UBS Investor Watch 2Q 2016

Transcription

2 The idea of old age has shifted. People are living longer and the definition of old is changing. In this instalment of Investor Watch we have travelled around the globe to better understand how investor views on old age and retirement have changed. No longer constrained by classic notions of how to retire, investors see this time as a new lease on life. Retirement is now seen as a time to pursue private passions and embark on new adventures. Across geographies - in the U.S., UK, Germany, Hong Kong and Singapore - investors want to travel and rediscover the world around them. Retirement is now viewed as spanning three distinct phases instead of one continuous phase. Now that investors live longer, there is a sense that the possibilities in retirement have become endless. This view, does not always match the reality of how investors are saving. Retirement necessitates a structured wealth planning approach so that there are sufficient financial assets to ensure funding across all three phases of retirement.many investors have not taken concrete steps in planning for lifestyle preservation on topics including asset accumulation, wealth preservation, legacy and estate planning or succession planning. Across the U.S.*, Germany, Hong Kong and Singapore, most investors also say they begin to feel old after the official retirement age. This trend is nuanced with differences by country and gender. While the majority of men and women in Germany, the U.S. say they feel old after retirement; in Singapore, 55% of women and 64% of men say they feel old before retirement. This is both similar and in contrast to Hong Kong, where 51% of women, but only 35% of men say they feel old before retirement. Retirement is when I ll still be earning considerable amounts of money to support my needs. Investor, age 30 *Notes Investor is defined as an individual who has investible assets over $250,000. Research in Germany, Hong Kong and Singapore was conducted in Q1 2016; research in the U.S. was conducted in Q This report looks at the regional sentiments and attitudes towards retirement in Singapore. 2

3 1 Retirement is not the same as old age Traditionally retirement has been directly linked with old age. As life expectancy has increased, this norm has been flipped on its head. No longer do all investors view retirement as a sign of old age. On closer inspection, there are some variations in how investors define old age. Most notably, men begin to feel old before women. For example, 55% of women begin to feel old before the age of 70 in comparison to 64% of men. Percentage of people that consider themselves old Question: At what age do you think you will first consider yourself old? Women 55% of investors that feel old before the age of 70 45% of investors that feel old after the age of 70 55% 55% 45% 45% Men 64% of investors that feel old before the age of 70 36% of investors that feel old after the age of 70 The official age of retirement is at 62 64% 64% 36% 36% Overwhelmingly, investors agree that the deterioration of mental capacities, such as memory loss, is a clear sign of old age. This is no surprise as losing one s memory is linked to an overall decline in health. This is, however, where investors cease to agree on what defines old age. Millennials associate old age with troubled hearing, while Gen X think retirement defines their old age. Baby Boomers, on the other hand, are more concerned about serious health issues, and see this as a definite sign of old age. Indicators of old age Question: After which life events do you consider someone old? Millennials Gen X Baby Boomers 38% trouble hearing 33% at retirement 43% serious health issues Memory loss Memory loss Memory loss Trouble hearing At retirement Serious health issues Other Other Other 3

4 2 Entrepreneurs have a balanced approach to retirement Entrepreneurs are savvy when it comes to retirement. They have a more realistic perspective on what retirement entails when compared to their peers. Entrepreneurs expectations of the amount of time they will spend on their career, in travel and on health issues mirror what actually happens in the lives of current retired investors. In contrast, others over-estimate how much they will work and travel in retirement. Entrepreneurs in retirement Question: What do you plan to do in retirement? Career Travel Health issues 24% 28% 24% 36% 48% 41% 20% 19% 24% Entrepreneurs Employees Retired Asia in focus Hong Kong Singapore There is a difference in how entrepreneurs perceive retirement in Singapore and Hong Kong. In Singapore, entrepreneurs see retirement as a time to finally relax, travel and enjoy the fruits of their hard work. In Hong Kong, entrepreneurs see retirement as a time to ramp up in their current career or even start a new business endeavour. 4

