Russians and their financial habits
RT: How can you describe your average client?
NS: “In fact, there are several layers. My most typical client is a family, where there is at least 1 child who hasn’t yet entered a University and where parents are younger than 45 years. So this is a classical example of a family that has such typical goals as to buy a bigger flat, a new car, to educate their children, to probably provide for an apartment for a child before he graduates from the University, to be able to help the parents and to provide for a decent retirement period when they get older.
Talking in terms of income, my clients usually have that above the average, which means that the difference between their income and expenses is at least 10% of the money they get monthly. The exact figure varies depending on the region a person leaves in. And this is usually coupled by the initial savings of at least 2 salaries. As a rule, both a man and a wife are hired and work outside a financial sphere.
The second typical situation is when a person has about 10 years remaining before pension, so these are people around 50 years old who need to think of their older ages.
And the third layer consists of wealthy people who want to save and multiply their capital.”
Natalia Smirnova, CEO at Personal Adviser and a member of the Financial Planning Association
RT: Which financial products do you usually offer to your average Russian client?
NS: “This depends on the goals set, the investment period and the amount of risk a person is ready to take on. Of course the most popular tool in banking is a deposit in one of the top – 100 banks. And I also advise credits, but just in cases when the talk of a very important goal that can’t be achieved other than this way. A mortgage, for example. A credit card with an exemption period is another advice, which can sometimes help to overcome so called “gaps” between salaries.”
RT: How often do you advise more sophisticated tools such as mutual funds, coins, etc? How well prepared is Russian population to use those?
NS:“I can tell that Russians are ready. Deposits in Russia have an interest rate below inflation and provide for a negative result or a nill. So, sometimes I would advise mutual funds, either Russian or foreign ones, or other investment products. This allows a person to diversify away from sharp currency fluctuations and to diversify in terms of both a country and a sector. As for gold coins and depersonalized metal accounts in Russian banks, I would advise the option only to those who don’t have enough money to buy gold through foreign banks, at a better price and without paying a value added tax. Depersonalized metal account isn’t secured against the risk of a bank’s bankruptcy and involves a lot of paper work that needs to be done by a client himself as far as paying taxes is concerned. So, this calls for a far higher level of financial literacy and discipline.”
RT: So briefly what’s the range of financial tools usually offered to a Russian client, moving from the most simple to more complicated?
NS: “That’sa deposit, mortgage, a transfer of a funded part of a state pension to a non – governmental pension fund or a managing company, life insurance, that still involves long hours of explanation to a client, and mutual funds, both domestic and foreign ones. All the other, more sophisticated investment tools as buying wine, diamonds, or real estate abroad comes as exotic in Russia.”
RT: How does this ranking compare with Europe and the USA?
NS:“I think several generations need to pass for Russia to reach the American level of operating with financial tools. There are just about 5% of active investors in Russia, who invested into a mutual fund or stocks directly, not through a funded part of a state pension, for example, while abroad the talk is of tens percents, in the USA the figure is even higher. Also, just 2% of Russians insure their lives, while more than a half ofpeople abroad do so. In terms of using credit, Russians are quite active, with about 50% already using or going to use it. The same story is with deposits, about 50%. Of course Russia is still lagging behind the developed world, with deposits and credits remaining the most popular.”
RT: Many take this “underdevelopment” as a bad characteristic for Russia? What’s your view of the situation?
NS:“Of course, the USA is a far more developed country in this respect.But we should always keep in mind that this society of consumption is also the place, where the world economic crisis started. This means that not everything is that perfect in the country as it might seem.
If we just make financial tools more accessible in Russia, thus simply increasing consumption, which wouldn’t involve much thinking, we’re most likely to face an economic collapse. We need to develop a financial culture first.
Also, Russia has been operating in a market just for 20 years. A stock market in the U.S. has been developing for more than a hundred years, while in Russia – just for 15.
So, we shouldn’t blindly follow an American example, time is needed.”
James Blake, Anastasia Kostomarova, RT