UBS launches family trust solutions as wealth rises

UBS (China) Ltd launched onshore family trust solutions for affluent Chinese clients on Wednesday, becoming the first foreign bank in China to provide such services.

"We are glad to become the first foreign bank to launch onshore family trust services in China, providing local clients with solutions based on our wealth management principles of liquidity, longevity and legacy," said Zhang Qiong, president and head of wealth management at UBS (China) Ltd.

The launch of family trust solutions is an attempt to meet explosive demand for them in China, UBS said.

The company, wholly owned by Swiss banking giant UBS AG, will provide advisory services for high-net-worth households to help them pass down family wealth and cooperate with third-party trust companies to offer family trust solutions that integrate wealth preservation and transfer.

A family trust refers to a specific type of trust that families can use to create a financial legacy for years to come.

The business of family trusts has long been one of UBS' core overseas offerings, and the company hopes to leverage such expertise to serve Chinese clients, Zhang said.

"Thanks to China's steady economic recovery, there has been continued growth in the number and wealth of high-net-worth Chinese households that are increasingly interested in family trusts," she said.

China's emerging family trusts business segment has seen explosive growth in recent years, especially as the COVID-19-related uncertainties turbocharged high-net-worth families' demand for wealth preservation.

The wealth managed by China's family trust industry has surged by 80.29 percent year-on-year in 2020.

As at the end of June last year, 9,049 family trusts had been set up in China, managing assets worth 186.35 billion yuan ($28.8 billion), data compiled by China Trust Registration Co Ltd showed.

Their rapid growth may sustain as the wealth of affluent Chinese families continues to grow. According to the China Family Trust Report released by China Merchants Bank, the group of Chinese people willing to set up a family trust may top 600,000 by the end of 2023, compared with last year's roughly 240,000.

The group is estimated to have 10 trillion yuan worth of assets that can come under the management of family trusts by the end of this year, compared with 7.5 trillion yuan in 2020, the report said.

A regulatory environment that is favorable for the development of family trusts and has leveled the playing field for domestic and foreign players also drew the participation of the Swiss banking giant.

"Although China is still in the process of perfecting regulations and rules over the family trust industry, we have found that domestic and foreign industry players are treated equally without differences in regulation," Zhang said.

China has rolled out a series of laws and regulations to promote healthy development of family trusts. For instance, the Civil Code, which took effect earlier this year, has strengthened the legal framework for the industry, experts said.

By far, the business of family trusts in China is dominated by a few domestic firms. CCB Trust Co Ltd and three other domestic players have combined to take up more than 60 percent of market share, in terms of assets under management, last year, according to China Trust Registration Co Ltd.

Qi Xiaohan contributed to this story.