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The 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. An expectation of better returns through advisors is driving uptake of professional advice, but investors are reluctant to relinquish control completely, preferring advisory mandates. The average portfolio is heavily invested into equities, and this is not expected to change. However, we forecast rising demand for alternative products, which currently only constitute a minor proportion of the typical HNW portfolio. HNW clients also show moderate to strong demand for financial and pension planning, while estate planning continues to be a service that is sold rather than bought.
Family business owners and first-generation entrepreneurs together form the largest HNW client segment in Hong Kong. Wealth managers need to be prepared for clients with irregular incomes, heavy exposure to single industries, and finances entwined with their business.
Expats constitute a sizable proportion of the local HNW market and should prove to be a lucrative target segment.
Advisory mandates continue to dominate in Hong Kong. However, HNW investors prefer to manage simple investments themselves.
The average portfolio is heavily exposed to equities, while only the bare minimum is held in cash and near-cash products to ensure liquidity.
Already moderate to strong demand for margin lending is forecast to increase even further, and wealth managers should ensure that clients understand the risks associated with a leveraged investment strategy.
Verdict Financial's "Wealth in Hong Kong: HNW Investors 2016" report analyzes the investing preferences and portfolio allocation of HNW investors in Hong Kong. The report is based on our proprietary Global Wealth Managers Survey.
Specifically the report:
Profiles the average HNW investor in Hong Kong in terms of their demographics and analyzes the expat opportunity in the country.
Analyzes which wealth management mandates are preferred among HNW investors in Hong Kong and how demand will develop going forward.
Examines the allocation of HNW investors' portfolios into different asset classes and how the allocation is expected to develop in the future.
Analyzes product and service demand among HNW investors in Hong Kong.
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' 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 product and service demand expressed by HNW investors in Hong Kong and react proactively to the forecasted change in demand.
The HNW market in Hong Kong is well diversified and attractive in its own right
Critical success factors
PROFILING HNW CONSUMERS IN HONG KONG
Entrepreneurs represent an important segment of Hong Kong's HNW market
In a diversified market, first-generation entrepreneurs and family business owners still need particular attention
HNW individuals have built their fortunes through manufacturing and the financial services industry
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
Uncertainty if they will return to their country of origin motivates HNW expats to invest locally
HNW INVESTMENT STYLE PREFERENCES
A multi-asset management strategy is key in Hong Kong
HNW investors in Hong Kong expect better returns through advisors
The largest proportion of HNW wealth is kept in advisory mandates
Advisory mandates are set to remain the preferred type of asset management
Demand for advisory and discretionary services is on the rise
HNW investors prefer to manage simple investments themselves
UNDERSTANDING ASSET ALLOCATION TRENDS AMONG HNW INDIVIDUALS IN HONG KONG
Hong Kong's love affair with equities is set to continue
Equities dominate the typical HNW portfolio, and this is not expected to change
Equities constitute almost two thirds of HNW investors' managed wealth
Bonds constitute the second-largest asset class
Cash and near-cash investments constitute a significantly smaller proportion in Hong Kong than in the wider region
Property constitutes only a minor proportion of the typical HNW portfolio
Commodity investments are of little interest to HNW clients
Alternatives only constitute a small proportion of the typical HNW portfolio
Dissatisfaction with traditional asset classes is driving demand for alternatives
HNW PRODUCT AND SERVICE DEMAND
Financial and retirement planning should be an integral part of a wealth manager's offering
With the exception of inheritance planning, demand for all planning services is forecast to increase
Current market conditions mean that property advice is of little interest to HNW investors
Positive lending conditions are driving demand for credit in China
HNW demand for margin lending will continue to rise
Abbreviations and acronyms
Verdict Financial's 2015 Global Wealth Managers Survey
Verdict Financial's 2014 Global Wealth Managers Survey
About Verdict Financial
Figure 1: Wealth managers should be prepared to cater to Hong Kong's large business owner community
Figure 2: BNP Paribas targets entrepreneurs in Hong Kong
Figure 3: Financial services represents an important driver of the economy and wealth in Hong Kong
Figure 4: Expats are an important part of the HNW community in Hong Kong
Figure 5: Hong Kong attracts expats from various regions, but China stands out
Figure 6: HNW expats invest locally as they are unsure if they will return to their country of origin
Figure 7: An expectation of better returns is driving uptake of financial advice
Figure 8: The majority of HNW wealth is kept in advisory mandates
Figure 9: Demand is strongest for advisory and discretionary mandates
Figure 10: Demand for advisory and discretionary asset management is forecast to increase significantly
Figure 11: Vontobel's private banking app allows clients to trade remotely
Figure 12: Investors feel confident enough to manage simple investments themselves
Figure 13: HNW investors are heavily exposed to equities
Figure 14: HNW investors prefer equity funds over direct holdings
Figure 15: Capital appreciation opportunities is the number one driver of equity investments
Figure 16: HNW investors allocate 23% of managed wealth to fixed income products
Figure 17: Demand for fixed income products is set to decrease
Figure 18: Only 5% of managed HNW wealth is held in cash products
Figure 19: HNW demand for cash products will continue to fall
Figure 20: 4% of HNW wealth is allocated to property
Figure 21: A weak property market will see real estate investments fall
Figure 22: Commodities are of little interest to HNW investors in Hong Kong
Figure 23: Commodity investments are forecast to decrease
Figure 24: Hedge funds are the preferred alternative investment product
Figure 25: Dissatisfaction with other investments is driving HNW demand for alternatives
Figure 26: Financial and pension planning is the core of a wealth manager's appeal
Figure 27: HSBC supports HNW investors over generations
Figure 28: With the exception of inheritance planning, all types of planning will see a marked increase in demand from HNW investors
Figure 29: HNW investors show moderate to strong demand for margin lending
Figure 30: Demand for margin loans is forecast to increase
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Credit Suisse, BNP Paribas Wealth Management, HSBC, Vontobel
Alternative investments, commodities, equities, bonds, deposits, funds, direct investments, private banking, wealth management, Hong Kong, investments, portfolio allocation, HNW, expats, discretionary asset management, execution-only, self-directed investors