A White Paper co-authored by Private Wealth Management Association (“PWMA”) and KPMG China highlights measures to attract family offices, the introduction of a wealth management cross-border scheme in the Greater Bay Area and enhancement of the regulatory environment as ways to best develop the potential of Hong Kong’s private wealth management industry.
Altogether, the White Paper lists a total of 13 recommendations, which also cover areas such as talent development and technology to facilitate client on-boarding.
“Hong Kong’s private wealth management industry continues to grow, but the market is also undergoing rapid changes. It is important for us in the industry to work together to ensure Hong Kong maintains its competitiveness. The White Paper is developed to inform and inspire how we can continue to advance to become a leading regional and global private wealth management hub,” said Amy Lo, Chairman, Executive Committee of PWMA.
Peter Stein, PWMA’s Managing Director, said, “Through this White Paper, we hope to define a vision for the future of our industry and we look forward to working with key stakeholders to bring these recommendations to fruition.”
Entitled “Hong Kong: A Leading Global Wealth Management Hub of the Future,” the White Paper incorporates ideas and feedback from extensive interviews with a wide range of contributors, including existing industry participants, family offices, regulators and service providers. It also leverages information gathered as part of the Hong Kong Private Wealth Management Report 2018, published jointly by PWMA and KPMG China.
The White Paper lays out the PWM industry’s extensive contributions to Hong Kong’s overall economy. In 2017, the industry and its associated supply chain contributed between HKD24.6 billion to HKD30.0 billion in value added(1). The industry currently manages US$1 trillion in AUM(2) , and aspires to double the amount in the next 5 years.
In order to attract family offices – a key engine of growth for the PWM industry - to set up in Hong Kong, the White Paper offers 5 recommendations that will help promote the city and set the right tax environment. Regulator and/or government-led effort to coordinate industry business development in targeted geographies is seen as critical, along with an Investment Office Liaison Centre to guide family offices through the setting-up process locally.
Furthermore, the tax environment in Hong Kong should be reviewed in order to promote family offices and enable the city to compete on a level playing field with other PWM hubs. The White Paper recommends that the existing list of Offshore Fund Exemptions should be expanded and non-resident High Net Worth Individuals (HNWIs) should remain exempt from Hong Kong tax. In addition, the taxation treatment of Hong Kong trusts need to be modified in order to encourage their use as an investment holding option for HNWIs and family offices.
The PWM industry is also looking closely at the significant growth opportunities presented by mainland China, particularly through the Greater Bay Area initiative. The White Paper recommends implementing a new Wealth Management Orientated Cross-border Scheme making the Greater Bay Area a single wealth zone and a three-stage approach to develop it over time. The first stage will allow for onshore solicitation and marketing for PWM institutions based in Hong Kong (and vice versa); following this a second stage will see freer cross-border fund transfer whilst maintaining sufficient controls, and finally in stage three the scheme could be further widened/deepened to other areas in mainland China.
On the regulatory front, a PWM industry specific code of conduct is suggested to consolidate regulatory requirements and maintain appropriate levels of investor protection.
(1 )Value added is the same as GDP less taxes and subsidies and is commonly used by the Hong Kong government to assess economic impact.
(2) SFC 2017 Asset and Wealth Management Activities Survey.
A full list of the 13 recommendations is included in Appendix 1. The full report is available for download
https://home.kpmg.com/cn/en/home/insights/2018/09/hong-kong-a-leading-global-wealth-ma nagement-hub-of-the-future.html :