Hong Kong will need to step up its efforts to streamline regulations on family offices amid competition from Singapore and a series of political and economic setbacks in recent months, according to bankers and accountants.
The matter is gaining urgency after the recent introduction of a wealth management scheme to facilitate movement of capital across the border. A recent surge in stock prices on mainland bourses have also generated large fortunes for companies, adding to a horde of first-time billionaires minted in 2019.
Among others, a clearer licensing requirement on family offices will help attract more billionaires to the city, according to Rex Ho, financial services tax leader at PwC. Pictet, a Swiss private bank, is keen to see better organised rules for family offices.
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“For Hong Kong to compete, the government should further streamline its regulations to make it easier for family offices to set up here,” said Claude Haberer, chairman of Pictet Wealth Management Asia. “Singapore will be a major rival” given its political stability and cost advantages, he added.
An active stock market, rule of law and free flow of capital and information have made Hong Kong a natural choice for wealthy mainland families to set up offices here, he added.
Even so, Hong Kong’s allure has suffered several knocks from the US-China trade war, anti-government protests, the promulgation of national security law (NSL) and the recent shocker involving China’s tax dragnet that is said to ensnare its citizens based in Hong Kong and overseas.
The Securities and Futures Commission said on Sunday it was not aware of any aspect of the NSL which would affect or alter the ways in which firms and listed companies originate, access, disseminate and send financial market and related business information under the regulatory regime it administers.
The Hong Kong government has taken measures to bolster its case. For example, the Legislative Council earlier this month passed a law to allow companies to set up as limited partnerships, a popular format for family offices. InvestHK, a government agency, last month introduced a portal to provide key information for family offices.
Ho of PwC, who is a committee member of the Financial Services Development Council, said details on licensing requirements from the SFC and more promotional works will support the city’s ambitions.
Despite its recent troubles, Hong Kong is the first choice for many mainland billionaires – especially those across the border in Greater Bay Area such as Shenzhen – to set up family offices to invest their wealth and establish succession planning, according to UBS.
“Many family-office owners are entrepreneurs who have factories or other businesses in the GBA cities,” said Koh Liang Heong, co-head of UBS global family office for Asia-Pacific. “Many of these companies are also listed in Hong Kong and it is natural for them to manage their wealth out of Hong Kong.”
Koh, who recently signed up a “big client” from Shenzhen, said Hong Kong’s proximity to mainland cities in the bay area is why Hong Kong is a popular place for family offices. It takes only 14 minutes by high-speed train to travel between Hong Kong and Shenzhen and 48 minutes to Guangzhou.
The family offices served by UBS in the Asia-Pacific region have assets under management exceeding US$500 million on average.
The bay area, with its nine mainland cities, is among the fastest-growing area worldwide in recent years. It had an average annual GDP per capita growth rate of 6.09 per cent during the five years to 2018, according to government data compiled by CPA Australia.
Hong Kong, Shenzhen and Guangzhou have a combined 196 billionaires, and are in the top 10 cities with the highest density of billionaires in the world, according to Hurun Research Institute 2020.
“Hong Kong is an ideal place to serve these family offices as it has an active capital market,” Koh said. “For Hong Kong to continue to become a hub for family offices, it should continue to offer attractive tax benefits and further expand investment opportunities through the opening up of the mainland markets.”
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