Hong Kong’s Post-80s generation lack basic financial planning and savings awareness and skills, Fidelity survey finds

Hong Kong, 8 August 2011 – According to a survey of Hong Kong’s post-80s generation announced by Fidelity today, a majority of respondents have highly unrealistic expectations of returns on investment, and few have sought genuinely qualified investment advice. Kerry Ching, Fidelity International’s Country Head of Hong Kong, said today that, although saving for retirement or a family may not be a top priority at this stage of their lives, the post-80s generation need to realize that there is a huge gap between what they need for their retirement and their actual savings, and it is vital for them to start saving straight away, seek professional advice, and manage their personal and pension investments wisely.


According to the findings of Fidelity’s “Financial Management of Post-80s Generation in Hong Kong” survey of respondents born in the decade 1980-89, 94% of the poll said that they do have savings. In terms of investment, 97% of them have lost money in investments. Asked why they thought they had lost money, 59% said this was because they are not sensitive to market fluctuations, and 54% said it was because they do not have enough investment knowledge.


Kerry Ching said that it takes forward thinking, preparation and self-discipline to prepare for retirement, and savers cannot start early enough. She remarked, “Although it is encouraging to see that 94% of the post-80s generation have some form of savings, and most will save or invest their extra income, they typically have not developed the knowledge or the habits to achieve their goals and expectations. Habits formed early stay with us when it comes to saving and investment, and those who have just begun working can gain a lot by starting off in the right way. Hong Kong’s post-80s need to realize that simply putting money aside for a rainy day will not be enough, and there is no substitute for detailed preparation and solid understanding.”


Survey highlight (1): Respondents save regularly, but with short-term goals

According to the survey, 94% of the sample do have savings of some kind, with 80% of these saving for rainy days or emergencies. Typically, they have around 17% of their monthly income put aside as cash savings, and a further 15% for investments or insurance. Beyond this total, however, much of the saving of the post-80s generation is done for short-term ends to improve their immediate quality of life, rather than for the long term. Exactly half of post-80s savers do put aside money regularly for a residential unit or other property, but almost the same number – 48% – save in order to travel, and 42% save to buy things they like.


The survey also found that Hong Kong’s post-80s typically spend up to 26% of their monthly income without knowing, or keeping track of, where it is going. When it comes to bonus money or extra income,

73% said they will save it, and 50% invest it, though spending on leisure pursuits comes close behind, at 47%.


“Hong Kong’s post-80s generation appear to be pretty optimistic about their chances of achieving their life goals, with 77% feeling they are somewhat likely to own a property, and 72% expecting a stable retirement life,” said Kerry Ching. “Yet their expectations are out of line with their priorities, and they make little effort to achieve their objectives. All income bands need to pay more serious attention to the tradeoffs between short-term enjoyment and long-term returns, and start to think more clearly and honestly about their priorities.”


Survey highlight (2): Respondents invest for a better life, but often end up worse off

When it comes to investing and growing the value of their assets, Hong Kong’s post-80s generation mostly invest to improve their lifestyles or buy a residential property. The survey found that 61%, the highest proportion, invest to live the lifestyle they want, with 53% investing to provide their family with a more comfortable life, and buying a residential unit or paying off a mortgage coming fourth at 52%, while 57% invest to prepare for a rainy day, and 50% invest to prepare for retirement. The sample on average looks to gain HK$1 million in 15 years’ time as the target to achieve their investment goals.


However, their understanding of what constitutes a sound investment decision appears somewhat incomplete, and their knowledge of investment discipline limited. The highest proportion of the post-80s respondents, 52%, believe that a sound investment decision is one that doesn’t put all their eggs in one basket, and 51% believe that a sound investment decision is a well-informed one that takes into account potential risks and return. And as for the key criterion for a sound investment decision from a long-term investment planning perspective, that it achieves preset financial targets in a planned timeframe, only 43% of the poll feel that this constitutes a sound decision. Compared to a survey done by Fidelity in late 2010, the post-80s generation are more aggressive in pursuing returns but pay less attention to disciplined financial planning.


