Wealth Management in Hong Kong 2009

Introduction

The global economic crisis has had a major effect on Hong Kong's onshore wealthy population, potentially causing them to lose faith in their wealth managers. To keep clients, wealth managers need to know what this lucrative customer wants from them, in terms of products, services and interaction.

Scope

*HNW demographic and attitudinal attributes based on our Wealth Management Market Leaders Survey 2009

*Extensive primary research from 17 wealth management companies highlights their strategies for revenue growth, acquiring and keeping clients

Highlights

For the wealthy population living in Hong Kong, 2008 was a particularly tough year to bear. However, global economic conditions appear to be heading towards recovery in 2009 and stock markets have bounced back, helping investors to feel more confident about the future.

Datamonitor believes that Hong Kong HNWs will return to risky assets over the short-term as economic conditions improve and investment assets increase in value.

Datamonitor believes that significant potential exists within a wealth manager's ability to identify successful investment opportunities in the recovery. Markets have picked up from their lows in March 2009 and clients will be looking to recover their losses.

Reasons to Purchase

*Understand the HNW population's investments by sector and geography, appetite for risk, and reasons for choosing/leaving their wealth service

*Assess the threats and opportunities for wealth managers by understanding how peers are planning to grow revenues, acquire and keep clients


Report Highlights

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Overview 1
Catalyst 1
Summary 1
Methodology 1
Executive Summary 2
The wealth of Hong Kong investors suffered at the hands of the global financial crisis 2
HNWs become more defensive at the start of 2009, however as economic conditions continue to improve the expectation is that they will return to real estate investments and equities 2
The global economic recovery presents an opportunity for wealth managers to show their skill in identifying attractive investment opportunities 2
Table of Contents 4
Table of Figures 5
Table of Tables 6
Hong Kong's Wealth 7
Hong Kong produced strong growth in the lead up to the financial crisis, however 2008 was a difficult time for investors 7
Labor market conditions weakened for Hong Kong workers in 2008 7
Entrepreneurs struggled to grow their wealth as business conditions deteriorated in Hong Kong 8
Events in the global economy sparked selling pressure in the local stock market 8
Hong Kong house prices declined in 2008 9
The wealth data in 2009 10
The Hong Kong HNW Investor 11
Hong Kong HNWs became more conservative in 2009, reducing their property fund exposure and investing heavily in cash 11
Cash and near cash represent an important asset class for Hong Kong HNWs 11
Wealth management service implication: provide clients with regular market commentary and offer forward-looking opinions on the Hong Kong and offshore investment markets 13
Innovative example from the US: Pyxis mobile is providing a complete mobile communications interface to allow wealth managers to contact their clients while on the move 13
Hong Kong HNWs are expected to remain fairly conservative over the next two years 14
Wealth management service implication: help investors position themselves for the global economic recovery 16
Innovative example from Singapore: SG Private Banking creates global centre of expertise for real estate products 16
Hong Kong HNWs lack financial knowledge and are considering managing their own money, making it important for providers to emphasize their expertise 16
HNWs are risk seeking individuals however they exhibit slightly less-than-average knowledge of financial products 16
Wealth management service implication: providers should be focused on furthering their clients' financial education 18
Innovative example from Switzerland: UBS is investing resources in its clients 18
Innovative example from China: Standard Chartered aims to educate second generation wealth holders 19
Hong Kong HNWs place high importance on personal relationships when doing business, however they are less demanding for face to face relationship management than the regional average 19
Wealth management service implication: wealth managers need to increase contact with their clients through the most appropriate avenues 21
Innovative example in Singapore: Standard Chartered enhances relationship management access and convenience for its wealthy clients 21
The global downturn has shifted the demands of Hong Kong investors 21
Clients are demanding more hand holding and a variety of asset management services 21
Wealth management service implication: Hong Kong wealth managers should focus on providing more client support and offering a variety of asset management services 23
The Hong Kong Wealth Manager's View 24
Over the next two years, wealth managers are likely to focus resources on deposits in response to the expectation that HNWs will be demanding these products 24
The majority of HNW clients will be demanding advisory asset management services and private equity funds over the next two years 24
Wealth managers expect to focus their resources on deposit and savings products over the next two years 26
HNWs are strongly influenced by investment performance and the economic recovery presents an opportunity for providers to show their skill in identifying investment opportunities 28
