Covid-19 Teaches Wealthy Kenyans Lesson Never Taught In School

Majority of Kenya’s rich to super-rich population have reset their financial life goals following the disruptions by Covid-19 pandemic, with a good number losing confidence in their hug cash reserves. In fact, many wealthy Kenyans have been forced to adopt a more futuristic approach to life when planning their finances, factoring in health issues and children inheritance.

This is according to Standard Chartered’s latest survey into affluent – comprising emerging affluent, affluent and high net worth) – consumers in 12 markets across Asia, Africa, the Middle East and UK. In Kenya, 96% of the rich have reset their life goals with 59% respondents indicating COVID-19 has diminished confidence in their finances, preventing them from taking the actions necessary to achieve their new goals.

More than half, or 57%, of Kenyan respondents have set the goal to ‘to improve my health’  and to ‘to set aside more for my children’s future’, radically shifting mindsets in a society that glorified liquid cash and piles of savings in bank and saccos.

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.

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The emerging affluent have disproportionately suffered a loss of confidence, with 61% reporting less confidence compared with 24% of HNW (high-net work) 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%), ‘fear of poor returns on investments’ (37%) and ‘insufficient information about specific investment opportunities’ (32%).

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

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At the same time, 45% plan to retire before the age of 65 and 22% 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.

Regaining control

Globally, almost all (94%) 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% 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,” says Mr Paul Njoki, Head of Wealth Management, Standard Chartered. “They 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.”

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