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Wealth in Hong Kong: HNW Investors 2017

Wealth in Hong Kong: HNW Investors 2017

Summary

Hong Kong private wealth market is an attractive mix of East and West. Its long-established nature makes it larger and more diversified than is common in the rest of Asia Pacific. Local HNW investors have mainly sourced their wealth through a mixture of entrepreneurship and earned income. Convenience is an important factor driving uptake of professional advice, but investors are reluctant to relinquish control completely, preferring advisory mandates. However, this is slowly changing as we are seeing greater uptake of discretionary mandates, in part driven by expats.

Critical success factors

  • Target expats: The Hong Kong HNW market has a large expat component and providers need to be able to onboard these much sought-after clients. This requires facilities that allow the onboarding process to begin remotely via a foreign branch in China, Taiwan, or the UK if possible, or via partnerships with relocation services.
  • Lead with advisory asset management: Hong Kong client preferences are skewed towards advisory asset management, although demand for discretionary mandates is picking up. Wealth managers must have service options that align with this in order to attract clients.
  • Be a one-stop shop: Demand for all planning services is on the rise, and given that convenience is an important factor driving uptake of advice, wealth managers able to pursue a multi-service proposition are at an advantage.
Key findings include in this report -
  • Wealth managers need to be prepared for entrepreneurial clients with irregular incomes, heavy exposure to single industries, and finances entwined with their business.
  • Expats are a sizable proportion of the local HNW market and should prove to be a lucrative segment.
  • Advisory mandates continue to dominate in Hong Kong. However, HNW investors prefer to manage simple investments themselves to save on fees.
  • The average portfolio is heavily exposed to equities, while only the bare minimum is held in cash and near-cash products to ensure liquidity.
HNW individuals in Hong Kong have sourced their wealth mainly through business ownership, although earned income plays a larger role in the market than elsewhere in Asia Pacific. The most prominent industry from which HNW individuals have amassed wealth is manufacturing, financial services, and property and real estate. However, various government initiatives will see other sectors, such as medical services and environmental industries, grow in importance, and wealth managers will find investors employed in these sectors an increasingly attractive target market. At the same time, wealth managers cannot afford to ignore the expat opportunity in Hong Kong, given that half of the HNW population in Hong Kong was born overseas.

The report Wealth in Hong Kong: HNW Investors 2017 analyzes the investing preferences and portfolio allocation of HNW investors in the SAR. The report is based on our proprietary Global Wealth Managers Survey.

Specifically, this report provides the following -
  • Profiles the average HNW investor in Hong Kong in terms of their demographics and analyzes the expat opportunity.
  • Analyzes which wealth management mandates are preferred among HNW investors in Hong Kong and how the demand will develop looking forward.
  • Examines the allocation of HNW investors’ portfolios into different asset classes and how the allocation is expected to develop in the future.
  • Analyzes the product and service demand among HNW investors in Hong Kong.
Companies mentioned in this report: BNP Paribas Wealth Management, Credit Suisse, Vontobel, HSBC Private Bank.

Scope
  • Wealth managers need to be prepared for entrepreneurial clients with irregular incomes, heavy exposure to single industries, and finances entwined with their business.
  • Expats form a sizable proportion of the local HNW market and should prove to be a lucrative segment.
  • Advisory mandates continue to dominate in Hong Kong. However, HNW investors prefer to manage simple investments themselves to save on fees.
  • The average portfolio is heavily exposed to equities, while only the bare minimum is held in cash and near-cash products to ensure liquidity.
Reasons to buy
  • Develop and enhance your client targeting strategies using our data on HNW profiles and source of wealth.
  • Give your marketing strategies the edge required and capture new clients using insights from our data on HNW investors’ drivers for seeking investment advice vs self-directing.
  • Tailor your investment product portfolio to match the current and future demand for different asset classes among HNW individuals.
  • Develop your service proposition to match the service and product demand expressed by HNW investors in Hong Kong and react proactively to the forecasted change in demand.


