'2022 Asset Management Customer Analysis Report'
Examining Customers with Financial Assets of 100 Million to 1 Billion KRW
50.1% of Expenditures Saved Intact
Asset Growth Means: "Work and Business, Not Investment"
[Asia Economy Reporter Song Seung-seop] It has been found that financial millionaires save half of their expenditures. As a way to become even wealthier, they cited increasing income from work and business rather than aggressive investment. They also responded that if interest rates rise in the future, they will further reduce new loans and investments and put their assets into deposits.
According to the "2022 Asset Management Customer Analysis Report" released on the 4th by Woori Financial Management Research Institute, the affluent middle class saved 50.1% (46.38 million KRW) of the money they spent last year. Of the savings amount, 60.4% was in safe assets. They placed 31.2% in demand deposits and 29.2% in time deposits and savings accounts. Long-term savings products such as personal pensions accounted for 20.6%. Non-consumption expenditures such as social security contributions and loan principal and interest payments were 16.5%, while consumption expenditures such as living expenses and medical expenses were 33.4%.
The affluent middle class refers to the group with financial assets between 100 million KRW and less than 1 billion KRW. Their total assets, including financial assets, averaged 1.15986 billion KRW. Net assets, excluding rental deposits and debts of 116.88 million KRW, were 1.04208 billion KRW. Among these, financial assets were 269.51 million KRW. Real estate assets were 853.23 million KRW, and other assets such as virtual assets were 29.82 million KRW. Total income averaged 100.75 million KRW before tax, with earned income accounting for the highest proportion at 72.1%.
The minimum asset standard that the affluent middle class considers to be "wealthy" was 7.05 billion KRW. They answered that 3.29 billion KRW of this should be financial assets. This is a much higher standard than the "financial assets of 1 billion KRW" defined as the wealth standard by banks or asset management industries. In particular, the higher the assets, the higher the standard, with those holding assets of 2 billion KRW or more considering themselves wealthy starting from 7.99 billion KRW. Accordingly, only 22.8% of the affluent middle class thought they could become wealthy themselves.
The average target asset planned by the affluent middle class for 10 years later was 2.16 billion KRW. This means they want to increase their current assets by 2.1 times. As the main method to achieve this goal, 45.5% chose "earned income from work or business." Investment in financial products was next at 24.8%, followed by real estate investment at 22.7%. They believed that through these methods, they could increase their assets by 3.9 times before they die. Also, 54.2% said it was possible to accumulate 1 billion KRW in financial assets, but 45.4% thought it would take "more than 10 years."
Prices and Interest Rates Rise... "Will Reduce Loans and Put Money in Deposits"
The income source that contributed the most to accumulating 100 million KRW in financial assets and entering the affluent middle class was also earned income from work or business, according to 77.6%. Only 8.8% answered that it was investment in financial products. Even in accumulating current levels of assets, 54.8% thought earned income from work or business contributed the most. However, the proportion who answered real estate investment was also high at 22.6%, indicating that real estate's contribution increased in the asset accumulation process after securing seed money.
As the base interest rate recently rose and a recession is expected, 31.9% adjusted their investment and management methods. Most do not make significant changes to their current portfolios, but as market interest rates influence decisions on loans or deposits, the direction and speed are expected to change. When loan interest rates reach the 6% range, 64.9% gave up new loans, and at the 7% range, 83.5% said they would not borrow money. Conversely, if deposit interest rates reach the 5% range, 37.2% said they would move investment assets to deposits, and at the 6% range, 58.1% responded similarly.
The economic perception was dominated by opinions that inflation and interest rate hikes will continue. Among the affluent middle class, 31.7% predicted that prices would rise until the second half of next year, more than the 28.9% who answered "first half of next year." The opinion that interest rate hikes will continue until the first half of next year was the highest at 35.5%. Seventeen percent of the affluent middle class believed that inflation and interest rate hikes would continue until 2024.
However, the majority of the affluent middle class (54.7%) expected household income next year to be similar to the current level. Regarding household expenditures, they expected both consumption and non-consumption expenditures to increase due to inflation and interest rate hikes. Among loan holders, 84.2% planned to reduce or maintain their loan balances according to the repayment schedule over the next year.
Woori Financial Management Research Institute advised, "Financial companies need to comprehensively understand the perceptions and difficulties of the affluent middle class during economic fluctuations," adding, "By supplying necessary financial products and improving service delivery methods, they can utilize market uncertainties as new growth opportunities in asset management business."
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