Hong Kong financial advisors are bullish on business prospects, according to a new global survey of financial advisors by Natixis Global Asset Management. About 65% of Hong Kong advisors surveyed indicated very strong or strong growth over the past few years - higher than the 62% global average. Hong Kong advisors projected an average of 18% annual growth in assets (16% globally) for next year. Meanwhile, over the longer term, advisors say clients in Hong Kong should expect 6.1% in annualized returns (5.6% globally).

According to the survey, net new assets from new clients (43%) and net new assets from existing clients (29%) are seen as the major factors fueling business growth for Hong Kong advisors, followed by enhanced productivity (13%) and market performance (11%).

Madeline Ho, head of wholesale fund distribution for Asia-Pacific, Natixis Global Asset Management, commented, "Advisors in Hong Kong are confident of their business prospects as retail investors continue to return to the market and existing clients grow in confidence. While investors are willing to take more risk to grow their assets, they should take an active role in reviewing their portfolio regularly based on their personal long-term investment objectives and risk tolerance given uncertainty and potential short-term volatility caused by the global recovery, rising interest rate risk and geo-political risk."

Although 90% of Hong Kong advisors said their clients' risk tolerance has increased (higher than the 76% global average), 88% say clients remain conflicted between achieving returns and preserving capital.

"When investors make emotional decisions, they decrease the odds of reaching their financial goals," said John Hailer, chief executive officer of Natixis Global Asset Management in the Americas and Asia. "Financial advisors cannot control the markets, but they can head off adverse reactions by creating portfolios designed to stand up in a variety of market conditions. Just as important, they can work with clients to agree on what to do before market-changing events occur. By doing this, they can help take the emotions out of investing."

Despite advisors being confident about their business prospects, advisors recognize two factors that could significantly disrupt the growth curve: markets and emotion. In the survey, Hong Kong advisors said clients reacting emotionally to markets (72%), investor behavior/confidence (78%) and pricing (87%) are seen as being intertwined with advisor business success.

Retirement planning as top priority For Hong Kong investors

The greatest demand Hong Kong clients have of their advisors is for retirement planning (76%, compared to 70% globally). Other common requirements are access to stable income producing products (68%) and access to trust services/advice (44%) - mirroring global results.

Ho added, "Hong Kong investors are aware that their retirement preparations are insufficient, especially with inflation and the growing cost of living and medical expenses. With a significant gap between expectations and reality of retirement income needs, Hong Kong investors face an increasingly pressing need to plan ahead, understand clearly their retirement goals and manage their pension more effectively to ensure quality of life after retirement."

The survey found that less than a third (28%) of advisors in Hong Kong use alternative investment strategies regularly (similar globally, 29%). Among those who do, they use them mainly as a diversifier (61%), volatility dampener (46%), risk reducer (43%) and return enhancer (32%). Advisors who do not use alternative investment products and strategies in client portfolios said it was mainly because their business model does not support alternative investments (37%) or they feel they need to learn more about alternative investment before investing clients' money (29%), illustrating the need for more education on alternatives, not only at an investor level, but also for advisors.

"There is an opportunity for advisors to talk to clients about using alternative strategies as portfolio construction tools," Hailer said. "It might be time to focus more on the role specific alternative strategies can play within a portfolio rather than attempting to educate clients on a wide array of very different strategies."