How the Emerging Affluent are Preparing for Tomorrow

In their third annual report, “How the emerging affluent are preparing for tomorrow”, Standard Chartered Bank gives an insight into how the millennials in the emerging markets are saving and why they are saving and which instrument are they using. 
 
The emerging affluent are consumers who are earning enough to start saving – and investing – and that’s what makes them a crucial engine of economic growth. A study into the savings habits of 8,000 emerging affluent consumers across China, Hong Kong, India, Kenya, Korea, Pakistan, Singapore and Taiwan have revealed the following:
 
The most common approach used by this demographic to achieve their top savings priority is a basic savings account (43%). In fact, this is also the preferred method for achieving second (39%) and third (38%) savings priorities.
 
While most markets are united in their preference for basic savings accounts, the most common method of achieving a top savings priority in China and Korea is a time deposit (41% and 51% respectively, compared with a global average of 30%). Meanwhile, half of emerging affluent savers in Pakistan prefer to store their savings in cash at home, making this the most popular approach in that country by far.
 
Given how regularly they save, the emerging affluent could find that adopting a more advanced approach to saving – taking calculated risk – reaps potentially greater rewards. Our research shows that the emerging affluent in Asia could increase the return on their savings by an average of 42% over a 10-year period, if they switched from a largely basic savings approach to a low risk wealth management investment strategy. This number could reach highs of 86% in Hong Kong.
 
The investment markets in Kenya and Pakistan are less mature, but even here emerging affluent savers could reach their goals sooner, just by moving one step up from their preference of basic savings accounts or cash to time deposits. By doing this they could be earning 25% and 82% more over 10 years, respectively.
 
 
While the vast majority of the emerging affluent (96%) do save, many say that low interest rates discourage them from saving more than they currently do. Almost a third (30%) of people in the markets surveyed cites low interest rates as a barrier to saving more.
 
Since the last study in 2015, the confidence of the emerging affluent in achieving their top savings priorities has fallen, with Hong Kong witnessing the largest (18%) and demonstrating the lowest level of confidence overall. The decrease in confidence highlights why it is so important for consumers to set themselves on the right savings plan to achieve their goals, as doing so could help them reach their ambitions much sooner.
 
Digital banking tools have a good following among the emerging affluent, with 23% using these frequently and more than half (54%) at least sometimes. For day-to-day management, digital tools and services can help savers with important skills such as budget planning, budget tracking and understanding how to grow their savings pot. Human interaction, however, still has a major role to play, as evidenced by the most common sources of information used by the emerging affluent to plan their finances: friends and family, financial institution/bank websites and financial advisers come top of the list.
 
As the emerging affluent become more aware of how digital tools and services can help them to create, manage and grow their savings, the uptake will likely grow and evolve. Almost a quarter (23%) admit to saving less than they could due to difficulty in setting financial goals and monitoring their savings progress – challenges that could be overcome through the efficient use of digital tools.
 
Not only are emerging affluent savers in China the most digitally-savvy, they are also the most entrepreneurially minded. More than one in 10 (12%) of these consumers cite funding a business as their number one savings priority – double the global average of 6%.
 
Property is a top savings priority for a considerable proportion of the emerging affluent. The prospect of owning a home is attractive and appeals to the emerging affluents’ preference for keeping their money where they can see it. The emerging affluent in Korea (25%), Hong Kong (24%), Taiwan (21%) and China (12%) all consider buying a home as their number one priority, with Singapore (15%), Kenya (15%) and India (11%) also citing this as an important goal.
 
The emerging affluent have their eyes set on the future. Saving for their children’s education is among the top priority, with almost a third (29%) in Pakistan choosing it as their number one savings priority and almost a quarter (23%) in Kenya.
 
The savings landscape is constantly evolving, driven by the changing habits of consumers and the market forces around them. These significant forces are putting increasing pressure on consumers to save more and to maximise the return on their wealth, in order to realise the future that they see for themselves and their families. The emerging affluent are saving proactively and regularly. By making full and proper use of the tools, products and services available they could reach their top goals sooner.

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Changes in Our Business Model
 
 
Greetings from Moneylife Advisory Services
 
Between financial years 2019-21, SEBI has come up with extensive changes to investor advisor regulations. On Sep 23, 2020, SEBI had issued new additional guidelines. This comes just two months after extensive changes announced in July 2020. Earlier, in December 2019 there was an ad hoc circular
 
As a result of these changes, IAs, cannot accept fees through credit cards, will have to sign a 26-clause investor agreement, have to maintain physical record written & signed by client, telephone recording, emails, SMS messages and any other legally verifiable record for five years. IAs were already asked to record the suitability and rationale for every piece of advice given, sign them and store them for five years.
 
While these extensive and frequent changes, designed to strengthen the conduct of IAs are well-meaning, these have sharply increased compliance efforts and cost. We, being online advisors, find many of changes harder to implement, compared to advisors working in the physical space. We will have to have an army of advisors, administrative and tech staff to be compliant. If we do this, we will have to divert money to these areas and the cost of our service will double. We want to remain the least-cost service in the market to benefit more and more people. In the circumstances, we are forced to change our business model from “advisory” to “research”. This will mean the following:
 
What remains the same:
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What changes:
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Over the next few weeks our site and our communication to you will reflect these and other additional changes.
 
We feel this will not affect you much in terms of what really matters in investing: knowing what to buy and when to buy. This is our edge and it will still be available to you.
 
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Debashis Basu
Founder