Confidence Gap Holding Back Affluent Consumers From Meeting their Goals

Standard Chartered’s latest survey into affluent consumers in Kenya has revealed that 96 percent of them have reset their life goals following the Covid-19 pandemic which diminished their confidence in their finances.

The survey looked at the affluent (comprising of emerging affluent, affluent, and high net worth) consumers in 12 markets across Asia, Africa, the Middle East, and the UK.

Findings showed that 59 percent of respondents agreed that the pandemic held them back, preventing them from taking the actions necessary to achieve their new goals.

COVID-19 has prompted the affluent in Kenya to become more future-focused when resetting their priorities: more than half have set the goal to ‘to improve my health’ (57 percent) and to ‘to set aside more for my children’s future’ (57 per cent).

To meet these new goals, the affluent need new strategies to grow their wealth, which often involves more proactive investment rather than just saving cash.

However, their current ‘confidence gap’ has made many increasingly averse to risk, potentially stopping them from putting their money to work through investing or making use of digital tools that simplify wealth management.

The ‘confidence gap’ is greater among the emerging affluent

The emerging affluent have disproportionately suffered a loss of confidence, with 61 percent reporting less confidence compared with 24 percent of HNW individuals.

That means those lower down the wealth spectrum, still establishing their finances, stand to lose out more if they do not have the support to rebuild their confidence.

For the affluent across the wealth spectrum in Kenya, the three most common factors impacting their confidence were ‘volatility in financial markets’ (38 percent), ‘fear of poor returns on investments’ (37 percent), and ‘insufficient information about specific investment opportunities’ (32 percent).

 Retirement is at risk

A late start to retirement planning, combined with the pandemic-induced confidence gap, leaves a significant proportion of affluent consumers at risk of a shortfall for their retirement.

In Kenya, 17 percent of people do not currently save/invest for retirement. For those that do, ‘investment income’ (62 percent) and ‘cash savings’ (38 percent) are the most common expected sources of income.

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At the same time, 45 percent plan to retire before the age of 65, and 22 percent have set a new goal to retire early. This shows a disconnect between current actions and future expectations if a confidence gap is holding them back from investing.

A pro-active approach can help the affluent regain control

Globally, almost all (94 percent) of investors who had tried more than five new investments or investment strategies reported being happy with their finances.

Whether it is diversifying into new asset classes, new investment strategies to rebalance their portfolios, or exploring sustainable investing, the survey revealed that more hands-on investors are happier with their finances.

This trend is mirrored in Kenya, where 95 percent of those who have made five or more changes to their portfolios following the pandemic are happier with their finances.

Saving in cash will not cover longer lifespans and new priorities, so it is essential for the affluent to invest for the long term.

“The affluent need to take charge of their finances and build diversified investment portfolios to meet their new goals, including a comfortable and timely retirement. If they do not act now, they may stand to miss out,” said Paul Njoki, Head of Wealth Management, Standard Chartered.

“Affluent consumers across the wealth spectrum can benefit from professional advice to help them manage their finances. We hope this report raises awareness of the risks posed by the confidence gap and are committed to helping by offering personalized advice and convenient digital access to the wealth management solutions most suited to their goals,” he concluded.