A couple of recent reports underscore growing financial planning risks in Southeast Asia, specifically relating to rising healthcare costs, people outliving their savings and low financial literacy in certain demographics.
Insurer Manulife’s Asia Care Survey 2024, which drew on responses from 8,400 consumers, found that many people are not confident of achieving overall wellbeing, with rising healthcare costs their main concern, while single people showed low levels of financial literacy and savings product knowledge.
Single people are significantly less fluent in how to plan financially
Longevity risk
These findings, combined with those from a paper on longevity risk by Roger Lau, head of investment manager Schroders’ retirement business in Hong Kong, suggest that a storm is brewing that small- and medium-sized practices (SMPs) in the region can potentially help their clients to navigate – whether by simply understanding their predicament or adding relevant services to meet their needs.
Of growing importance across Asia is healthcare and wellbeing, both physical and mental, with physical wellbeing (39%) considered even more important than financial (32%), according to the Manulife survey. Perhaps most notable is the fact that single people, when compared with married couples, are significantly less fluent in how to plan financially: only 39% have a financial planner, against 65% for married couples.
Factor in that populations are living longer, which not only increases the cost of healthcare but also tests people’s ability to save sufficiently for longer retirement years, add into the mix a region-wide reliance on cash savings (68%) as opposed to investment products (39%) in retirement – cash loses value over time, especially when inflation is high – and there are plenty of obstacles for ageing populations facing rising healthcare costs.
‘The risk of outliving your assets and savings has become very real around the world’
Healthcare spend
‘The risk of outliving your assets and savings – or longevity risk – has become very real around the world,’ Lau notes in his paper. ‘It is one of [the] top five concerns about retirement among the non-retired Hongkongers surveyed in our latest Schroders Hong Kong Retirement Survey 2024. Respondents in Hong Kong expect only 15 years of retirement on average compared to 22 years post-retirement in reality, so they are more likely to outlive their assets if they don’t plan ahead.’
Healthcare spending across the diverse region varies considerably. For example, per capita healthcare spending reached US$3,970 in Singapore in 2021, according to the World Health Organization, while in China it was US$671, in Vietnam US$173, in Indonesia US$161 and in Myanmar US$65.
There is potential for increased health insurance take-up, with only 18% of respondents in the Manulife survey having critical illness cover, compared with accident (32%), inpatient (32%) and outpatient (26%) insurance.
However, there are varying levels of awareness around healthcare planning across the region. Taking Singapore as a bellwether, MediShield Life and CareShield Life are mandatory basic health insurance and long-term care plans administered by government agencies, with Singaporeans encouraged to supplement and integrate these with their own policies.
‘In light of greater awareness, most Singaporeans see the need to plan early for their retirement’
Ongoing education
On top of this, education around financial planning is ongoing. The Monetary Authority of Singapore has launched campaigns to increase public awareness about financial planning, a basic guide helps Singaporeans take steps to safeguard their financial wellbeing and the MoneySense initiative educates citizens in making informed decisions.
‘In light of greater awareness, most Singaporeans see the need to plan early for their retirement,’ says Bernard Foong, an associate director at Avallis Financial in Singapore. ‘The next challenge would be a trust factor in seeking professional advice. Some prefer to work with bankers, others with financial advisers while, increasingly, younger Singaporeans would rather do it themselves.’
Outside Singapore, Foong has observed less developed healthcare systems and a lack of comprehensive government financial education initiatives, as well as a mistrust of domestic financial institutions. ‘This sometimes leads people to undertake health, insurance and investment tourism – buying policies and securities and visiting hospitals in Singapore due to a perceived faith in its institutions,’ he says.
On mental health, public awareness of which has grown significantly since the pandemic, governments and insurers are perhaps playing a little bit of catch up.
‘In Singapore there is a movement towards better coverage in this area,’ says Foong. ‘Increasingly we’re seeing insurers include dementia and depression, but it’s baby steps at the moment, as they’ll need the data to substantiate any claim.
Accountants’ role
A notable trend in certain markets, such as the US, the UK and Australia, is SMPs adding wealth management and financial planning to their service offering, either by directly providing this expertise inhouse or partnering with a third party. According to experts in the region, this is yet to take off meaningfully in ASEAN and China, but accountants may yet find themselves exposed to financial planning – for example, in setting up family offices.
‘Accountants and lawyers work together to ensure that such arrangements are done according to a client’s requirements, because there are many permutations to setting up a family office,’ Foong says. ‘It’s an interdisciplinary approach where accountants will be involved in providing us with certain figures, while lawyers will help draft binding agreements.’
Another example is insurance tourism. ‘Singapore is more tax friendly than many other countries, so we use insurance as a mechanism to reduce tax,’ Foong continues. ‘Income derived under a life policy bought offshore in Singapore, for example, will have an exemption on capital gains tax. We typically work with accountants to ensure that the policy wording is correct.’
More information
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