7 November 2017 |

HNWIs’/UHNWIs’ Attitudes Towards Retirement Planning

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Wealthy Asians are increasingly turning to life insurance for retirement planning purposes, according to a survey by Transamerica Life Bermuda and Asian Private Banker, which surveyed a total of 456 RMs, wealth managers, independent asset managers, brokers and clients from private banks, family offices and brokerage firms in Hong Kong and Singapore between April and July 2017. The report shows that nearly half of all HNW and UHNW individuals in the region do not have a retirement plan in place.

So how do HNWIs and UHNWIs conceptualize retirement planning? For one thing, retirement is a multifaceted concept that touches upon different aspects of economic and social life, while also entailing a psychological dimension. For example, in many cases, brokers and RMs noted cultural and personal issues that determine people’s standpoints towards retirement planning.

While retirement planning is a process that differs based on wealth, a common denominator amongst all segments of the sample group is that clients want to ensure financial security for their families, with a focus on maximising efficiency in succession and legacy planning while also ensuring that they will maintain their lifestyles post-retirement.

The notion of retirement includes a constellation of ancillary concepts that stretch across a spectrum of needs, wishes and priorities of HNWIs and UHNWIs in Asia. Retirement planning encapsulates the concepts of legacy planning, wealth transfer, estate and inheritance planning, business transfer, financial security, effective liquidity, hedging against tax and legal risks, as well as maintaining lifestyle.

Conceptualisation of retirement planning

While most respondents and interviewees believe that retirement planning should be high on the agenda of end-clients and their RMs, one must keep in mind that retiring is not a priority for most of the respondents – 36% of whom said they will only retire in over a decade, while 15.4% responded that they do not intend to retire.

Chart 1: When do you intend to retire?

In line with life-cycle hypothesis, clients in their 30s are primarily concerned about the needs of their immediate family. Family/wealth transfer becomes an issue when they turn 40 and then, once they become 50, they become more concerned about maintaining their lifestyles post-retirement.

Retirement planning is relevant across all different groups of RMs’ clients regardless of their source of income as well as their investable assets. Among others, for UHNWIs, it is important to plan ahead so that their heirs have immediate access to liquidity in the event of death or incapacitation.

Chart 2: Relevance of retirement to RM’s clients (by client type)

Against this backdrop, insurance products appear to be a promising option for clients, as insurance can ameliorate their limited confidence in their decisions on retirement planning.

In particular, 42% of respondents expressed limited confidence in their retirement planning, combined with an interest in purchasing insurance for retirement purposes. At the same time, 11% of respondents have no confidence in their retirement planning, while 19% are interested in purchasing insurance products for retirement purposes despite their confidence in their existing retirement planning. This portion of respondents represents a part of the sample population that seeks to maximise the effectiveness of retirement planning.

Chart 3: Confidence in retirement plan & interest in purchasing life insurance

Chart 4: How important to end-clients are the following choice criteria when selling a UL policy?

In many cases the decision to a purchase life insurance policy is the outcome of a trigger event. One broker offered a very vivid anecdotal example when she described how one of her clients decided to buy a life insurance product for retirement planning purposes when the client witnessed a co-passenger suffering a heart attack during a flight.

Therefore, brokers view retirement, as well as choice criteria that fall within the conceptual framework of retirement planning, as of particular importance when selling a UL policy.

Stay tuned for Part 3 of the report, “Desired Product Features and the Distribution Model of Retirement-Focused Life Insurance Products” to be published late November 2017.

Read Part 1 of the report, “Asia’s wealthy turning to life insurance for retirement planning: Survey” published in October 2017.

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