2017

Investor
Pulse
Hong Kong

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Welcome to the
2017 BlackRock
Global Investor Pulse.
Investor Pulse is one of the world’s largest surveys of investors. This, our 5th edition,
takes in the views of 28,000 individuals across 18 markets. We ask people about
their hopes and concerns for retirement, expectations about investment returns,
and their thoughts on technology and advisors. In today’s complex financial
landscape, knowing what your fellow investors are up to can help you with growing
your wealth.

Read on to find out what Hong Kongers aged 25 to 74 are thinking and doing
about their financial futures.

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 Confidence Investors keep
falls, but is it investing despite

Contents justified? emerging

confidence gap

Pg. 02 Pg. 04

Restoring Hong Family, The missing

Kongers’ faith in friends retirement
financial advice or online? years

Pg. 08 Pg. 10 Pg. 14

Hong Kong The three steps

millennials: to wealth: control,
Asia’s risk diversification,
takers advice

Pg. 18 Pg. 20

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 Confidence falls,
but is it justified?
The future appears to be concerning Hong Kongers. Since our last survey, their
financial outlook and confidence in financial decision making has dropped sharply.

So what’s behind the fall in sentiment? They’re fretting about the high cost of living
and the state of the domestic economy. There’s also been a hike in people worried
about economic issues globally, which is understandable given the murky picture
they face.

On the one hand, geopolitical uncertainty, economic volatility and general

negativity have heightened. But we’re also seeing signs of a global economic
recovery and there are indications that reflation – government policies aimed at
stimulating growth – will be supporting the economy for some years to come.

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 HK investor confidence and positivity*

67%
64%
64%
58%
59%
49%

50%

36%

2013 2014 2015 2017

Confidence in decisions Positive about financial future

* The Global Investor Pulse was conducted in 2013, 2014, 2015, and 2017.

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 Investors keep
investing despite
emerging
confidence gap
Despite deteriorating confidence and sentiment, investors in Hong Kong have not
been idle. Since 2015 there’s been an increase in financial and insurance-linked
investments, while the amount moving into cash savings has fallen. And almost one-
quarter of investors are actively planning or researching a move out of cash, and
one in two say they’re considering it.

So a ‘confidence gap’ is emerging: Investors know they need to make their savings
work harder, but many are unsure whether they’re on the right path.

One way to know you’re on track is to be clear about your investment goals: How
much will you need to retire? How much of your savings can you afford to risk?

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How much can you afford
not to risk? What investment
Since 2015 there’s been
options are available to an increase in financial
you? And, how you should and insurance-linked
evaluate them?
investments, while the
A financial advisor can help amount moving into
you work through these
questions so you can take cash savings has fallen.
steps to grow your wealth
with greater confidence.

HK product ownership (2017)

3% 19% 45% 72% 80%

Other Property Insurance Financial investments
linked (equities, bonds, multi-
investments Cash and asset, alternatives)
cash equivalents

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 What’s wrong
with cash?
Cash is great, but in the current low interest rate and low growth environment,
it won’t deliver the sort of returns investors expect. In fact, it’s effectively a
depreciating asset. Our survey found most Hong Kongers are highly optimistic
about the performance of their investments, aiming for a target annual return
of around 8%. But to achieve those results in today’s market you need to think
about making your savings work that much harder. In fact, it would take Hong
Kong investors 35 years to double his or her money in cash, assuming a long-
term expected return of 2%. Investors in Hong Kong, and indeed across most
of APAC, have high cash holdings. So if you’re sitting on cash, it’s worth talking
to an advisor about options for putting it to work.

HKD$297,000
the median amount of cash being held for long-term
savings or investment opportunities.

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 32%
Financial
investments

33
Cash
%

Asset allocation of
HK investors

13%
Insurance
linked
investments

8%
14% Property

Other assets

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 Restoring
Hong Kongers’
faith in financial advice
Since the last survey, there’s been a sharp drop in people using financial advisors.
This move away from professional advice is most pronounced among women and
the over 65s. It seems a breakdown in confidence is turning Hong Kongers off, with
people most worried about fees, lack of information and low levels of engagement.

So what would it take for Hong Kongers to use advisors again? Investors say the
most valued aspect of using an advisor is the experience, even more so than fees
and performance. They want advisors to put the client’s interests above their own;
they want advice relevant to them personally; and they want transparent fees and
commissions. In short, they’re looking for an advisor they can trust.

Investors’ concerns about financial advice might be real or perceived. But it’s
important to recognise that advisors are not completely on the outer;

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 Investors say the most valued aspect of
using an advisor is the experience, even
more so than fees and performance.

Use of advisors*

more than a third of

41% 37
%
43 %
36 % investors still use them,
36% particularly individuals
25% under 34 or with high
net worth.

But what the survey

shows is that people
are increasingly turning
All investors Women Over 65s to other sources for
guidance and counsel
2015 2017 about their investments.

* The Global Investor Pulse was conducted in 2013, 2014, 2015, and 2017.

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 Family, friends
or online?
For most Hong Kongers, family and friends are the number one choice for trusted
advice. While this is understandable, it may not be the best approach to building
long-term wealth. Are friends and family best qualified to provide strategies and
advice to navigate today’s complex investment environment?

