Investors in Asia Pacific are more likely to switch into active investments during volatility, with 44% increasing allocations to active investments compared to 20% of investors in North America and 36% in Europe, according to the 2023 EY Global Wealth Management Research report.
The fourth edition of the survey, which recorded the views of more than 2,600 wealth management clients across 27 geographies, found that wealth management clients with the strongest appetite for active investments were in Mainland China, where 54% of respondents increased allocations. Only 31% of those in Hong Kong and Japan took the same route.
The appetite for passive versus active is also reflected in the generational divide, with younger investors more likely to switch to active investment in the face of volatility. More than half of millennials — defined as those born between 1981 and 1996 — increased allocations to active investments compared to just 33% of boomers or those born between 1946 and 1964.
Concurrently, 40% of the survey respondents in Asia Pacific have taken a more conservative approach toward savings and deposits in response to heightened market volatility. This is much higher than the 33% global average.
In Singapore, a vast majority (80%) of respondents said they change their investment behaviour due to a decline in portfolio value, versus 83% in Asia Pacific and 73% global average.
The report also finds that there has been a shift in the leading financial goals of clients in Asia Pacific over the past two years, with protecting wealth against losses and inflation now ranking as the top priority to 44% of the respondents. This is followed by strengthening investment returns at 43% as well as ensuring adequate income and financial security at 29%.
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This is a huge difference from survey results in 2021, when their main goals were to ensure adequate income and financial security indicated by 55% of the respondents, followed by wealth protection (48%) and wealth diversification (45%).
Meanwhile, a smaller proportion of investors in Asia Pacific feel well-prepared financially or met their investment targets (54%) compared to their global peers (63%), with the figure falling even further to 48% for millennials, defined as those born between 1981 to 1996.
Amid market uncertainty, the appetite to switch wealth management providers is particularly high in Asia Pacific, especially for younger investors. More than half of clients in the region (57%) plan to add, move money or switch to a new provider in the next three years, much higher than the global average at 45%.
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This trend is particularly strong in Mainland China (70%) and Singapore (64%) compared with Australia (41%) and Hong Kong (44%). Millennials (76%) are much more likely to move assets than boomers (47%) — defined as those born between 1946 and 1964 — who may have already retired or are close to retirement.
Attracted by low charges, specialised digital experiences and low-friction switching, the proportion of clients working with fintechs to manage their wealth in Asia Pacific is expected to nearly double to 26% from 14% over the next three years. This growth is expected to be more dramatic in South Korea, Mainland China and Australia.
Similarly, figures also underscore the trend toward new types of wealth providers and new asset classes, with 22% of clients saying they expect to use providers of digital assets or crypto wallets over the next three years from the 15% recorded currently. Millennials are more than three times more likely to use these, compared to their older generational counterparts.
More than half of the respondents in Singapore (52%) said they are satisfied with the performance of alternative investments, with 59% saying the same for actively managed funds.
EY Asean wealth and asset management sector leader Mriganko Mukherjee says in Singapore, the firm is witnessing higher allocation towards alternative asset classes particularly private equity, venture capital and real estate as both limited partners and direct investors. The outperformance in this category has helped keep investors happy, with more than half of them satisfied with returns they are getting.
“We’ve also seen a sharp increase in the number of family offices, signalling a desire to organise and plan for future generations. This includes hiring of professionals by single family offices, as well as a focus by the Monetary Authority of Singapore on a range of issues — including attracting new entrants to Singapore’s single family office ecosystem, a push towards more professionalisation of the industry, involvement and reliance on the local private banking system and training and sharing of views and ideas required to strengthen this space,” he adds.
