Cash and property have historically been the go-to ways for Vietnamese people to hold their wealth, but they are increasingly waking up to the need to make their wealth worker harder. As a lifelong financial adviser, it’s really heartening to see the strength of Vietnam’s savings culture. Yet the manner in which many people are still choosing to hold their wealth does cause me concern – and often outright alarm. Keeping the bulk of your wealth in cash – or even that old stalwart, property – are far from the most effective ways to make the most of your wealth. Moreover, they can be incredibly dangerous. I regularly hear of individuals literally keeping cash in their attics, with scant regard for the very real risk of theft or loss. The prospect of someone losing the fruits of all their life’s labour in one fell swoop doesn’t bear thinking about.
Putting money in the bank is a far safer option and it is clearly preferable to take advantage of the security of Vietnam’s banks. This is relatively newfound, however, and while deposit insurance is in place, the coverage limit of just VND75 million, including principal and interest, is unlikely to deliver the level of protection wealthy Vietnamese need. Back in the UK we also have deposit protection, but the relatively modest amount that will be protected means that savers have often spread their wealth among several institutions. A safer approach, no doubt, but one that I would argue is a big headache few people need in their busy lives. What’s more, while Vietnamese banks currently do offer very much more attractive rates than you could dream of in the West, you could often do very much better – of which more later.
Turning to property, I understand the appeal of an investment you can see and touch, and the rationale that bricks and mortar is a safe investment as people will always need somewhere to live. But the property market is especially prone to fluctuations and, what’s more, it can be a particularly illiquid way to hold wealth: if you need your cash back you may find yourself being forced to sell in a down market, or waiting far longer than you would want. And that’s assuming that all goes well. Disasters do happen and I suspect that contracts and insurance policies are often not as robust as they could be in such a rapidly developing market. So, we have a situation where the economy is booming and Vietnamese people are diligently saving the fruits of their labours. But they are very often putting that wealth at serious risk – of not working as hard as it could be at best, and being utterly destroyed at worst.
People are often surprised at the course I have chosen. Why would someone with decades of success as a UK financial adviser choose to move halfway around the world to establish a wealth management firm in a country where the concept is still new? Well, for me, the very nascence of the market is what holds its attraction. Not only does Vietnam have a dynamic, entrepreneurial spirit that makes many other Western countries seem sleepy, here I feel I can make a real impact on people’s lives through promoting the effective management of their money.
Make your wealth work for you!
The truth is the Vietnamese are very good at working to create wealth, but many still aren’t doing anywhere near enough to make that wealth work for them. Taking whatever excess capital you have and making that create as great a return as you safely can is the key to building wealth across the generations. By harnessing the power of compound growth, you can enjoy seeing your wealth grow exponentially year after year. So, what does effectively managing wealth look like? Well, letting go of the notion that cash and property are king is a good start. Safety of assets needs to be paramount, which means diversifying away from traditional means of holding wealth. Then, savers need to think about how to maximise the growth of their capital while intelligently managing risk.
For smart investors, building an investment portfolio is the only route to getting the diversification you need and the growth that you want. Cash and property may feature, but should only be part of the picture. What is needed – and what so many Vietnamese lack – is exposure to many sources of growth through stock market investment. At first, this may seem daunting to the inexperienced. But as we have seen at S&P Investments, the many attractions of stock market investment quickly become core to people’s thinking about wealth. And it is far easier than you might think to get started.
Everyone will have heard of the Vietnamese stock market hitting all-time highs, but many will be thinking ‘But how can I as an individual be part of that?’ Well, an index tracker is the answer. By investing in such a fund, which in turn invests into all the constituents the index represents, you can gain exposure to a range of companies and sectors in a quick and cost-effective way. Your risk is diversified, you partake in stock market growth and avoid the many downsides of relying on cash and property to hold all your wealth.
A portfolio for your profile
From this starting point, you can add different funds and direct equity investments to your portfolio, start thinking about other asset classes like bonds and then look to sources of capital growth overseas. With the right advice, the end-result should be a diversified portfolio which represents growth targets and risk exposures which are perfectly suited to your financial objectives. Working out what your wealth profile really is with a professional will provide a great foundation for getting to where you want to be. Promoting this model of intelligent wealth management is my mission here in Vietnam and I couldn’t be more excited about helping the hardworking people of this beautiful country on that journey. You’ve worked hard making your wealth, now it is time to start making it work as hard as it possibly can for you. I’ll be addressing the many facets of properly managing wealth in future columns, but please don’t hesitate to get in touch to learn more now. Discussing your situation with an experienced financial adviser could make all the difference in the world to your financial position, and I’d be delighted to have an informal chat whatever your level of wealth and experience.
* Brian Spence is managing partner of S&P Investments. He has more than 35 years of experience in the UK financial services industry as an investment manager, financial planner and M&A specialist. He is a regular contributor to the UK financial press and has a deep understanding of the financial services community. Brian’s column will reflect on all the challenges and opportunities within the Vietnamese market, bringing a fresh perspective to today’s hottest issues. The columnist’s email address is firstname.lastname@example.org.