SJP Asia - Study finds Singapore and Hong Kong Millennials Charting a New Course in Wealth Management for Future Generations
A new report released by St. James’s Place Asia (“SJP Asia”) has uncovered different approaches to wealth management between older and younger investors in Singapore and Hong Kong, finding that millennials are setting a new tone in the way they manage their wealth for future generations.
With around 28% of Asia Pacific’s millennials and Gen-Zers looking to inherit more than USD15 trillion via multigenerational wealth transfer over the next decade the report by St. James’s Place titled Money Relationship Monitor 2022 – Wealth Through the Generations, looks more deeply at how Singapore and Hong Kong millennial investors between 25-39 years old view and approach wealth creation, management and financial planning as a barometer for future trends.
Oliver Wickham, CEO, SJP Hong Kong, said: “Overall, what our research shows is that Singapore and Hong Kong millennial investors take a more personalised approach to investing and are more resilient in their convictions despite the turbulence and a shift in their surrounding environment. While there are gaps for this generation in having a robust and well thought out financial plan, Singapore and Hong Kong millennials are prepared to follow their ideals even if it might mean less than ideal investment returns – things they can easily avoid with appropriate advice and planning.”
Across the board, the importance of good quality, independent financial advice is valued with millennials in Singapore and Hong Kong (79%) seeking professional advice before making any major financial decisions. For long-term investment planning, most prefer to visit a professional financial adviser (46%) or their bank (31%) and robo-advisors platforms (19%).
The study found that most millennials in Singapore and Hong Kong value trust when they look for financial advice, with family being the leading source of such information (63%). Hong Kong millennials also seek financial advice from bank managers and staff (40%) and professional financial advisers (30%), while those in Singapore rely on professional financial advisers (35%) and friends (34%).
The topics in highest need for financial advice and knowledge are investments (88%), property and mortgage and insurance (both at 74%).
54% of millennial investors say that they currently engage a financial adviser to manage investments on their behalf compared with 52% in the older generations and 92% indicate that the financial advice they received was useful.
The study also revealed that 54% of millennials have no financial plan at all and that only one-third (33%) of those with a plan in place, have included the costs of inflation over the years. Millennials with no financial plan say they are making lifestyle sacrifices to secure a better retirement (75%), which is significantly higher compared with 56% for those who do have a financial plan in place.
Gary Harvey, CEO, SJP Singapore, said: “While the millennial generation is more receptive to digital platforms and solutions as compared to the older generations, it’s encouraging to see how much they continue to value relationship-based financial advice. However, this also underscores the importance of financial advisers in maintaining that trust and demonstrating how they can continue to equip this generation of investors with the knowledge, time and confidence to manage the growing complexity of financial affairs as they go through different stages of their lives.”
Investing is More Personal for Millennials
More millennials see wealth (92%) as something that would make them happier compared to their counterparts over 40 years of age. They also score the highest in the view that having a balanced lifestyle is more important than a high income (85%).
While 83% of millennial investors in Singapore and Hong Kong believe that being wealthier would allow them to have a better work life balance, more Singaporeans (69%) are willing to spend more time working to increase their wealth compared to Hongkongers (65%), with 70% of millennials in both markets believing that they should work longer and harder, even at the expense of personal relationships while they are young to enjoy the fruits of their labour when they are older.
In contrast, only 67% of their older counterparts in Singapore and Hong Kong are willing to compromise on personal relationships to maximise their wealth.
Having money to invest in personal ambitions is the main reason why nearly half (49%) of millennial investors in Singapore and Hong Kong want to grow their wealth. This is the same for their older counterparts in Hong Kong at 37%, while those in Singapore the main reason is to grow wealth for future generations (40%).
A Generational Gap Exists in Wealth Planning
When looking at the passing of wealth across generations, the study shows 73% of millennials in Singapore and Hong Kong lack knowledge or understanding about effective inter-generational wealth transfer. It also shows 74% do not understand the tax implications of it, compared with 63% and 65% across other age categories.
As a result, over half (62%) of millennials say that wealth and succession planning causes stress in their life, compared with 55% of investors over the age of 40. They are also more likely (57%) to feel that wealth and succession planning is a source of family disharmony compared to (50%) in older generations.
The study also finds that more millennials in Singapore are planning to donate part of their wealth to a philanthropic entity or cause, with 48% indicating this compared with 40% of those older. Interestingly, fewer millennials (27%) in Hong Kong are willing to do the same, compared with (37%) in the over 40 generations.
Oliver Wickham, CEO, SJP Hong Kong, said: “Millennial investors in Singapore and Hong Kong are strong and resilient and will offer us early signs of what the future of wealth management, advisory and planning should incorporate for generations that come after. Through this study, we can also see they bear enormous responsibility in dealing with the transfer of wealth and managing it well for their best future in good times and bad. Financial planning will continue to play an important part of how that is managed and invested to support their legacy.”
Singapore and Hong Kong Millennials Investing with a Purpose
The study finds COVID-19 has increased interest in responsible investing, with Singapore and Hong Kong millennials being more likely than their older counterparts to put environmental, social and governance (ESG) factors into their investment thinking. Over two-thirds (70%) say ESG is a priority for them – up by six percentage points compared to 2021 with 68% actively reviewing sustainability reports and credentials before making an investment.
Interestingly, despite their greater propensity for it, 61% of millennials incorrectly believe that returns must be sacrificed in order to invest responsibly, compared with 58% of older generations.
The sustainability issues of greatest importance to eight out of 10 millennials included climate change (14%), health & wellbeing (13%), education (11%), decent work & economic growth and poverty (both at 9%), gender equality (8%), affordable & clean energy (7%), clean water & sanitation (6%).
The study finds that investors of all ages are willing to act on their concerns, with 49% of millennials saying they are prepared to divest from a company that is not operating sustainably, and 61% would do the same for a company contributing negatively to climate change.
Gary Harvey, CEO, SJP Singapore, said “We see younger investors leading the way in ESG investment trends as they see this as a vehicle to put their own money to better use. Given their convictions around responsible investing, seeking out financial advisers who are knowledgeable in this space can help them incorporate the ESG principles they value most into their investment and wealth planning while debunking false assumptions that returns must be sacrificed.”
Angelina Lai, Chief Investment Officer, SJP Hong Kong, said: “It is positive to see millennials as a generation taking such an active lead in responsible investing. As they increasingly look to align their investments with what they believe in, financial advisers need to help them cut through the noise and incorporate the ESG principles they value most into their portfolios, while demonstrating that returns don’t have to be compromised in order to invest responsibly. I believe the pandemic and recent world events highlight how important it is for millennials to continue to set new trends and standards in this respect.”