5 Though retirement is seen as three distinct phases, investors plan for retirement as if it is one continuous phase. As a whole, investors see their retirement funds as one investment pot and do not think about saving for each phase of retirement separately. This is concerning as financial needs may be vastly different during each phase s 60-80s 80-90s Transition Cutting back on hours at work and achieving a healthy work life balance Saving plans for retirement My Time Question: How are you saving for retirement? Increased travel and involvement in leisure activities Golden Years Relaxation, a simpler life and spending time with family Transition My Time Golden Years 56% 38% 25% 61% 39% 27% 57% 48% 19% Stocks Real Estate Cash 5

6 3 Investors Investment portfolio decisions include the broader family unit Providing financially for the family unit is important to investors because they expect their children to support them during retirement. As a result, they take an active role in the financial decisions of their adult children. For example, investors are highly involved in decisions around investments and health care benefits. are highly involved in adult children s financial decisions Question: What is your role in the financial decision making of your adult children? Investments Benefits Undergraduate education 78% 57% 43% High involvement Medium involvement Low involvement No involvement My family and I sit together to decide all of our financial goals, business goals and even plan our retirement. Female, Gen X Asia in focus Hong Kong Singapore There is a difference in how investors interact with their adult children in Singapore and Hong Kong. In Singapore, investors have a medium involvement in the decisions of their adult children. While in Hong Kong, investors have a high involvement as the primary decision maker in their adult children s financial decisions. 6

7 4 Investors leverage their social networks when planning for retirement Investors value the advice that their social networks provide. As a result, their spouses and friends tend to be their first stop for advice when it comes to planning for retirement. Financial planers and parents are also opinion sources, but are seen as secondary in importance. Multiple sources provide retirement advice Question: Who do you go to for advice on your retirement plans? Spouse Friends Financial planners Parents 47% 33% 27% 20% My wife always tells me that I should not make all the investments in one place. There has to be more than one investment so that if one fails, we have others to rely on. Male, Baby Boomer Asia in focus Hong Kong Singapore There is a difference in how men plan for retirement in Singapore and Hong Kong. In Singapore, men leverage their social networks first and do their own research second. In Hong Kong, the opposite is true. Men first turn to their own research before consulting other sources. 7

8 Women start their own businesses for financial stability, while men do it for legacy. Women see starting a business as having a direct relationship with their retirement savings. 48% of women start a business to increase their yearly returns and are confident that the proceeds will support them in retirement. Men have different goals. While annual returns remain important, men say that they mainly start a business to leave behind a legacy. They recognize that in doing so they have to consider funding their retirement through other sources. Women and men do, however, share some commonalities when it comes to the reasons for starting a business. As investors get older, the emphasis on yearly returns decreases while the focus on leaving behind a legacy increases. 48% of women start a business to help support them in retirement Reasons for starting a business Question: Why did you start a business? % 60% 50% 40% 30% 20% 10% 0% Millennials Gen X Baby Boomers To leave behind legacy To increase my yearly returns Asia in focus Hong Kong Singapore There is a difference in how women who are starting a new business think about saving for retirement. In Singapore, women expect the proceeds of their business to fund retirement. Whereas, in Hong Kong, women save more for retirement to hedge against their businesses failing. 8

9 67% of individuals that have investible assets under $1 million and use a financial planner to look for advice on how much to set aside for retirement. As the investor s investible assets grow, these needs change. 53% of investors with investible assets over $1 million seek out the advice of financial planners to identify the best investment strategies. Advice on retirement planning Question: How do you use your financial planner? Advice on how much to save 45% 67% Optimising retirement plan 42% 53% Investible assets under $1million Investible assets over $1million I generally speak with financial planners about long term insurance plans and ways to save more for the future. Female, Gen X I had a word recently with my financial planner, where we discussed the amount I need to save for my future. Female, Baby Boomer 9

