In China, the emerging rich are finding it tough to trust financial advisers.
Sixty-four percent of participants in a new survey get investment-related information from friends, colleagues or family, while only 15% seek professional advice, according to a report by Shanghai Advance Institute of Finance (SAIF) and Charles Schwab.
“It’s clear that there is distrust because they are seeking advice from family and friends primarily,” says Lisa Hunt, executive vice president, international services and special business development at Charles Schwab.
“There is this sense of isolation around where they can go. It goes back to the need for education. I also think there is a need for transparency around not only the fee structure (of financial advisers), but also around product creation,” she adds.
But the new rich in China are keen to invest, the survey shows. Forty-two percent of survey participants want to invest to improve their standards of living. Thirty-three percent of them are investing for retirement, while 12% are setting aside cash for the education of their children and grandchildren.
“Most people want a better life and they want to get there in a way that makes sense to them,” explains Hunt. The rising costs of healthcare and education have been weighing on people’s minds and they see investing as means to build their assets.
But their desire to enhance their wealth is not helping them overcome their strong distrust of professional advisers.
The survey reveals that only a quarter of respondents actually had experience engaging with financial advisers. The majority of those who did seek financial advice, did so with investment professionals of a domestic bank. A few of them went to foreign banks or domestic wealth management companies.
“The environment in China is very product-focused so the adviser is perceived as maybe selling a product,” says Hunt. “In the US, we are upfront on what the goal is and (we) really understand what the client risk tolerance is. This is before we even get into the product discussion.”