25 August 2021

Pandemic an opportunity for Asean to see wealth through a wider lens

Southeast Asia’s growing wealth is creating a new generation of more sophisticated investors, and the financial services industry needs to keep pace.

Over the past two decades, Asia has almost tripled its share of global wealth, from 9 per cent in 2000 to a quarter today. And within five years, ASEAN will also have 120 million middle-income households, roughly double its number in 2010.

Fueling its meteoric ascent has been ASEAN’s supply chain-driven economic growth; the accelerating shift of its 630 million people towards urban centres and higher-paying jobs; and the mushrooming entrepreneurial spirit across the region.

Singapore, as the region’s leading offshore wealth management centre, has been a prime beneficiary.

However, if the City State is to maintain its leadership, we need to be agile enough to help our customers navigate significant structural and cyclical shifts in society that are changing how wealth is understood, preserved, and passed on to future generations.

Specifically, we’re seeing three emerging trends when it comes to the region’s wealth: increasing volatility and headwinds in wealth preservation; continued knowledge gaps (particularly in inter-generational wealth transfer); and how wealth is now being viewed from a wider and more holistic wellness lens.

First, when it comes to wealth accumulation, Singapore and its surrounding markets, are grappling with living costs rising faster than ever; changing family and social structures; an ageing population; and the all-pervasive infiltration of technology into every facet of life whilst leaving many lives behind – socially, professionally and, therefore, economically.

The pandemic has accelerated this wealth insecurity and instability. Data suggest that Asia’s wealth has remained fairly resilient1 but the past 18 months has been a bumpy ride, to put it mildly. For example, many business owners have tapped into their private savings to manage their commercial debts and costs. Elsewhere, lockdowns and economic down-cycles are impacting employment and income security.

Both of these developments bring us to the second trend which is the apparent knowledge gaps - or future bear trap - when it comes to wealth creation, preservation, and potentially transfer to younger generations.

That Asia has blind-spots in this wealth transfer space is quite understandable given wealth is still new and the region is still learning how to build and preserve its legacy. But these issues are urgent, particularly when you consider an estimated US$2 trillion of wealth is expected to be passed down to new generations in Asia over the next two decades.

The final shifting plate in Asia’s personal wealth story is the increasing interconnectedness and interplay between financial, physical and mental well-being.

In a 2021 HSBC survey of over 10,000 participants across mainland China, Hong Kong, Singapore and UK, 75% of respondents feel that their mental health and financial position are connected. What this tells us is that Asia is now making a strong correlation between personal and mental well-being to financial fitness.

When taking all of these structural and cyclical transitions together, it really suggests that Southeast Asia’s wealth is at an inflection point and requires a different approach to how wealth is viewed and supported.

I believe, the best way we can help our customers and people is to build a more prosperous and sustainable future, in the wake of COVID-19, to share our understanding of these trends and to support them through their various lifecycles.

We are doing this now. For example, we are helping our clients, their employees and their families rebuild or grow their wealth that takes holistic wellness into account. This will become increasingly important as economies and employment stabilise and people once again begin to travel for business, job opportunities and to re-unite with their families.

Another crucial segment of society that we are supporting are entrepreneurs. We are helping business owners build resilient and technologically-enabled businesses while also helping them with the financial needs of their employees. We also help these business owners manage their legacy planning to enable them to distribute personal wealth in a way that benefits their family so as to secure their wealth.

However, there is more that we can do to take our customers’ wealth, and health needs into consideration. Our recent move to purchase of AXA Singapore’s insurance company is part of this strategy.

The deal will enable our insurance business, HSBC Life, to meet the needs of customers in a far more holistic way: from health and life protection, savings and investments, and retirement and legacy planning – as they move from one stage of life to the next.

The fallout from the pandemic, as well as ongoing structural changes, show that a re-think on building sustainable prosperity is needed.

As our customers face these challenges, our purpose will remain the same as always: to help Singapore turn the changes, risks and shifts that we face into opportunities.

A contribution piece by Kee Joo Wong, Chief Executive Officer, HSBC Singapore was first published in The Business Times on 25th August 2021.

1HSBC data: As of end of March 2021, wealth revenues in Asia surged by 57% year on year to USD1. 5 billion