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December 5, 2009

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66% aware financial planning important

WHILE two-thirds of individuals in a survey in Asia Pacific are now more aware about the importance of financial planning, they still lack sufficient financial literacy, Citigroup said.

There is a need for regulators to be more proactive and step up efforts to protect retail investors from falling prey to sweet-talking and aggressive sales personnel promoting complicated financial derivative products, industry watchers said.

About 66 percent of respondents said they are paying more attention to their finances than before, Citigroup said in the annual survey which was conducted online in October in 11 Asian countries, including China, and targeted individuals over 18 years old who have at least a bank account or a credit card.

About half of the respondents said they were hit by the crisis, and 39 percent of them said their retirement savings suffered serious losses due to the crisis.

About 29 percent of the respondents said they would know exactly what to do if they were given a lump sum to invest, and one-fourth of them said they have a formal retirement plan.

"The findings suggest that while a lot of lost ground has been clawed back, there is still clearly a significant room for improvement," Citigroup said.

But rapid wealth creation and the emerging middle class in rising economies such as China and India have made it necessary to enhance financial literacy to avoid a repeat of the global economic crisis, industry watchers said during a two-day Citi-FT financial education forum that ended yesterday in Singapore.

While financial institutions should scrutinize their internal system more strictly to avoid mis-selling, regulators should also put pressure on the market to tighten up its act and guide it rather than let the industry self-determine its direction, said Kishore Mahbubani, dean of the Lee Kuan Yew School of Public Policy in Singapore.

The China Banking Regulatory Commission requires that sales persons selling bank wealth management products have to state they have informed clients of the risks in writing.


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