10 5 Millennials aspire to save more than the preceding generation for retirement Millennials recognize that retirement is far off and that they cannot acccurately predict the economic circumstances that they may find themselves in at that point of their lives. As a result, they aspire to save more than Gen X to account for this uncertainty. Saving for retirement Question: How much money do you plan to or have set aside for retirement? $1 million under $10 million 54% 54% Under $1 million 47% 47% 54% 54% 54% Gen X Millenials 47% 47% 47% Across age groups, investors do not see professional advice as something that is needed until later in life. This is especially apparent for Gen X and Millennials. They either believe that they do not need advice or do not yet see the value in paying for that advice. Millennials have not planned for retirement Question: What are the main reasons for not using a financial planner for retirement planning? I do not need advice I do not want to pay for advice I plan to hire a financial advisor in the future 40% 22% 14% 52% 24% 9% 40% 22% 14% 52% 24% 9% 40% 22% 40% 22% 40% 22% 14% 52% 14% 52% 14% 52% 24% 24% 9% 24% 9% 9% Millenials Gen X 10

11 Retirement does not happen in the distant future. It is a certainty that needs to be addressed today. There are important questions to tackle such as how much you should save, how you can optimize those savings for your lifestyle and how to create a lasting legacy. This necessitates a structured wealth planning approach to ensure that there are sufficient financial assets to ensure funding for travel, education and leisure. However, many investors have not taken concrete steps in planning for lifestyle preservation on topics including asset accumulation, wealth preservation, legacy and estate planning or succession planning. Answers to these questions can be found today. There is no need to wait for tomorrow. The key is to start early, find the right advice and stick to a structured plan. 11

12 About the survey UBS Wealth Management surveys investors to keep a pulse on their needs, goals and concerns. After identifying several emerging trends in the survey data, UBS decided in 2012 to create the UBS Investor Watch to track, analyse and report the sentiment of affluent and high net worth investors. UBS Investor Watch surveys cover a variety of topics, including: Overall financial sentiment Economic outlook and concerns Personal goals and concerns Key topics, like aging and retirement For this first international edition of UBS Investor Watch, we surveyed 860 affluent, high net worth, and ultra high net worth investors in Germany, Hong Kong and Singapore from Jan 4 February 14, In Germany we surveyed 451 investors in investors with at least $250,000 in investible assets 121 investors with at least $1 million in investible assets 90 Millennials: Respondents ages Gen X: Respondents ages In Hong Kong we surveyed 204 investors in investors with at least $250,000 in investible assets 89 investors with at least $1 million in investible assets 84 Millennials: Respondents ages Gen X: Respondents ages In Singapore we surveyed 226 investors in investors with at least $250,000 in investible assets 95 investors with at least $1 million in investible assets 103 Millennials: Respondents ages Gen X: Respondents ages In the U.S., we surveyed 2,319 investors in 2013 UBS AG One Raffles Quay #50-01 North Tower Singapore Tel: This material has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient and is published solely for information purposes. No representation or warranty, either express or implied is provided in relation to the accuracy, completeness or reliability of the information contained herein, nor is it intended to be a complete statement or summary of the developments referred to in this material. This material does not constitute an offer to sell or a solicitation to offer to buy or sell any securities or investment instruments, to effect any transactions or to conclude any legal act of any kind whatsoever. Nothing herein shall limit or restrict the particular terms of any specific offering. No offer of any interest in any product will be made in any jurisdiction in which the offer, solicitation or sale is not permitted, or to any person to whom it is unlawful to make such offer, solicitation or sale. Not all products and services are available to citizens or residents of all countries. Any opinions expressed in this material are subject to change without notice and may differ or be contrary to opinions expressed by other business areas or divisions of UBS AG or its affiliates ( UBS ) as a result of using different assumptions and criteria. UBS is under no obligation to update or keep current the information contained herein. Any charts and scenarios are for illustrative purposes only. Historical performance is no guarantee for and is not an indication of future performance. Neither UBS AG nor any of its affiliates, directors, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of this material. UBS specifically prohibits the redistribution or reproduction of this material in whole or in part without the prior written permission of UBS, and UBS accepts no liability whatsoever for the actions of third parties in this respect. UBS The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.