Wealth in Hong Kong: HNW Investors 2017

Table of Contents

EXECUTIVE SUMMARY 3

1.1. Market summary 3

1.2. Key findings 3

1.3. Critical success factors 3

1. PROFILING HNW CONSUMERS IN HONG KONG 9

1.4. Entrepreneurs represent an important segment of Hong Kong’s HNW market 9

1.4.1. Wealth managers reaching out to female HNW investors should focus on the entrepreneur segment 9

1.4.2. In a diversified market, first-generation entrepreneurs and family business owners still need particular attention 10

1.4.3. Manufacturing is the leading source of HNW wealth but wealth managers will find investors employed in financial services an increasingly lucrative target market 12

1.4.4. HNW investors in Hong Kong are more likely to hold director roles than their peers in the wider region 14

1.5. Wealth managers should be prepared to cater to the distinct needs of Hong Kong’s large expat community 15

1.5.1. HNW expats represent a lucrative target market in Hong Kong 15

2. HNW INVESTMENT STYLE PREFERENCES 18

2.1. A multi-asset management strategy is key in Hong Kong 18

2.1.1. HNW investors in Hong Kong use an average of two wealth management firms 18

2.1.2. The convenience factor has to feature strongly in every wealth manager’s marketing campaign 19

2.1.3. The largest proportion of HNW wealth is kept in advisory mandates 20

2.1.4. However, a multi-asset management strategy is key in Hong Kong 21

2.2. Wealth managers should integrate automated investment services into their service propositions 22

2.2.1. Demand for all types of asset management will rise 22

2.2.2. Investors’ reluctance to relinquish control means that advisory mandates will maintain their leading position 24

2.2.3. A transparent fee structure is a must in Hong Kong 25

3. UNDERSTANDING ASSET ALLOCATION TRENDS AMONG HNW INDIVIDUALS IN HONG KONG 27

3.1. Hong Kong’s love affair with equities is set to continue 27

3.1.1. In light of rising demand for equities wealth managers should discuss the benefits of industry and geographic diversification 27

3.1.2. HNW investors’ love affair with equity is set to continue 28

3.1.3. Bonds constitute the second-largest asset class 30

3.1.4. Cash and near-cash investments constitute a significantly smaller proportion in Hong Kong than in the wider region 32

3.1.5. Property constitutes only a minor proportion of the typical HNW portfolio 34

3.1.6. Alternatives only constitute a small but growing proportion of the typical HNW portfolio 37

3.1.7. A wide selection of alternatives is becoming more important 37

3.1.8. Commodity investments are of little interest to HNW clients 39

4. HNW PRODUCT AND SERVICE DEMAND 41

4.1.1. A one-stop-shop strategy will pay off 41

4.1.2. With the exception of inheritance planning, demand for all planning services is forecast to increase 43

5. APPENDIX 45

5.1. Abbreviations and acronyms 45

5.2. Definitions 45

5.2.1. Affluent 45

5.2.2. HNW 45

5.2.3. Liquid assets 45

5.2.4. Mass affluent 45

5.3. Methodology 46

5.3.1. GlobalData’s 2016 Global Wealth Managers Survey 46

5.3.2. GlobalData’s 2015 Global Wealth Managers Survey 46

5.3.3. GlobalData’s WealthInsight 46

5.3.4. Exchange rates 47

5.4. Bibliography 47

5.5. Further reading 48

List of Figures

Figure 1: The average HNW investor in Hong Kong is male and over 50 10

Figure 2: Professionals dominate Hong Kong’s wealth market, making programs targeting specific segments economical 11

Figure 3: Professionals dominate Hong Kong’s wealth market 12

Figure 4: The bulk of HNW investors have sourced their wealth from the manufacturing sector 14

Figure 5: Director is the most common title held by Hong Kong HNW individuals 15

Figure 6: Expats represent an above-average segment of the HNW population in Hong Kong 16

Figure 7: Chinese migrants dominate Hong Kong’s HNW expat market 17

Figure 8: HNW investors in Hong Kong prefer to work with one or two wealth management firms 19

Figure 9: Lack of time is driving uptake of financial advice, making convenience an implicit part of a wealth service 20

Figure 10: The largest proportion of HNW wealth is in advisory mandates, meaning it has to be a critical element of every wealth manager’s offering 21

Figure 11: HNW demand is strongest for advisory and discretionary mandates 22

Figure 12: Demand for all investment services is forecast to increase 23

Figure 13: Demand for all investment services is forecast to increase 24

Figure 14: HNW investors are reluctant to relinquish control over their investments 25

Figure 15: Wealth managers need to be able to present a clear fee structure 26

Figure 16: HNW investors are heavily exposed to equities 28

Figure 17: The typical HNW equity portfolio is dominated by funds 29

Figure 18: Capital appreciation opportunities and dividend income are the top drivers for equity investments 30

Figure 19: HNW investors allocate just 7% of managed wealth to fixed-income products 31

Figure 20: Demand for fixed-income products is set to decrease 32

Figure 21: Only 13% of managed HNW wealth is held in cash products 33

Figure 22: Already low HNW demand for cash products is expected to stagnate 34

Figure 23: Offering REITS is a must in Hong Kong 35

Figure 24: Concerns regarding the sustainability of the property boom will see demand for real estate fall 36

Figure 25: Hedge funds dominate HNW investors’ small alternative investment portfolio 37

Figure 26: Demand for alternatives is on the rise 38

Figure 27: Commodities are of little interest to investors in Hong Kong 39

Figure 28: Commodity holdings are forecast to rise, albeit from a low base 40

Figure 29: HNW investors show moderately strong demand for all planning services 42

Figure 30: HSBC supports HNW investors over generations 43

Figure 31: Already strong HNW demand for financial and pension planning services is forecast to increase 44