They Save But They Don’t Plan

Chinese Americans are great at saving, according to research from Wells Fargo, but fewer than half of survey respondents have a written financial plan.

On average, Chinese Americans reported twice the national savings among nonretired adults and significantly higher savings rates than the national average, according to a survey from Wells Fargo.

Saving is more of a priority for Chinese Americans, with 43% cutting back on spending to save for retirement (versus 36% of the general population). Non-retired Chinese Americans have median self-reported retirement savings of $100,000, compared with $45,000 for non-retired Americans. Only one in four Chinese Americans (24%) agree that current expenses prevent them from saving for the future (versus 39% of general population). And nearly two-thirds (63%) are confident that they will be able to continue their lifestyle in retirement, compared with fewer than half (48%) the general population.

Many Chinese Americans already have a solid foundation to meet their long-term financial goals, said Margaret Liu, a senior vice president, and senior trust and fiduciary specialist of Wells Fargo Private Bank, but not all of them have maximized their investment potential. “I found the study very interesting, based on my own household and upbringing,” Liu told PLANADVISER. “Savings is just there,” she said, an important part of the culture. “But there is not a lot of discussion about planning. Saving is one critical component, but there are others.”

Despite making retirement savings a priority, only two in five (43%) have a written retirement plan, the study found. “There is gap in planning and investment potential,” Liu said. The next step for this population is to help them get pen to paper, so they can have a roadmap, which includes a need for sound investment advice.

Advisers who are considering tapping this market can emphasize the importance of sitting down to think about goals. As Liu pointed out, planning takes more than mere savings. “It’s not just squirreling money away, but thinking about what you need now, what are you trying to save for, whether you’re optimizing in terms of legacy, and thinking about strategy.”

Let Numbers Tell the Story

Chinese Americans could learn to optimize their investment potential, she suggested, and advisers can provide education around what investors are trying to achieve. “Show the numbers,” Liu said. Show the numbers in black and white, and how these numbers project out based on what investors have.

Numbers give the adviser a quantifiable measure, Liu said. She suggested projections based on current assets to show investors where they could be in 10, 15 or 20 years: “Know the goals, and show the difference in numbers.” Show the importance of having a written financial plan and investing appropriately to meet goals. “Savings is not investment,” Liu said flatly.

“This group does a lot of online research and likes to get information there,” Liu said. “So maybe a place to start would be Wells Fargo’s online resource, ‘My Financial Guide,’ which offers articles, videos and tools to gain more knowledge.”

“Advisers need to get into the community and get involved,” Grace Niwa, the Asian public relations consultant for Wells Fargo, told PLANADVISER. “Let them feel like they know you, and support the community efforts they are passionate about to build that relationship.”

Other survey findings:

  • About two-thirds of Chinese-Americans report feeling financially comfortable (67%) and are confident about their financial future (65%), compared with only about half of all U.S. adults;
  • Three in five (60%) Chinese Americans feel they are better off financially compared to three years ago (versus 51% of U.S. households);
  • Chinese Americans reported significantly higher household incomes, with about a third (37%) earning over $100,000 annually (versus 23% of all U.S. adults);
  • Only 17% of Chinese Americans said they spend more than they can afford (versus 25% of the general population); and
  • Most (65%) report paying off credit card balances every month, compared with just 42% of all Americans.

The survey was conducted online between November 9 and December 3, 2012 among adults nationwide and Chinese Americans. Qualified respondents were nonstudents, age 25 to 75, who are the primary or joint financial decision-maker in the household with household investable assets of at least $10,000. Survey results are weighted to reflect U.S. Census data for gender, age, race/ethnicity, region and household income.