A provider's ability to identify investment opportunities is very important to Hong Kong HNWs 28
Hong Kong wealth managers view their personal relationships, brand and reputation, and their ability to identify investment opportunities in the downturn as their biggest strengths 30
Providers that offer financial planning and focus on lending products are likely to increase their share of wallet and retain more clients 32
Providers need to ensure they are offering financial planning and focusing on the lending business in order to enhance their share of wallet 32
Hong Kong HNWs will stick with providers that offer lending products as well as asset management and those who resolve all problems quickly and completely 34
Hong Kong wealth managers have more frequent contact with their clients compared to the Asia Pacific average 36
Hong Kong wealth managers contact their clients over the phone more frequently than their Asia Pacific counterparts 36
Hong Kong wealth managers see their clients in person more frequently than their Asia Pacific counterparts 38
When clients meet with their wealth manager they most want to discuss where the investment opportunities are now 39
Appendix 41
The drivers of growth in the wealthy population 41
Income growth (combined with inflation, changes in GDP by sector, household savings rates and debt levels) 41
Investment returns (market capitalization, interest rates and bond yields) 41
The following measures are not, in themselves, drivers of wealthy population growth 41
Market capitalization 41
GDP 41
The following measures are not drivers of wealthy population growth except under very restricted circumstances 41
Primary residence value growth 41
Inheritance 42
Methodology 42
Wealth Management Market Leaders Survey 2009 42
Global Wealth Model 42
The UK sub-model 42
Global sub model (for all other countries) 42
Forecasting methodology 43
Continuous refinement to the understanding of liquid wealth distribution 43
Datamonitor's wealth numbers compared with other wealth numbers 43
Bibliography 44
Definitions 44
Asia Pacific 44
Further reading 44
Ask the analyst 45
Datamonitor consulting 45
Disclaimer 45
List of Tables
Table 1: What proportion of your HNWs' portfolios is allocated to the following five asset classes? 13
Table 2: HNWs' portfolio allocation now versus in 2 years' time 15
Table 3: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high) 18
Table 4: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high) 20
Table 5: What are HNWs demanding today? 23
Table 6: Over the next two years, how much demand do you expect from HNWs for the following product areas? 26
Table 7: What product areas will your wealth management service focus most resources on over the next 2 years? 28
Table 8: What will determine HNWs' choice of wealth management service over the next two years? 30
Table 9: What are your company's biggest strengths and weaknesses today? 32
Table 10: What is the most effective means of increasing share of wallet today? 34
Table 11: What is the best way to retain clients today? 36
Table 12: On average, how often do your relationship managers speak by phone to each HNW client? 37
Table 13: On average, how often do your relationship managers speak in person to each HNW client? 39
Table 14: When speaking with clients, what do they most want to talk about today? 40
List of Figures
Figure 1: The global financial crisis negatively influenced the Hong Kong labor market 8
Figure 2: Like most developed economies in the Asia Pacific region, Singapore's stock market declined sharply in 2008 9
Figure 3: Growth in the Hong Kong property market turned negative in 2008 10
Figure 4: The majority of HNW wealth in Hong Kong is invested in the 'cash or near cash' asset category, with this accounting for 27% of all investments 12
Figure 5: Over the next two years the majority of HNW wealth in Hong Kong will be invested in the 'cash or near cash' asset category with this accounting for 27% of all investments 15
Figure 6: HNW investors in Hong Kong have a higher risk appetite than the average Asia Pacific HNW investor 17
Figure 7: There is a greater risk of HNW clients in Hong Kong leaving to find another wealth manager than the average Asia Pacific HNW investor 20
Figure 8: In Hong Kong, HNW investors' greatest demand is for execution-only asset management services 22
Figure 9: Over the next two years, the greatest demand amongst HNW investors in Hong Kong will be for advisory asset management with 96% of HNW investors demanding this category of product 25
Figure 10: Wealth managers in Hong Kong will be focusing most of their resources on deposits and savings products over the next two years 27
Figure 11: HNW investors in Hong Kong are most influenced by ability to identify investment opportunities in the downturn when selecting a wealth manager 29
Figure 12: Personal relationships were viewed as the greatest strength of Singaporean wealth managers 31
Figure 13: The best way for wealth managers in Hong Kong to increase share of wallet is to target relationship managers on cross-selling products 33
Figure 14: The best way for wealth mangers in Hong Kong to retain HNW investors is to provide lending products as well as asset management 35
Figure 15: In Hong Kong the Wealth Management relationship managers speak to clients by phone approximately once a week 37
Figure 16: In the Wealth Management relationship managers speak to in person to clients approximately once a month 38
Figure 17: The majority of clients in Hong Kong want to speak to their wealth manager about where the investment opportunities are now 40

