Companies which have concentrated on giving general financial advice have weathered the storm far better than firms or operations that relied heavily on the sale of insurance-linked products.

The reason is simple. There is always a demand for financial advice regardless of the economic climate. However, there is more resistance to long-term investment contracts during periods of market uncertainty.

More importantly, though, the financial planning industry is now getting to grips with demographic changes.

The number of expatriates, a traditional source of income, has started to decline and there is a growing awareness that a viable future for a financial planning business rests on creating a substantial Hong Kong Chinese client base.

Smart operators, and those with the financial backing to act early, recognised the changing face of the industry several years ago and have been recruiting Chinese consultants.

However, the financial planning sector is still dominated by British advisers - and advice available has a heavy British bias.

Catering for Hong Kong Chinese clients is not achieved simply by hiring local consultants. Companies must also explore the type of advice they can offer.

According to Matheson PFC managing director Paul Tagg, this can be quite different from the service provided to expatriates.

'We are looking at this new market, but don't want to rush into it until we have identified the differences between the taxation and financial planning [needs] of expatriates and Hong Kong Chinese,' he said. Matheson PFC has added two Chinese consultants to its staff.

In some areas, the needs of local and expatriate investors are the same.

For example, most professional Chinese, especially those educated overseas, are familiar with pension planning and trusts for their children - two important sources of income for financial planners.

As with expatriates, advice is also based on the investor's personal circumstances.

Financial planners will be of most help to Hong Kong Chinese who hold overseas passports. But due to the territory's liberal tax laws, the help they can give other local investors will probably be limited to investment advice.

With this in mind, Matheson PFC has already earmarked its portfolio management services as a key area for Chinese investors in the future.

For most companies, the expected rush of expatriates and overseas passport holders looking for financial guidance in the run-up to 1997 has not materialised - at least not on the scale anticipated.

But according to Mr Tagg, retiring expatriates still represent an important market for financial planners.

Most financial advisers say the slow but steady departure of retiring government employees and the end of big expatriate packages has also set the scene for a different expatriate market in the future.

Coupled with this, the industry also has more brokers than before and because the pool of clients has not increased, competition levels have risen dramatically.

One of the first companies to respond to changes in the market for financial advice was private bank Hill Samuel.

The bank's personal finance arm began to cater fully to local investors' needs about two years ago. It now has 27 Chinese financial advisers against only three expatriate consultants.

The Chinese advisers are graduates, most of them educated overseas, and have passed through the company's training programme.

A spokesman for Hill Samuel said the company had been working for some time towards a target market of 80 per cent Hong Kong Chinese clients.

Currently, between 70 and 80 per cent of new business at Hill Samuel comes from local investors.

Financial planning company Cameron Butler, which opened last year and originally consisted of advisers who left the direct selling company Mondial, has recently started to recruit Chinese advisers.

'As 1997 approaches there will be a bigger market among the Hong Kong Chinese and we see this as being an increasingly important part of our business and aim to have the flexibility to adapt to it,' said Cameron Butler consultant David Bates.