Shanghai Jiaotong University’s Shanghai Advanced Institute of Finance (“SAIF”) and Charles Schwab & Co., Inc. – a leading international provider of financial services – launched the fourth annual “SAIF-Charles Schwab China Rising Affluent Financial Well-Being Index,”

Post-COVID-19 increases in financial planning indicate the responsive pragmatism of China’s rising affluent

Newly released 2020 Index shows:

·         The pandemic has increased consideration of financial planning and diversified investment

·         Signs of emerging vulnerabilities indicate the importance of financial literacy as a base for achieving financial aspirations

·         An integrated service model combining in-person financial advisory with digital platforms can improve overall financial well-being

SHANGHAI, NOVEMBER 27, 2020 – Shanghai Jiaotong University’s Shanghai Advanced Institute of Finance (“SAIF”) and Charles Schwab & Co., Inc. – a leading international provider of financial services – launched the fourth annual “SAIF-Charles Schwab China Rising Affluent Financial Well-Being Index,” which aims to track the shifting perceptions of China’s rising affluent investors – an increasingly influential cohort within the Chinese and global economies.

The 2020 Index presents much cause for optimism alongside areas requiring heightened concern. Many of the rising affluent appear to be taking a more proactive approach to financial planning, and respondents also indicated greater heed to the importance of diversification by moving their portfolios towards a fuller range of financial products. At the same time, a significant proportion of the rising affluent show signs of financial mismanagement, indicating a growing need for investor education and guidance. Growing positivity towards diverse forms of financial advisory may suggest a pathway for financial services industry to enhance rising affluent ability to navigate these challenges.

The fourth edition of the Index investigated the response of the rising affluent to the COVID-19 pandemic, deepening our understanding of how they adapt their finances to unexpected shocks. The Index surveyed more than 4,300 members of China’s rising affluent class – those earning CNY 125,000 to 1 million per year but owning less than CNY 7 million in investable assets – across 15 cities in China, including Shanghai, Beijing, Guangzhou, Shenzhen, Chengdu, Hangzhou, Dalian, Xiamen, Chongqing, Wuhan, Nantong, Shijiazhuang, Zhongshan, Kunming, and Xiangyang, asking 65 questions, including core Index questions. 

The Rising Affluent Financial Well-Being Index was commissioned as part of a collaboration between SAIF and Charles Schwab & Co., Inc. Survey design, data collection, and Index formulation were conducted by Nielsen, an international research organization. This 2020 Index seeks to further enhance financial professionals and policymakers’ understanding of the drivers behind the investor behavior of the rising affluent, and subsequently, the ability to serve this emerging powerhouse of the Chinese and global economies.

“COVID-19 will likely have profound consequences for the financial future of the rising affluent as well as China”, said SAIF Professor Wu Fei at the Index launch event. “The shift in preference away from real estate towards low-risk products indicates they are changing their approach to their finances as they become more cognizant of risks from external shocks to the macroeconomic environment.”

“It is positive that the rising affluent are taking a more proactive approach towards financial planning in response to the pandemic. The elevation of financial literacy and access to trustworthy financial services can ensure that this motivation translates into a longer-term ability to achieve financial goals” said Lisa Hunt, Executive Vice President of International Services and Business Initiatives at Chares Schwab. “The continued opening of China’s finance sector provides ample opportunity for financial service providers to facilitate this process.”

KEY SURVEY INSIGHTS

China’s rising affluent reported the highest well-being score of the four years of the Index at 69.73, an increase of 3.77 points since 2019. All four sub-indexes increased, with management’s improvement of 7.35 the largest, followed by planning’s 6.56, to 46.56 and 43.32 respectively. Engagement reached 76.63, an improvement of 5.31 points, while confidence recorded a smaller growth of 1.33.

The pandemic has increased consideration of financial planning and diversified investment. The rising affluent report possession of a financial plan at a 8.8 percent higher rate than last year, with inclusion of risk consideration and timelines further increased by 8.5 percent and 5.6 percent respectively. Respondents have also shifted away from real estate towards cash and other low-risk products, with 49.6 percent stating that COVID-19 has pushed them in this direction. This shift has been driven by a belief that financial products offer more stable returns, with a corresponding 28.7 percent decrease in respondents investing in real estate as a result.

Signs of emerging vulnerabilities indicate the importance of financial literacy as a base for achieving financial aspirations. Despite reporting steady confidence, the rising affluent also revealed areas of future concern. Inconsistent levels of financial literacy demonstrate the need for extensive investor education. Significant proportions of respondents report that “fear of missing out” on what their family and friends post on social can affect their financial decisions, and 21.3 percent of respondents have missed a debt repayment over the last six months, suggesting a need for better financial guidance that can help them stay focused on their long-term aspirations.

An integrated service model combining in-person financial advisory with digital platforms can improve overall financial well-being. Across all age groups, trust in financial advisory services increased this year. These changes were most pronounced in the youngest age group, who reported an increase in trust of 15.7 percent. At the same time, digital platforms have increased in use, with the rising affluent’s most popular investment channels – mobile banking apps, online banking, and internet investment and financial platforms – all digital. This increased desire for financial services of all kinds indicates a gap in the market for companies able to provide a comprehensive, integrated service offering.