Expenses seen rising faster than Filipinos’ average ROI

THE COST of retirement, education, living expenses and healthcare in the Philippines is rising nearly twice faster than Filipinos’ average return on investment (ROI), thus requiring asset diversification into better-yielding assets.

This is according to Manulife Asset Management, which recently released a report titled “One Step Forward, Half a Step Back: Meeting Financial Goals in Asia.”

The report discussed how investors in the region—including Filipinos—were losing ground each year as the rate at which their savings was growing was outpaced by rising cost of big-ticket purchases.

The research revealed that the limited investment growth was primarily the result of the high level of cash investors were holding in their portfolios.

For this research, Manulife analyzed the top five financial goals across Asia—saving for retirement, paying for children’s higher education, meeting current living expenses, buying a home and saving for a rainy day (including unexpected healthcare costs)—and the saving and investment strategies that investors use to meet these goals.

Michael Dommermuth, executive vice president and head of wealth and asset management for Asia at Manulife Asset Management, explained in a press statement on Tuesday: “In the Philippines, we looked into the goals of saving for a rainy day and for children’s higher education. We found that healthcare costs have risen 11.9 percent annually over the past five years. Meanwhile, the cost of education has risen an average of 8.2 percent a year over the past four years.”

Manulife estimated that the cost of retirement, education, living expenses and healthcare in the Philippines had risen by an average of 8.1 percent a year in the past five years while Filipinos’ investment portfolios only delivered average returns of 4.6 percent a year in the same period.

Aira Gaspar, chief investment officer at Manulife Philippines, explained: “While P10,000 invested today has the potential to grow to more than P15,500 over 10 years, P10,000 in the cost of a basket of the top five financial goals is expected to grow to more than P21,500 in the same period—resulting in a potential shortfall of about P6,000.”

“Looking further ahead, the potential shortfall stands to increase more than 350 percent to almost P23,000 after another 10 years and then almost triple again to about P65,000 by the 30th year. Investors should seriously consider what this means, particularly as retirement was reported as one of their top financial goals.”

Like the findings across the region, the limited investment growth was attributed to the high level of cash investors held in their portfolios. According to the survey, the average Filipino held 38 percent of assets in local currency, with another 4 percent in foreign currency. In total, cash represented 42 percent of their assets.

Dommermuth said: “Filipinos are hardly alone, with survey respondents across Asia reporting that 37 percent of their assets are allocated to local currency and another 5 percent to foreign currency.