The post-80s generation also appear to be undisciplined about monitoring their investment portfolio, with two thirds reviewing their bank accounts a few times a month, but just less than half reviewing their portfolio this often. And on their hopes for investment performance versus what they have achieved, expectation and reality seem even further apart. On average, they regard 19% or more as a satisfactory ROI, though this level of returns is hard to find in the long term. And despite these high expectations, their actual experience of investment is largely negative, as they admit. Among those who have lost money in investments, 59% attribute this to not being sensitive to market fluctuations, while 54% explain that they just do not have enough investment knowledge.


“The post-80s generation are candid and realistic enough to admit that they are not well-informed investors,” concluded Kerry Ching. “All the same, they still seem to judge results according to ROI expectations near the top of today’s performance range, while taking little time to actually track how their investments are performing. Also, their investment behavior seems to be short-term in both their approach and their goals. They do not appear to correlate careful investment planning and asset allocation with better performance over the long haul.”


Survey highlight (3): Respondents see their MPF portfolios as their primary support in retirement, but are dissatisfied with its performance

Survey respondents are overwhelmingly committed to the MPF scheme in their retirement savings, with 86% having the MPF as their only pension plan, only 3% combining it with the voluntary Occupational Retirement Schemes Ordinance (ORSO) scheme, and only a further 3% using ORSO only. About 40% is not happy with the returns from their pension schemes. Out of those dissatisfied, 69% said they would rather invest the contributions themselves in individual stocks – despite the poor investment outcomes noted above.


Despite this prevailing dissatisfaction, the post-80s generation still expect the MPF to support most, if not all, of their life after retirement. Some 21% expect the MPF to finance 100% of their retirement, and a further 38% expect it to finance 50% of their retirement. Only 8% are ready to admit that the amount of their pension plan is too little to support their retirement. Yet, 52% still expect their retirement life to be better supported financially than their parents’, while a further 20% expect to be as well off as their parents after retirement.


“Once again, the hopes and expectations of Hong Kong’s post-80s generation for their MPF portfolios seem to be very much at variance with their experience,” Kerry Ching pointed out. “Despite their broad dissatisfaction with the existing MPF/ORSO arrangements, they still expect to be able to finance their retirement out of them, and to retire better provided for than their parents. They can have a better chance of achieving these results if they factor MPF into their overall asset allocation scheme, review the performance of their MPF portfolio more often and more carefully, and look at other monthly contribution savings schemes, such as mutual funds, to supplement the basic mandated pension scheme.”


Survey highlight (4): Respondents rate investment advisers highly – but seldom use them

The survey found that a majority of Hong Kong’s post-80s generation, 55% of the respondents, rely heavily on word-of-mouth recommendations for financial and retirement information; while 49% use newspapers and magazines most, and a further 49% rely on internet search. However, respondents’ ratings of the reliability of these sources are very different. Family and friends are seen by 19% as the most trustworthy source of information, but only 8% trust the print media, and only 6% for internet search. Financial advisers, conversely, are used most by only 27% of the respondents, but rated by 16% as the most trustworthy source of financial and retirement information – the second highest ranking behind family members.


Kerry Ching said, “The post-80s generation’s views of financial information sources, and their habits in using them, are very divergent, even contradictory. While respondents admit they have little trust in magazines and internet searches, they still mostly use these sources in seeking information. Hong Kong’s post-80s generation need to develop habits of using financial advisers more, to match their apparently high opinion of professional financial advice.”


Based on the findings of the survey, Fidelity proposes the following four recommendations for the post-80s generation to come closer to realizing their hopes from saving and investment:


Fidelity’s Four Recommendations for Forward Planning

(1) Set a goal, calculate how much you need and plan how to achieve it

(2) Use smart asset allocation

(3) Do your homework or talk to professionals

(4) Discipline yourself


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About Fidelity International

Fidelity International provides investment products and services to individuals and institutions in the UK, continental Europe, the Middle East and Asia Pacific. Established in 1969, the company has over 5,400 staff in 23 countries and manages or administers client assets US$309.7 billion as at 31 March 2011. Fidelity has over 7 million customer holdings and manages more than 750 equity, fixed income, property and asset allocation funds. Fidelity’s fund managers receive research from one of the largest proprietary research teams, covering 99% of the world’s largest listed companies. Fidelity International is an independent company which is privately owned.

Media Contacts:

Rowena Kwok
Fidelity International
Tel: 852 2629 2800
Email: rowena.kwok@fil.com

Jaime Leung
Fidelity International
Tel: 852 2629 2800
Email: jaime.leung@fil.com