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Three Key Steps to Setting Up a Family Wealth Management System!
A comprehensive family wealth management system consists of at least three components: the core of the system, the system support and the system guarantee. Accordingly, its completeness relies on three core parts: goal management, wealth management tool, and family governance mechanism. At first, the family wealth goal plays a core role in the management system, encompassing the four major wealth goals: safeguarding wealth, growing wealth, fostering harmonious wealth, and preserving enduring wealth, which are interlinked and interacted, placing the core and leading role in family wealth management, of which security is the foundation. Security serves as the foundation, upon which wealth growth is pursued. Likewise, harmony is achieved on the basis of both security and growth. By doing so, long-term prosperity can be achieved. Secondly, wealth management tools serve as the backbone for achieving family wealth goals, necessitating the integrated use of various tools such as investment banking, financial planning, gifting, testamentary, and family trust. Besides, with distinctive advantages, these tools should be selected and combined based on the specific conditions of families, so as to achieve wealth creation, protection, and inheritance. Last but not least, family governance mechanism, as a guarantee of the management system, requires to establish an effective governance structure within the family, while achieving joint wealth management goals. Family governance not only includes the wealth protection and operation of wealth, but also involves family members’education and cultivation, so as to ensure long-term stability in family wealth. The completeness of family wealth management system demonstrates a combination of family wealth goals, wealth management tools and family governance mechanisms. Hong Kong Fiduciary Association Limited will continue to serve as a connector linking between high-net-worth individuals and inheritance service providers, providing professional and dedicated family wealth management services, and assisting families in establishing a comprehensive wealth management system, so as to ensure long-term growth and inheritance of family wealth.
Hong Kong Becomes Treasure Trove Due to High Tax on Global Rich
Thomas Piketty, the author of the world’s bestselling Capital in the Twenty-First Century, wrote in the book: “The clear regressivity in the top centiles reflects the importance at this level (the high and low levels of tax rates) of capital income, which is largely exempt from progressive taxation.” This reveals the underlying crux of rising global wealth inequality. Many countries are ready to raise taxes on the rich Obviously, the fact is that the real tax rates on the affluent are so much lower than those of the general public, which has become a top priority for many countries to stay competitive in recent years, so much so that their intention to target the wealthy population has been well known. Let’s take a look at some countries that will soon levy higher taxes on the rich. 1. New Zealand According to a report by New Zealand Inland Revenue Department, (IRD), revealed in April, the average New Zealanders pay 20.2 percent tax on all income, goods and services, compared with super rich New Zealanders paying only 9.4 percent. David Parker, Revenue Minister, said the government is seeking targeted measures. 2. Canada The Canadian government released its federal budget plan in March meant to close tax loopholes that favour the wealthy and corporations, conduct a public review to identify federal tax expenditures, tax loopholes, and other tax avoidance mechanisms that particularly benefit to high-income individuals, the wealthy and large corporations, while putting forward proposals to eliminate or limit these expenditures. 3. United States However, one of the most typical examples is that of the U.S. government. According to the Fiscal Year 2024 Budget in March, the Biden government proposed to levy a 25% minimum tax on billionaires on unrealized capital gains on assets such as equities. Admittedly, Biden’s proposal can find crucial problems and work on them. By doing so, those who shall still be levied on capital gain tax, even though they purchase shares. In addition, Biden has proposed raising the capital gains tax rate to 39.6% from 20%, and increasing income levies on corporations and the affluent population. Upon implementation, wealthy Americans may be in for a capital gains tax hike. Such an action has caused shock waves: A series of wealth tax policies on the rich in the developed countries have raised a storm of protest from top billionaires. For example, Elon Musk, the world’s richest man said that even taxing billionaires at 100 percent wouldn’t solve America’s national debt problem. For another instance, Bill Gates, the founder of Microsoft, argued that higher taxes on the wealthy would undermine social incentives and economic development. Seemingly, the wealthy hold a strong protest on the rich tax, yet in fact they have already faced the music by taking precautions beforehand. Global wealth shift of the rich makes Hong Kong become a “Treasure Trove” Recently, relevant reports suggest that “global funds are flowing into Hong Kong”, “US dollar deposit business in Hong Kong has boomed”. Ms Julia Leung, the Chief Executive Officer of the Hong Kong Securities and Futures Commission, also said at the ASIFMA China Capital Markets Conference on 27 June, “indeed, our data for the first quarter show signs of hope. The licensed corporations under major investment banks saw their net profits before tax jump twofold over the previous quarter. Total income also rebounded by a high single-digit percentage.” Likewise, on 29th June, John Lee Ka Chiu, the Chief Executive of Hong Kong Special Administrative Region (HKSAR), said in an interview with South China Morning Post that “with capital and investment returning to Hong Kong and this turnaround would be better reflected in the city’s third-quarter figures.” Undoubtedly, these reports have highlighted the attractiveness and prospects of Hong Kong, as a leading global asset and wealth management hub. Thus it can be seen that Hong Kong is truly an “ideal destination for investment” that attract visitors from different places to engage in commercial activities. With a large and well developed financial system, Hong Kong can fully satisfy the multiple needs for the global billionaires with a wide range of products and services such family offices, stocks, trusts, bonds, insurance, precious metals, property, and even virtual assets. Naturally, Hong Kong has become a preferred wealth management centre for ultra-high-net-worth individuals in the international context. What makes Hong Kong so desirable? As the city with the highest concentration of ultra-high-net-worth individuals (UHNW) in the world (more than 15,000), Hong Kong is also home to the top professional financial organisations and financial talents. On top of that, Hong Kong has many world-renowned advantages: 1. Simple and competitive tax system Hong Kong is regarded as a “low-tax paradise” because of its narrow tax base, few tax types, low tax rates and many tax exemption policies. In particular, what billionaires most focus on no capital gains tax nor estate duty in Hong Kong. 2. The Linked Exchange Rate System The Linked Exchange Rate System is defined as an economic approach that enables Hong Kong to effectively protect itself from external financial turbulence and political shocks. By anchoring the Hong Kong dollar to the US dollar, it can reduce exchange-rate volatility for individuals, enterprises and the government in economic activities, thereby helping reduce transaction costs while stabilizing the expectations of all parties. 3. Continuous innovation in the financial market Recently, Hong Kong has implemented a series of positive measures, such as the launch of the network of Family Office Service Providers, the introduction of HKD-RMB dual counter, the opening of the Licensing Regime for Virtual Asset Trading Platforms and the relaunch of the Investment Immigration Program. All these efforts have proven that Hong Kong has proactively responded to the trend of development of the times while striving to satisfy the growing needs of various parties. Due to continuous innovations in the financial sector, Hong Kong has remained among the top in various areas of competitiveness in the global financial market. Conclusion: Against the backdrop of a complex international landscape and geopolitical tensions, Hong Kong is now playing an important role as a global wealth centre. Amid such historic opportunities, it will strive for even remarkable results in near future through continuous reform, innovation and enhancement. Like Mr Lee Ka-chiu, the Chief Executive of HKSAR, expresses great expectations that Hong Kong will definitely have huge potentials with and greater prosperity infinite splendour!
Elderly-Care Trusts in Demand as Pension Competition Intensifies
During the Spring Festival, banks in China did not let down its guard, but instead took unprecedented action to “attract clients from its competitors”. In fierce competition, banks nationwide have made every possible effort to tempt clients to set up a personal pension account by marketing activities such as the lucky draw, instant discount, referral rewards, etc. Regrettably, despite the craze for opening a bank account, people are reluctant to deposit, which has become a hidden hazard that cannot be neglected. As of the first half of 2023, the number of individuals participated in personal old-age pension exceeded 40 million, with the amount of deposits exceeding 18 billion yuan, which is merely equivalent to 450 yuan per capita contributions. With a meagre 450 yuan, how can we guarantee our care-free life after retirement? It’s nothing short of a unrealistic illusion. Therefore, through other effective financial instruments, solving elderly-care problems has become one of the most pressing social issues. In particular, some countries and regions like Japan, Hong Kong, are at the forefront of this trend, having developed full-fledged elderly-care Trust, which provides a solution to address the challenges of an ageing society. Accordingly, it has become a preferred choice of many retirees. There are the following significant advantages behind its the favour of the general public: Reasonable utilisation of funds. You can pre-arrange living expenses, medical expenses or nursing care expenses for yourself or your parents to ensure a high-quality retirement life. Asset protection has the effect of isolating all types of risks. When assets are transferred to a Trust account, they are held in the name of the Trustee Company and strictly protected by relevant Trust laws. This means that your assets can be protected to the greatest extent possible, thus preventing them from exposed to all kinds of potential risks. Achieve steady growth through professional investment. Your assets are not only protected, but can also grow steadily through professional investment teams, providing you with a stable income. A comprehensive service system ensures a better life in your old age. Trustee Companies can offer you with a variety of elderly-care services, given the long term relationships they have established with many well-known elderly service organisations. With Elderly-Care Trusts gaining further popularity and growth nationwide, we are fully confident that it is bound to become a wise option for a growing number of people. Meanwhile, Elderly-Care Trusts can safeguard those in need, enabling them to live a more comfortable, secure and care-free life in their old age and enjoy the joy and beauty of old age.
