l Roots of the industry
Friends Provident International’s
Hong Kong sales
director, Trevor Smith,
agrees: “Advisers are now
going back to the roots of
the industry, and offering
more protection products,
such as life insurance and
critical illness. We are also
seeing a move towards
regular savings, as investors
focus on the benefits
of dollar-cost averaging.”
Hong Kong investors
are different from their
counterparts in other major
markets anyway, Smith
notes, as they typically salt
away as much as 28% of
their discretionary income,
and also place a higher
priority on saving for their
children’s education than
those who live in higher
tax countries with more
social security provision.
l Cautious climate
Because it is a low-tax jurisdiction,
“Hong Kong investors
are more likely to be
motivated by a need to
save for the future, unlike
the UK, where tax efficiency
is often the driver,” Smith
points out.
Rainbow Pan, chief
executive of Ipac Financial
Planning Hong Kong, an
arm of the Australian Ipac
wealth management company,
says Hong Kong
consumers are increasingly
turning to financial planners
because they realise
they need help.
As they are doing so,
they are more careful about
who they consult, Pan, the
Institute of Financial
Planners of Hong Kong’s
(IFPHK) 2006 Financial
Planner of the Year, adds.
“When the market is so
good that you can throw a
dice and make money,
investors do not question
their financial planner’s
qualifications,” she explains.
“But when times are more
difficult, like now, they ask
a lot more questions and
are more cautious.”
Sheila Dickinson, senior
vice president at Ipac and,
like Pan, a holder of the
IFPHK Financial Planner of
the Year, this time for 2008,
says the firm’s fee-based
“lifestyle financial planning”
model does better
during a bear market
because people are looking
for more than just basic
investment advice in a
downturn.
Dickinson, who was
working in the UK when
commission disclosure
came in 15 years ago,
recalls that UK IFAs were
worried then about whether
their businesses would
survive the changeover –
with good reason as it
turned out, as a significant
number did not.
“But it was a positive
thing for the industry,
because the firms left were
the better ones. So I suppose
the same will apply
here – some people may
leave the industry but we
will be left with the top
quality advisers, which is
in the clients’ interests.”
A phenomenon almost
everyone has observed is
that those expats living in
Hong Kong who have lost
their jobs during the downturn
will do almost anything
to remain. The
reason, most agree, is that
they believe Hong Kong is
nEw hong kong rEguLatIons
n Marketing materials of all structured investment products must
include a so-called ‘health warning’ that would begin, “This is a
structured product involving derivatives. The investment decision
is yours but you should not invest in the [product name/type]
unless the intermediary who sells it to you has explained to you
that the product is suitable for you...”
n A provision that an assessment of each customer’s risk profile be
carried out by ‘non-sales staff’ who are not involved in selling the
customer investment products. The risk assessment process also
must be ‘audio recorded’.
n A requirement that RIs should “ensure adequate records and audit
trail, including audio records, are in place to show that due selling
process is being followed for all investors”, and any audio records
“should be retained for seven years”.
n When routine risk assessment reveals the risk rating on a product
already sold to clients has increased, the selling institution “should
disclose this to customers to whom it recommended and sold the
product”. This obligation ends if the customer closes their account
or transfers the investment product to another institution.
n RIs must put in place a so-called ‘mystery shopper’ programme to
test their sales processes. The HKMA and SFC are in the process
of developing a joint external mystery shopper programme of their
own, as well as a programme of customer surveys.
n A ban on the use of bonuses to frontline sales staff that are based
solely on financial performance.
By the end of September, Hong Kong financial services firms are
also expected to be in compliance with these additional regulations:
n Using clients’ deposit accounts “to target and channel” them
into investment activities has been banned, and a “complete
information separation” must now exist “between a retail
customer’s deposit accounts and his investment accounts”.
Further information on this may be found on the HKMA website at
http://www.info.gov.hk/hkma/eng/guide/index.htm
A complete list of the new regulations may be found in an online
version of this story at www.international-adviser.com.
Country ProFILE hong kong
a better place to be once
the recovery begins.
Many expats value the
quality of life, in spite of
the high population density,
and despite the fact that
it recently ranked fifth on a
list of the most expensive
cities in the world for
expats to live – moving up
one place from 2008.
“Hong Kong is the international
face of China, and
the Chinese are very happy
for it to be exactly that,”
says Francis Leach, of
Rothschild private bank in
Hong Kong.
“It has prospered since
the handover, and will continue
to. It is a Chinese city
in many ways now, but one
with global characteristics
that make it distinct from
the rest of China.”
kEy PoInts
The collapse of Lehman
Brothers had a major impact
on Hong Kong investors,
many of whom had bought
investments backed by
the bank.
The financial crisis has
seen more people turning
to advisers as they realise
they need help with financial
planning.
“
Advisers are now
going back to the
roots of the industry
and offering more
protection products,
such as life insurance
and critical illness.
We are also seeing
a move towards
regular savings,
as investors focus on
the benefits of dollarcost
averaging
”
Trevor Smith, sales director,
friends Provident International
AuguST 2009 [www.international-adviser.com] INTERNATIONAL ADVISER
27
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