local economy has benefited from many positive factors in the last two years, but with interest rates and the price of oil both rising, some advisers are suggesting that slower economic growth will necessitate a more cautious approach to investing in the coming twelve months.
"The performance of the stock market will not be as good next year," predicts Ben Kwong, chief operating officer of KGI Asia. "There will be fewer investment vehicles to choose and the returns will not be as lucrative from stocks or gold as in 2005." He advises the investing public to expect this change and study any products carefully before making investment decisions.
Mr Kwong expects low-risk products such as bonds, time deposits and the Link real estate investment trust to gain in popularity as the overall economy slows. He adds that these options also meet the needs of Hong Kong's ageing population, and believes the bond market will develop more quickly when the government and mainland corporations issue debt to raise funds locally.
Due to keen competition and the promotion of services by banks, securities brokers, insurance companies and independent financial advisers (IFAs), the number of people investing in newer products has been increasing. "For example, structured notes were traditionally something only for the rich, but are now available to the general public," he says.
He states that education is essential for proper long-term investment decisions and warns against a strategy which looks only for short-term returns from speculative plays. "The younger generation of investors is growing quickly and can benefit from getting sound financial advice," he says.
In fact, according to Mr Kwong, it is already common for secondary and even primary schools to teach students about the concept of money and the importance of wealth management. And while he sees sharing his opinions and experience with the public as one of the key aspects of his job, he nevertheless stresses that it is the responsibility of investors to learn for themselves and pick up market intelligence from different sources.
For this reason, he strongly supports the move towards wealth management, with its emphasis on careful financial planning for the long term. "There should be a combination of assets and arrangements," he says, "The objective is to add value, so that people can achieve economic security after retirement and have enough to support the lifestyle they want."
Whatever plans are made should be tailored to individual needs and changed over time. In this respect, Mr Kwong highlighted the three basic stages of financial planning. The first is for those aged 20 to 30, just starting their careers, with comparatively low earnings but high outgoings. Mr Kwong says this is the time for a more conservative approach to investment.
"It may be possible to be more aggressive after 30, when a person has accumulated savings and can see their career developing," he adds. "However, after 45, one should again act more carefully and take a balanced approach towards risk diversification."
A number of variables will affect any financial plan, such as getting married, starting a family, or facing illness and unexpected setbacks. Since the process of working out a comprehensive financial plan can be complicated and involve a range of products, customers always have high expectations of their advisers. Mr Kwong admits that the standard of professionals within the industry is still rather inconsistent. "Nevertheless, there is now stricter control of the practitioners, in terms of their professional knowledge, reliability and integrity, and that will certainly help," he says.