Asia-Pacific Leads Investment as Hong Kong Eyes Family Office Hub
Recently, Union Bank of Switzerland (UBS) released Global Family Office Report 2024, which brings together the insights of 320 single family offices across seven regions of the world. The result shows that the Asia-Pacific region (APAC) looks set to be the top destination of added allocations in family offices globally. According to this survey, the total net wealth of the family offices exceeded US$600 billion, with an average net wealth of US$2.6 billion. Meanwhile, APAC has the highest number of respondents of all regions. The result presents that global family offices have shown significant changes in investment in terms of regions, portfolios, and methods. LH Koh, Head of UBS Global Family Institutional Wealth APAC, shared, “almost half of APAC family offices plan to allocate more assets to APAC over the next five years, with APAC set to be the top investment hotspot globally.” Indeed, Hong Kong’s family office market has been flourishing in recent years. Invest Hong Kong (InvestHK) announced on 18 March that according to the Market Study on the Family Office Landscape in Hong Kong conducted by Deloitte, commissioned by the department, it is estimated that there are more than 2,700 single-family offices in Hong Kong. Furthermore, if we count in the multiple family offices not being included in this survey, the total number of family offices in Hong Kong will be far more than 2,700. The details are set out below: In recent years, the Hong Kong Government has keenly consolidated its status as a global family office hub and is determined to maintain an unrivalled position. To this end, the Government has introduced a series of policies and complementary measures to attract more ultra-high-net-worth individuals and families to set up family offices in Hong Kong. The Government has put in place a series of measures to witness its thriving family office sector. As of February this year, the dedicated team of InvestHK has assisted 58 family offices to set up or expand their operations in Hong Kong, and more than 100 family offices indicated that they had decided or were preparing to set up or expand their operations in Hong Kong. As a leading international centre and well-recognised wealth management centre, Hong Kong provides an enabling environment with many unique advantages for family offices to operate and grow. Being a gateway to the Chinese Mainland, Hong Kong offers outstanding potential for building a lasting family inheritance for business families from both the East and the West, becoming a preferred destination for family offices.
Hong Kong OFC: A New Choice for Global Asset Allocation!
As one of the products designated by New Capital Investment Entrant Scheme, Hong Kong Open-ended Fund Company (OFC), leading the new trend toward asset allocation, is preferred by the advantages such as openness,flexibility, risk-control capacity, stable return. The development of open-ended fund company in Hong Kong did not happen overnight. As early as 2014, Hong Kong had planned to build an open-ended fund company system in terms of rules, fees and taxation. The Securities and Futures (Amendment) Ordinance 2016 has formally been implemented since 30 July 2018. This marks that “open-ended fund company” (or “OFC”), a new company form,was introduced into Hong Kong. As a new form of fund scheme with a wider scope, more inclusiveness and a higher degree of freedom, investors will be able to obtain stable returns by utilising OFC for global asset allocation according to their needs. In addition, an OFC must be managed by an investment manager who has a Type 9 (asset management) regulated activities licensed/registered by Securities and Futures Commission of Hong Kong (SFC). Similar to the Hong Kong Unit Trust structure, an OFC may be established as an umbrella structure (as illustrated above) consisting of multiple sub-funds operating within a single entity with its own investment objectives in order to diversify risks. As a late bloomer in asset allocation, OFC provides investors with an importance tool to spread their risks by asset allocation and diversification, and capture its global investment opportunities due to flexible investment strategies, wider investment scope and easier access to international markets.
