Family offices set to reshape wealth management landscape

HK's private wealth-management business is at a turning point where multifamily-office players seek to continue playing a pivotal role in shaping the industry's outlook. Oswald Chan reports from Hong Kong.

The Hong Kong Special Administrative Region government unveiled its policy road-map document in March that outlines development of family-office businesses in Hong Kong in eight strategic directions, including offering tax concessions and other financial incentives, nurturing professionals, promoting art storage facilities, developing philanthropy, and expanding business networks.

The objective is to help no fewer than 200 family offices establish or expand their operations in Hong Kong by late 2025.

"I believe we are at an inflection point in our sector, a transformative moment that promises to reshape the landscape of wealth management and bespoke financial services," Raffles Family Office Group Founder and CEO Kwan Chi-man says.

"We have received many inquiries from our pan-Asian clients and some of the biggest family offices in Europe who have shown immense interest in Asia's private wealth development against the backdrop of macro-economy development and wealth transfer," he says.

"This is because the recent banking crises have shaken the ultra-wealthy around the world, prompting them to take a hard look at their risk-management strategies and explore a broader range of investment options. The crises have forced them to recognize the importance of diversification, including where and how they choose to hold their wealth."

Hong Kong and Singapore have become increasingly popular destinations for the ultra-wealthy to steer their assets.

Kwan says ultra-wealthy clients are now more inclined to use the investment-holding vehicles of multifamily offices to facilitate their investments because they can share the same goals with clients, and provide a nimble and flexible investment mandate, as well as access to diverse investment options.

Hong Kong-based Raffles Family Office Group, with branches in Beijing, Shanghai, Singapore and Taipei, is a multifamily office with a full suite of wealth-growth and wealth-preservation solution services for ultrahigh-net-worth individuals, providing advisory expertise and sourcing financial products from the world's leading financial institutions.

Kwan says it is vital for the SAR to become a more-inclusive and full-fledged financial center in Asia where family offices can fulfill their diverse interests in education, philanthropy, art appreciation, financial technology and virtual assets, as well as private equity businesses. "It is important to note that our industry's ecosystem relies on more than tax incentives."

The Legislative Council passed the Inland Revenue (Amendment) (Tax Concessions for Family-owned Investment Holding Vehicles) Bill 2022 in May, whereby eligible family-owned investment holding vehicles managed by single-family offices in Hong Kong are given profits tax concessions for their assessable profits earned from qualifying and incidental transactions.

Kwan says Hong Kong should leverage its transparent legal system, mature regulatory framework, superconnector role, and talent tools to enable family offices operating in the city to cater to the evolving demands of next-generation investors, who have a different investment appetite and a different view of risks and returns.

"Next-generation investors have growing interest in digital assets. New policies like the e-HKD (electronic Hong Kong dollar) pilot program represent proactive and strategic visions to enable Hong Kong to continue to prosper and thrive as a global financial hub," he says.

Last month, the Hong Kong Monetary Authority launched the e-HKD pilot program, with 16 firms chosen from the financial, payment and technology sectors to participate in 14 pilot projects covering six categories of potential e-HKD use cases, including full-fledged payments, programmable payments, offline payments, tokenized deposits, settlement of Web3 transactions, and tokenized-asset settlements.

The Hong Kong Securities and Futures Commission's virtual-asset trading platform regulatory regime took effect on June 1, enabling local retail investors to access virtual-assets trading provided by SFC-licensed platforms in the second half of this year.

Kwan says that clients from the Chinese mainland and Southeast Asian countries are having complex needs for new-wealth and generational-wealth transfers. "Our strategic emphasis is on broadening our investment platforms to encompass diverse alternative options, such as real estate, digital assets and private equity. We have hired key people in our Hong Kong office this year to meet the surging demand."

With the accelerated economic development of the Guangdong-Hong Kong-Macao Greater Bay Area, the city cluster provides a wealth of opportunities for family offices to make direct equity stake investments in high-growth industries.

In September 2022, the SAR government and the Qianhai Authority of Shenzhen jointly promulgated "18 measures for supporting the linked development of Shenzhen and Hong Kong venture capital investments in Qianhai" to promote Hong Kong and Shenzhen as an international venture-capital cluster.

Kwan says the market expects the cross-boundary wealth management connect program between Hong Kong and the mainland to give residents in the Greater Bay Area access to global equity products. The rapid growth of industries like high-tech, telecommunication, healthcare, life sciences and new energy in the Greater Bay Area should provide an array of investment opportunities for family-office clients.

According to the UBS Global Family Office Report 2023, 45 of the interviewed Asia-Pacific single-family offices had the highest allocation for equities and developed market fixed income. But they still favor hedge funds, private debts, and private equity investments in technology, healthcare, information and communications, real estate and rental leasing to diversify risks and boost long-term returns. The report surveyed 230 single family offices worldwide with a combined net worth of almost $496 billion.

Contact the writer at oswald@chinadailyhk.com