC
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