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List of Tables
Table 1: What proportion of your HNWs' portfolios is allocated to the following five asset classes? 13
Table 2: HNWs' portfolio allocation now versus in 2 years' time 15
Table 3: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high) 18
Table 4: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high) 20
Table 5: What are HNWs demanding today? 23
Table 6: Over the next two years, how much demand do you expect from HNWs for the following product areas? 26
Table 7: What product areas will your wealth management service focus most resources on over the next 2 years? 28
Table 8: What will determine HNWs' choice of wealth management service over the next two years? 30
Table 9: What are your company's biggest strengths and weaknesses today? 32
Table 10: What is the most effective means of increasing share of wallet today? 34
Table 11: What is the best way to retain clients today? 36
Table 12: On average, how often do your relationship managers speak by phone to each HNW client? 37
Table 13: On average, how often do your relationship managers speak in person to each HNW client? 39
Table 14: When speaking with clients, what do they most want to talk about today? 40

List of Figures
Figure 1: The global financial crisis negatively influenced the Hong Kong labor market 8
Figure 2: Like most developed economies in the Asia Pacific region, Singapore's stock market declined sharply in 2008 9
Figure 3: Growth in the Hong Kong property market turned negative in 2008 10
Figure 4: The majority of HNW wealth in Hong Kong is invested in the 'cash or near cash' asset category, with this accounting for 27% of all investments 12
Figure 5: Over the next two years the majority of HNW wealth in Hong Kong will be invested in the 'cash or near cash' asset category with this accounting for 27% of all investments 15
Figure 6: HNW investors in Hong Kong have a higher risk appetite than the average Asia Pacific HNW investor 17
Figure 7: There is a greater risk of HNW clients in Hong Kong leaving to find another wealth manager than the average Asia Pacific HNW investor 20
Figure 8: In Hong Kong, HNW investors' greatest demand is for execution-only asset management services 22
Figure 9: Over the next two years, the greatest demand amongst HNW investors in Hong Kong will be for advisory asset management with 96% of HNW investors demanding this category of product 25
Figure 10: Wealth managers in Hong Kong will be focusing most of their resources on deposits and savings products over the next two years 27
Figure 11: HNW investors in Hong Kong are most influenced by ability to identify investment opportunities in the downturn when selecting a wealth manager 29
Figure 12: Personal relationships were viewed as the greatest strength of Singaporean wealth managers 31
Figure 13: The best way for wealth managers in Hong Kong to increase share of wallet is to target relationship managers on cross-selling products 33
Figure 14: The best way for wealth mangers in Hong Kong to retain HNW investors is to provide lending products as well as asset management 35
Figure 15: In Hong Kong the Wealth Management relationship managers speak to clients by phone approximately once a week 37
Figure 16: In the Wealth Management relationship managers speak to in person to clients approximately once a month 38
Figure 17: The majority of clients in Hong Kong want to speak to their wealth manager about where the investment opportunities are now 40
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