In Singapore, retail investors’ significant deposit holdings limit overall wealth growth while contributing little to wealth managers’ fee income.
A greater focus on investor education and low-risk fund products is needed to overcome this challenge.
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Despite the low returns on deposits, the asset class’ dominance is staggering – especially when compared to other wealth hubs across the globe.
Singapore wealth deposit allocations
As per GlobalData’s Retail Investments Analytics, Singaporean retail investors allocate 68% of their wealth to deposits. This proportion can be compared to 62% in Hong Kong, 55% in the UK, and 21% in the US.
This significantly limits overall retail savings and investments growth. According to data from the Monetary Authority of Singapore, the average interest rate paid on savings accounts in the city state has remained below 0.2% since 2009, while a 12-month term deposit generates interest of 0.55%. When inflation is factored in, investors are left with negative returns.
At least to some extent, investors’ bias towards deposits can be attributed to weak equity market performance in recent years. But as a leading wealth hub Singapore has more to offer.
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By GlobalDataWealth growth options
Wealth managers looking to entice investors out of deposits that contribute little to their fee income should shift the focus to other low-risk products. Bonds are certainly an option that has not been pursued, despite government efforts to develop the retail market.
And while carrying a notably higher risk than term deposits, balanced funds or blue chip equity funds that offer overseas exposure could be of appeal in this context.
Or combine the liquidity of equity with the solidity of bonds through bond ETFs, another means for giving Singaporeans alternatives to the dismal returns of deposits without drastically upping risks or costs.