  • Executive Summary
    • Market summary
    • Key findings
    • Critical success factors
  • Profiling HNW Consumers in Hong Kong
    • Entrepreneurs represent an important segment of Hong Kong's HNW market
      • Wealth managers reaching out to female HNW investors should focus on the entrepreneur segment
        • Table Figure 1: The average HNW investor in Hong Kong is male and over 50
      • In a diversified market, first-generation entrepreneurs and family business owners still need particular attention
        • Table Figure 2: Professionals dominate Hong Kong's wealth market, making programs targeting specific segments economical
        • Table Figure 3: Professionals dominate Hong Kong's wealth market
      • Manufacturing is the leading source of HNW wealth but wealth managers will find investors employed in financial services an increasingly lucrative target market
        • Table Figure 4: The bulk of HNW investors have sourced their wealth from the manufacturing sector
      • HNW investors in Hong Kong are more likely to hold director roles than their peers in the wider region
        • Table Figure 5: Director is the most common title held by Hong Kong HNW individuals
    • Wealth managers should be prepared to cater to the distinct needs of Hong Kong's large expat community
      • HNW expats represent a lucrative target market in Hong Kong
        • Table Figure 6: Expats represent an above-average segment of the HNW population in Hong Kong
        • Table Figure 7: Chinese migrants dominate Hong Kong's HNW expat market
  • HNW Investment Style Preferences
    • A multi-asset management strategy is key in Hong Kong
      • HNW investors in Hong Kong use an average of two wealth management firms
        • Table Figure 8: HNW investors in Hong Kong prefer to work with one or two wealth management firms
      • The convenience factor has to feature strongly in every wealth manager's marketing campaign
        • Table Figure 9: Lack of time is driving uptake of financial advice, making convenience an implicit part of a wealth service
      • The largest proportion of HNW wealth is kept in advisory mandates
        • Table 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
      • However, a multi-asset management strategy is key in Hong Kong
        • Table Figure 11: HNW demand is strongest for advisory and discretionary mandates
    • Wealth managers should integrate automated investment services into their service propositions
      • Demand for all types of asset management will rise
        • Table Figure 12: Demand for all investment services is forecast to increase
        • Table Figure 13: Investment services - Vontobel mobile private banking
      • Investors' reluctance to relinquish control means that advisory mandates will maintain their leading position
        • Table Figure 14: HNW investors are reluctant to relinquish control over their investments
      • A transparent fee structure is a must in Hong Kong
        • Table Figure 15: Wealth managers need to be able to present a clear fee structure
  • Understanding Asset Allocation Trends Among HNW Individuals in Hong Kong
    • Hong Kong's love affair with equities is set to continue
      • In light of rising demand for equities wealth managers should discuss the benefits of industry and geographic diversification
        • Table Figure 16: HNW investors are heavily exposed to equities
      • HNW investors' love affair with equity is set to continue
        • Table Figure 17: The typical HNW equity portfolio is dominated by funds
        • Table Figure 18: Capital appreciation opportunities and dividend income are the top drivers for equity investments
      • Bonds constitute the second-largest asset class
        • Table Figure 19: HNW investors allocate just 7% of managed wealth to fixed-income products
        • Table Figure 20: Demand for fixed-income products is set to decrease
      • Cash and near-cash investments constitute a significantly smaller proportion in Hong Kong than in the wider region
        • Table Figure 21: Only 13% of managed HNW wealth is held in cash products
        • Table Figure 22: Already low HNW demand for cash products is expected to stagnate
      • Property constitutes only a minor proportion of the typical HNW portfolio
        • Table Figure 23: Offering REITS is a must in Hong Kong
        • Table Figure 24: Concerns regarding the sustainability of the property boom will see demand for real estate fall
      • Alternatives only constitute a small but growing proportion of the typical HNW portfolio
        • Table Figure 25: Hedge funds dominate HNW investors' small alternative investment portfolio
      • A wide selection of alternatives is becoming more important
        • Table Figure 26: Demand for alternatives is on the rise
      • Commodity investments are of little interest to HNW clients
        • Table Figure 27: Commodities are of little interest to investors in Hong Kong
        • Table Figure 28: Commodity holdings are forecast to rise, albeit from a low base
  • HNW Product and Service Demand
    • A one-stop-shop strategy will pay off
      • Table Figure 29: HNW investors show moderately strong demand for all planning services
      • Table Figure 30: HSBC supports HNW investors over generations
      • With the exception of inheritance planning, demand for all planning services is forecast to increase
        • Table Figure 31: Already strong HNW demand for financial and pension planning services is forecast to increase
  • Appendix
    • Abbreviations and acronyms
    • Definitions
      • Affluent
      • HNW
      • Liquid assets
      • Mass affluent
    • Methodology
      • GlobalData's 2016 Global Wealth Managers Survey
      • GlobalData's 2015 Global Wealth Managers Survey
      • GlobalData's WealthInsight
      • Exchange rates
        • Table Hong Kong dollar to US dollar exchange rate, December 31, 2015 and December 31, 2016
    • Bibliography
    • Further reading

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