The Chinese Mainland Capital Is Flooding into Hong Kong
Currently, with a large amount of the Chinese Mainland (hereinafter referred as to the Mainland) capital pouring into Hong Kong, there are 4 hot trends in terms of bank account opening, cross-boarder wealth management, insurance purchasing and real estate investment. 1. Rush to bank account opening: Despite higher entry thresholds for Hong Kong bank account opening, yet it still boost the Mainland investors’ enthusiasm. Banks such as Hang Seng and HSBC have seen a surge in new clients, with non-local residents accounting for a significant proportion, especially those from the Mainland. 2. Cross-boundary wealth management connect “Southbound Service”: “Southbound Service” is available to the Mainland residents to purchase eligible wealth management products in Hong Kong, and the amount of cross-border remittance has surged by more than 60 times, showing the strong demand for freer asset allocation. 3. Hong Kong’s insurance boom: New policy premiums from Mainland visitors hit a record high in the first quarter, up more than 60% year-on-year. Hong Kong Endowment Plan attracts middle-and-high-net-worth families with high expected returns, becoming the preferred choice for risk hedging and appreciation. 4. Buying property in Hong Kong: After the “Removal of spicy measures”(the Hong Kong government’s decision to completely withdraw all demand-side management cooling measures in the housing market), Hong Kong saw a record purchase surge by Mainland buyers. In addition, the number and cost of registrations in both the primary and secondary markets reached record highs, leading to a significant reduction in taxes and fees. Why does Hong Kong attract so many affluent individuals ? They are three major reasons. Firstly, as interest rates on the Mainland continue to fall, Mainlanders are eager to transfer their money into overseas bank accounts for seeking higher returns. Secondly, some affluent Chinese are returning to Hong Kong as Singapore and the United States tighten restrictions on investment. Thirdly, the wealthy people adopt risk diversification strategies by allocating cross-border assets. This is also a major incentive for Mainland funds flooding into Hong Kong. With ever closer bond between Hong Kong and the Mainland, we are fully confident that Hong Kong will still emerge as an international hub for capital flows for the Mainland for a long time to come.
Why Do the Wealthy Prefer to Set Up Family Offices in Hong Kong?
Thanks to its competitiveness, unique geographic location, solid market foundation, and mature financial and legal environment, Hong Kong is well positioned to be a top destination to allure the world’s wealthy to set up family offices. Firstly, Hong Kong is backed by the Chinese Mainland, the world’s second largest economy, which offers infinite wealth growth potential for family offices. As China’s economy continues to grow, the Mainland market brings vitality and opportunity into family offices in terms of investment options and asset appreciation. Meanwhile, Hong Kong assumes “super-connector” role between the Chinese Mainland and the rest of the world, being a global destination for setting up family offices as it offers access to a wide range of resources for global perspectives to help them achieve global wealth allocation and risk management. Secondly, Hong Kong’s well developed financial system and sound legal system provide a reassuring level of protection for family offices. As the world’s largest offshore RMB hub, Hong Kong has one of the highest concentrations of the world’s top financial institutions and professionals, providing diversified financial products and services for them. Moreover, thanks to its well-established and transparent legal system, Hong Kong provides stronger legal support and protection for family offices to ensure a smooth succession of family wealth and sustain enduring family business. Thirdly, capitalising on cultural commonality with the Chinese Mainland and the city’s diverse talent pool, Hong Kong possesses unrivalled advantages for family offices. Besides, as a fusion of East and West, it has unique cultural diversity to attract global talents. All these help Hong Kong better understand and serve the Mainland clients so as to satisfy their needs for family culture inheritance and wealth management. In general, Hong Kong offers an ideal environment for setting up family offices with many unparalleled advantages that encompass the strong backing from the Motherland, its mature financial and legal environment, cultural commonality and global talent pool. During this era of global economic growth amid accumulating family wealth, looking ahead, we are fully confident that the prospects for family offices in Hong Kong are even more promising.