What online sources are Hong Kongers using?

Bank’s website
21%
20% Asset management
firm’s website

16% General online sources

12% Social media, blogs

10% Insurance company’s website

10% Broker or Dealer’s website

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 Are friends and family best qualified
to provide strategies and advice to
navigate today’s complex investment
environment successfully?

Investors are also increasingly turning online for advice: one in four say their
primary source of advice is online; over half say it’s among their top three sources.
And three-quarters of Hong Kongers go online regularly to monitor savings
and investments.

While online advice is a broad and growing trend, it does vary between different
groups. Millennials – people aged roughly between 25 and 35 – are the biggest
users of social media as a source of information. Men tend to use online advice
more often than women, except when it comes to social media.

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 Making sense
of online
Going online for advice is growing in popularity. But how do you know whether
you’re getting quality information or the right guidance? With so many different
sites and opinions, how do you sort the good from the bad? Remember that the
principles of sound financial counsel are the same, whether delivered digitally or
not. Here are some things to think about when looking for advice online:

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 Does it help you
How reputable is
figure out your
the source?
financial goals?

Does it consider your

Is it from a brand Is it relevant to
appetite for risk and
you know and your current
your current financial
trust? situation?
circumstances?

If you’re in doubt about any of these things, it’s probably

worth talking to a professional advisor.

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 The missing
retirement years
Hong Kongers have high retirement savings compared to the rest of the world, but
they are still unclear about their future. Only one in five know they are on track to
meeting their financial goals in later life, and half only think they are.

There are genuine reasons for them to be concerned. Investors in Hong Kong are
underestimating how long they’ll spend in retirement and how much they’ll need to
retire comfortably.

People are also living longer. This is a good thing and reflects ongoing
improvements in healthcare and quality of life. But investors will need to adjust their
plans accordingly to make sure they aren’t caught short.

A retirement gap has opened.

Most Hong Kongers expect to retire at 58 and are planning for 18 years of
retirement. But many will have a life expectancy of almost 85 years. What
happens for the additional eight years of retirement not accounted for?

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 8
Retirement-life expectancy gap years

Life expectancy 84 years

58 years 18 years

Expect to retire

Expected years
of retirement

Additional years
in retirement
Annual household
Expected saving
income required
at retirements
in retirement
HKD 2,750,000 HKD 625,000

Current funding Funding gap

4 years 22 years

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 Most Hong Kongers expect to retire
at 58 and are planning for 18 years
of retirement. But will have a life
expectancy of almost 85 years.

Significantly, most people don’t have enough savings to cover even part of their
planned retirement, let alone those extra years they can expect to live. Based on
their current level of savings and investments, most Hong Kongers will be able to
fund only four years of retirement. This means they’ll need to find income for an
additional 22 years.

Investors will need to think carefully about new or additional steps to fill the
savings-longevity gap. For a start, be more active in planning and monitoring your
investments; only one in five checks and adjusts their retirement plans online.

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 Products HK investors most likely to invest in:

56%
Stocks and shares

39%
Fixed income funds
51%
say the best way to
use savings to
38% generate income
Low-risk options like bonds
in retirement is by
investing.
23%
Income generating equity funds

21%
Multi-asset funds

Also, consider new ways of using savings to generate income, such as reinvesting
your retirement pool or moving savings into investments that will work harder.

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 Hong Kong 23%
say saving for a
home deposit

millennials:
is a priority

Asia’s risk
takers
Investors aged 25-35 in
Hong Kong are among the
25 %
think an advisor
77
would consider buying
an investment online
%
highest risk takers in Asia. can understand
their long-term
They’re more likely than objectives
either their Generation X
or Baby Boomer cousins,

35%
or indeed their millennials
peers in other markets,
to invest in products with are confident in
higher risks but also higher their decision
about moves
returns, such as equities.
out of cash

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 Investors aged 25-35 in Hong Kong are
among the highest risk takers in Asia...
They’re among the most willing to move out
of cash, but lack the confidence to do so.

But there’s a catch; while they’re among the most willing to move out of
cash, they lack the confidence to do so.

One explanation could be that millennials are unclear about their financial
goals. And with home ownership seemingly out of reach, many must be
wondering what they’re investing for?

An adviser can play a key role at this time in their life and help them clarify
their investment objectives and build their financial knowledge. With the
right advice, millennials can transform their risk taking mindset into a robust
wealth-building plan.

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 Three steps
to wealth:
control,
diversification,
advice
Building wealth isn’t easy. But there are proven ways to get you on track towards
your financial goals. The three most powerful steps are to take control of your
savings and investment plans, diversify your investments, and get yourself
professional advice.

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When we look at the survey, it’s clear that investors who use financial advisors are
ahead on many measures. They are:

more positive about their financial future and confident about their
investment decision making

more likely to ‘agree they are on track’ to achieve expectations

for retirement

more realistic about income needed for retirement

more likely to be actively considering steps out of cash

more likely to generate greater wealth over the long-term

So what are
you waiting
for? Speak to
an advisor that
you trust today.

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Want to know more?
blackrock.com/hk    [email protected] 

+852 3903 2688

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