Wealth in Hong Kong: HNW Investors 2018

Wealth in Hong Kong: HNW Investors 2018

Summary

"Wealth in Hong Kong: HNW Investors 2018", report analyzes the investing preferences and portfolio allocation of HNW investors resident in Hong Kong. The report is based on our proprietary Global Wealth Managers Survey.

The established nature of the Hong Kong market makes it larger and more diversified than is common in the rest of Asia Pacific, with a strong element of offshore wealth management. 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. While advisory mandates dominate, this is changing and we are seeing greater uptake of discretionary mandates, in part driven by expats. The average portfolio is heavily invested into equities, but bonds and alternatives will grow. We forecast a bias towards defensive assets.

Specifically, the report -

profiles the average HNW investor in terms of their demographics and analyzes the expat opportunity in Hong Kong

analyzes which wealth management mandates are preferred among HNW investors in Hong Kong and how demand will develop looking forward

examines the allocation of HNW investors’ portfolios into different asset classes and how this allocation is expected to develop in the future

analyzes HNW investors’ propensity to invest offshore, their preferred booking centers, and the asset classes as well as Hong Kong’s standing as an offshore center

analyzes the wealth and investment management product and service demand among HNW investors in Hong Kong.

Scope

Constituting 22,000 individuals, the HNW female segment is predicted to grow strongly as demography and changing social mores reshape Hong Kong.

42.8% of the local HNW population are non-nationals, making the expat opportunity a significant one.

6% of offshore wealth from the wider region is booked in Hong Kong, but one of the center’s key appeals - client anonymity - will be under pressure from the Common Reporting Standard (CRS).

31% of HNW wealth is held in bonds, making it the preferred asset class, closely followed by equities (30%); the former and alternatives are forecast to show the steepest increase in demand.

An increased focus on tax evasion following the introduction of the CRS will drive demand for tax advisory services in the short term, while a focus on discretionary service is a must in the long term.

Reasons to buy

Develop and enhance your client targeting strategies using our data on HNW profiles and sources of wealth.

Give your marketing strategies the edge required and capture new clients using insights from our data on HNW investors’ preferences for the various styles of asset management.

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.

1. EXECUTIVE SUMMARY
1.1. The HNW investor base is diversified, with large elements of offshore
1.2. Key findings
1.3. Critical success factors

2. OVERVIEW
2.1. Hong Kong’s wealth market requires a keen competitive edge
2.2. Demographics: professionals employed in the financial services industry represent a lucrative target market
2.3. Expats: Wealth managers in Hong Kong must have a compelling proposition for the expat opportunity
2.4. Investment preferences: lack of time drives uptake of advice
2.5. Asset allocation: bonds and alternatives will be on the rise
2.6. Offshore preferences: a good investment track record and a wide range of products can entice wealth home
2.7. HNW product and service demand: wealth managers need to develop tax capabilities along with a range of discretionary options

3. WEALTH MANAGERS NEED A VARIED TARGETING STRATEGY
3.1. Offerings aligned with key sectors will be lucrative in trade, construction, and finance
3.1.1. Highly paid executives are not uniformly distributed across the economy
3.1.2. Hong Kong’s HNW population has long been property- and finance-focused, but has moved away from manufacturing
3.2. There are more than 22,000 HNW women in Hong Kong
3.2.1. Wealth held by women is on a long-term growth path in Hong Kong
3.2.2. Tailoring a proposition to HNW women in Hong Kong requires a look at family wealth

4. EXPATS ARE THE MAIN OPPORTUNITY FOR HONG KONG WEALTH MANAGERS
4.1. Catering to the expat market requires serving business executives
4.1.1. The bulk of HNW expats are in Hong Kong only temporarily, requiring rapid response
4.1.2. Highlighting the extensive array of investment options will pull expat assets to advisors
4.1.3. Wealth managers must be prepared to cater to the needs of HNW investors looking to migrate to Hong Kong from the mainland

5. DISCRETIONARY MANDATES ARE SET TO SOAR
5.1. Hong Kong is below average in discretionary but this will change
5.1.1. The current allocation into discretionary mandates is modest but growing
5.1.2. Demand for discretionary mandates has been building in Hong Kong since plummeting during the financial crisis
5.1.3. Discretionary mandates appeal to those wanting to spend less time on their investments, but who still want that alpha
5.1.4. Asset management needs to be part of a bundled service