Dubai Is Becoming A New Magnet for Global Affluent Migrants
The Henley Private Wealth Migration Report 2024, released today by international investment migration advisory firm Henley&Partners, shows that the United Arab Emirates (UAE) continues to take first place as the world’s leading wealth magnet for high-net-worth-individuals (HNWIs), with a record-breaking 6,700 affluent migrants the by the end of 2024. There are a variety of factors driving Dubai’s attraction for global immigrants, such as high-quality real estates, investor-friendly framework, large-scale industrial advertisement, the United Arab Emirates Golden Residency Program or the UAE Golden Visa. In particular, there are five major reasons as follows: 1. Strategic and economic resilience As part of forward-looking economic initiatives, like Abu Dhabi Economic Vision 2030, Dubai Economic Agenda “D33”, the UAE is actively strengthening its position as a leading global financial hub by growing and diversifying its economy. 2. Leveraging its geographical advantages as a trade hub As a major business and commercial hub between the East and the West, the UAE serves as crucial links to trade and investment worldwide by the Port of Jebel Ali and its two national airlines, particularly in collaboration with key markets such as India. 3. Favourable tax and residency policies Tax-free policies and golden visa schemes offer financial freedom and long-term residency for investors and top talents, thus attracting capital and talents around the globe. 4. Family office hub As a new global focus for family wealth management, Dubai becomes a magnet for global giants by actively developing its family office business. 5. Prosperous real estate market Dubai, well-known for its luxury properties and high-end projects, attracts a large number of investors around the globe. Its real estate market demonstrates strong growth potential as the transactions appear to be on a continuous upward trend. In conclusion, Dubai emerges as a preferred destination for global HNWIs due to its resilient economy, tax incentives, thriving property market and high quality of life. Notably, HKFA (Hong Kong Fiduciary Association Limited) has already established a presence in Dubai by offering HNWI clients in the Middle East and the rest of the world, professional Trust and financial advisory services to Middle East and global HNWI clients, helping them seize the investment opportunities in Dubai and realise their wealth appreciation. We welcome your inquiries.
KPMG: Hong Kong Reclaims Position Among Top Five Global IPO Venues
On October 3, 2024, according to KPMG’s latest Chinese Mainland and Hong Kong IPO Markets 2024 Q3 review, Hong Kong has regained its position among the top five global IPO venues. Hong Kong IPO activity displayed signs of recovery in the third quarter of 2024, with 45 listings and a total fundraising of HK$55.6 billion recorded so far in 2024. Both the amount of fundraising and the number of listings spiked 123% and 2% respectively compared to the same period last year. It is worth noting that the consumer markets sector led in terms of funds raised, attributable to the listing of a large Chinese home appliance maker, which alone attracted HK$ 35.7 billion, as Hong Kong’s largest IPO in the last three years. Hong Kong has regained its position among the top five global IPO venues in funds raised. As of the third quarter of 2024, global IPO markets raised a total of US$ 83.3 billion through 851 deals, reflecting declines of 21% in funds raised and 15% in the number of deals compared to the same period last year. Among them, the two stock exchanges in the US continued to lead the world in terms of fundraising, accounting for one-third of the total IPO funds raised worldwide. The National Stock Exchange of India ranked third, while the Hong Kong Stock Exchange and the Shanghai Stock Exchange ranked fourth and fifth, respectively. The KPMG report reflects investors’ renewed confidence in the Hong Kong IPO market, demonstrating that Hong Kong has retained its global financial and trading centre, which is still favourable for doing business.
What Does Donald Trump’s Election Win Mean for the International Capital Market?
Specifically, the U.S. presidential election has triggered more volatility in U.S. stocks, U.S. bonds, gold, and commodities. U. S. Treasury Bonds Due to the return of inflation and mounting U.S. budget deficit, as much as concerns about yields have grown significantly since October. Moreover, the yields continue to soar as Trump wins U.S. presidency election. Now, republican clean sweep will make it significantly easier to implement its fiscal policy in the U.S., which could further increase the yields. Longer-term trends will still base on economic fundamentals, while the U.S. government’s budget deficit will significantly affect the term spread. Currently, there is a widespread consensus that the U.S. Treasury yield curve may steepen. U.S. Stocks When short-term investor sentiment is high, tax cuts and easing regulatory have a positive effect on corporations, the market appears to be favourable to small-and mid-cap stocks, financials and value, etc. It’s worth noting that a continued rise in long-term U.S. Treasury yields may put higher pressure on U.S. stock market valuations. In particular, when inflation or even stagflation makes a comeback, both stocks and bonds may decline simultaneously. Gold Trump’s “America First” policy may escalate trade frictions, while his fiscal plan will further raise the U.S. fiscal deficit. From a long-term perspective, as a natural currency, gold is considered as a reliable investment over the long term. However, in some cases, overpricing gold prices is partly a result of some investors taking profits in the short term. Commodities Generally speaking, the most common commodities are energy sources like crude oil, etc. Trump’ preference for traditional energy sources may further increase the U.S. energy supply. From the supply and demand relationship, as there is no shortage of crude oil, the increase in U.S. production capacity may not necessarily be conducive to favourable oil prices. Virtual Assets Trump’s support for cryptocurrencies could push several digital assets such as Bitcoin to a surge in price. And he advocated for a strategic bitcoin reserve, positively influencing the cryptocurrency market. In fact, the price of Bitcoin hit an all-time record sparked by Trump’s election win rolls on.
