By Tasha Vashisht in London, and Sean Kang and Nikhil Dama in Singapore
Imagine: You spend your life climbing to the top of a mountain and, before you’ve reached the summit, you’re asked who should enjoy the view from the top in your place. Upset? Frustrated? Disappointed? Probably understandable.
This is perhaps how it feels – after decades spent on the trajectory to commercial success – to be asked about retirement and succession plans. And, for wealth advisors staring into the faces of those whose financial achievements are equivalent to conquering Everest, it’s frankly awkward to ask the question: “So… What next?”
Both retirement and succession planning are high value services which, by their nature, force personal and emotionally-charged discussions into the open. Handled well – they can offer an insight into clients’ hopes and aspirations for later life, as well as initiate relationships with the next generation of a family business. Handled poorly, these conversations could heighten the anxiety that naturally accompanies major change.
Yet Asia’s wealth managers are demurring from the challenge just when clients need them most.
Many would concede that wealth planning is the cornerstone of being retirement-ready, yet our data suggests that only 49% of HNW clients across APAC have had any recent experience of products and services in this area. Insurance products, which could offer long-term financial protection and an essential piece of retirement planning, have similarly limited penetration. Indeed, just 34% of HNWIs have visibility of them from their advisors in Singapore compared to 46% in Hong Kong.
At a more fundamental level, even the initial conversation about planning for the future isn’t happening. In the last 18 months, just two out of five clients in Singapore say they have had a discussion about wealth and succession with their advisor. In Hong Kong, this drops to one in three.
Take a step back from the data and the missed opportunity is glaring.
More than one in five (23%) HNW APAC clients say mishandling succession is a serious threat to their wealth, second only to poor investment performance. And yet, many Asian wealth managers are not having the necessary conversations related to this area – a sizeable missed opportunity. Even where plans are in place, HNWIs in Singapore and Hong Kong tend to be visibly less satisfied with advisor performance than clients elsewhere in the world [Figure 1].
Figure 1: Room for improvement
Q: When you discussed your wealth and succession plan with your Wealth Manager to what extent did the bank deliver on the following statements?
(Only responses that scored 9 or 10 out 10 for satisfaction are shown)
Source: Scorpio Partnership HNW Insights Database (2018)
So, how can the industry address this dissatisfaction? Here are three ways to better reflect client needs in wealth planning.
- Family at the forefront. Only about a third of clients in Singapore and Hong Kong are completely happy that their retirement plans are comprehensive, compared to 70% in other markets. Misalignment of the plan to family goals is a key driver of frustration. As conversations around wealth planning are happening relatively infrequently, HNWIs have a sense that their advisors do not have the full picture. Because family is so front and centre in their lives, advisors need to show they are listening to the aspirations of different generations and accounting for broader goals in wealth planning.
- There’s no substitute for experience. Similarly, 30% of clients in Singapore (and 39% in Hong Kong) are fully confident in the capabilities and understanding of their advisory team in wealth and succession planning. This contrasts with 69% of HNWIs in other parts of the world who have had a satisfactory experience. Financial institutions servicing the Asian market need to ensure that their staff have the right training and support in order to initiate these conversations and make recommendations that inspire client confidence.
- Don’t forget the human touch. Empathy is an under-rated quality in Wealth even though it is a pre-requisite for trust in relationships. It is critical for conversations that touch upon deeply personal topics, such as illness and death, and to whom (and when) family wealth should be transferred. Advisors should therefore avoid the temptation to hide behind a process. Instead, they should focus on asking straightforward, open questions. Clients will have anxieties and these should be acknowledged and explored in full, with clear resolution.
Retirement is a major milestone in the life of any client. Planning for it effectively is a growing priority for Asia’s HNWIs as demographic trends and family governance structures continue to evolve. And while there is no doubt that the complexity and emotions involved pose a challenge to the Asian wealth industry – when done right, the opportunity and path to growth for all involved should be too good to miss.
Thought of the week:
“You cannot escape the responsibility of tomorrow by evading it today.” – Abraham Lincoln
News from the world of wealth:
Are the most innovative companies just the ones with the most data? – Harvard Business Review
Market turmoil won’t deter central banks – Bloomberg View
What the charts say about the sell-off – Financial Times
Mifid tips balance against active funds in favour of ETFs – Financial Times
Wealth Management Apps below par, say rich Millennials – WealthBriefing News