6. BONDS ARE THE PREFERRED ASSET CLASS AMONG HNW INVESTORS
6.1. Hong Kong investors are big on direct bonds and equity
6.1.1. Shares and corporate debt are a major part of HNW portfolios
6.1.2. The Hong Kong bond market will be spurred on by government, and wealth managers can benefit

7. OFFSHORE WEALTH IS A CRITICAL SEGMENT
7.1. Offshore wealth is primarily Asian, but Hong Kong attracts funds from around the world
7.1.1. Offshore HNW AUM are concentrated from Greater China, although India is rising
7.2. Providing offshore investors with access to real estate investments is essential
7.2.1. Stability and well-developed financial markets make HNW offshore clients crucial to private banking business volumes
7.2.2. Wealth managers can play up the stability of the market to attract the cash element of the Asian offshore portfolio
7.3. Like many offshore centers, CRS implementation is an issue for Hong Kong
7.3.1. The top drivers for non-resident investors booking into Hong Kong derive from its safe-haven status

8. APPENDIX
8.1. Abbreviations and acronyms
8.2. Bibliography
8.3. Supplementary data
8.4. Definitions
8.4.1. Affluent
8.4.2. HNW
8.4.3. Liquid assets
8.5. Methodology
8.5.1. 2017 Global Wealth Managers Survey
8.5.2. 2016 Global Wealth Managers Survey
8.5.3. Level of agreement calculation
8.5.4. Service level of demand score
8.5.5. Forecast level of demand calculation
8.6. Further reading

List of Tables
Table 1: Cash and near-cash products: importance of asset allocation drivers
Table 2: Equities: importance of asset allocation drivers
Table 3: Bonds: importance of asset allocation drivers
Table 4: Property: importance of asset allocation drivers
Table 5: Commodities: importance of asset allocation drivers
Table 6: Alternatives: importance of asset allocation drivers

List of Figures
Figure 1: Hong Kong’s wealth market remains male-dominated, but wealth is slowly starting to transfer to women from founding patriarchs
Figure 2: The large expat client base is mainly drawn from the Commonwealth or around the region
Figure 3: Investors are becoming more risk-averse, with a greater preference for short-term investments
Figure 4: Commodities remain out of favor in Hong Kong as bonds go from strength to strength
Figure 5: The US and European financial centers entice money out of Hong Kong with better returns and range
Figure 6: Strong movement towards discretionary asset management means it should be the focus for all wealth managers
Figure 7: The key industries for high-earning executives in Hong Kong are trade and construction
Figure 8: Real estate and construction have traditionally generated Hong Kong’s fortunes and this remains the case
Figure 9: Women in Hong Kong have been major wealth generators for some time
Figure 10: Women’s wealth in Hong Kong is more aligned to family wealth but that doesn’t make them idle heiresses
Figure 11: Hong Kong expats are typically in the market for one or two postings before moving on
Figure 12: The broader foreign population in Hong Kong is longer-term than HNW expats
Figure 13: Hong Kong’s superior capital markets attract expat wealth to local wealth managers
Figure 14: Greater China figures strongly in the HNW expat community, along with the Commonwealth
Figure 15: The bulk of foreigners in Hong Kong are from the rest of Asia
Figure 16: Hong Kong, like the rest of Asia, lags in uptake of discretionary mandates
Figure 17: Discretionary mandates will be the clear winner in terms of growing demand from HNW clients
Figure 18: HNW investors expect time savings and alpha from their discretionary mandates
Figure 19: Planning services have strong demand currently but few are expected to grow
Figure 20: The stability of fixed-income products is gaining traction among local risk-averse HNW investors
Figure 21: Though the Hong Kong bond market remains near an all-time high, the dim sum element has shriveled
Figure 22: Hong Kong is among the top offshore financial centers for Asian HNW investors
Figure 23: Property and equities dominate the Asian offshore portfolio
Figure 24: Hong Kong remains the world’s pre-eminent offshore renminbi booking center
Figure 25: Stability and anonymity are big drivers for offshore investors in Hong Kong