Hong Kong has been a favored family office hub in Asia, with political disruptions, and fiscal dragnets from the mainland – will they prevail?
Why are Family Offices important
Ultra-High Net Worth families in Asia have adopted the use of family offices to handle the financial and non-financial needs of the affluent; such as family governance, legacy preservation, education, charity, insurance, investing and oversight of family-owned business.
Family offices manage the world’s wealthiest families’ private wealth and offer a degree of separation between their internal affairs and the management of their assets.
They are set up to ensure that there is a smooth administration of their wealth and to mitigate any risks from external factors (e.g., market volatility, socioeconomic disruption etc.…) and internal factors – family member differences, divorces etc.…
A great number of family offices are concentrated in Singapore, London, Zurich and more recently Shanghai, Moscow and St. Petersburg. Last year UBS and Campden Wealth surveyed almost 400 family offices – predominantly Single Family Offices and identified that the majority of their investments were in equity (public and private) 19% and 17 % in real estate.
Read more: Where is the money? Asia will be the fastest growing wealth hub in 2025
Competing with Singapore as a Family Office Hub
Asia is now known to be home to a quarter of the world’s billionaires.
As wealth in Asia has had exponential growth, Hong Kong’s position as a family office hub has grown too.
Yet, of late Hong Kong has been hit by several blows from the US-China trade war, antigovernmental protests, the promulgation of national security law (NSL) and the latest announcement of China’s ‘wealth tax’ that will impact Chinese based in Hong Kong and beyond.
With the continuous rise in the number of HNWIs in Asia, will Hong Kong prevail as a family office hub or will disruptions in Hong Kong make HNWIs look to Singapore or even Tokyo as their family office hub?
At critical times such as these brought about by Covid19, governments are keen to attract more foreign direct investment and cashflow. Recently, Singapore introduced legislation governing the Variable Capital Company to draw in more FDI from institutional and private investors globally.
So, in order for Hong Kong to continue to present itself as fertile ground for family offices, it should adapt and offer family offices tax incentives, as suggested by Mr Ho, FSDC New Business Committee member last week.
Some potential changes that could be on the horizon include:
- tax incentives for UHNWIs;
- education incentives to lure professional talent needed to operate these family offices;
- streamlined financial licensing for family offices;
- a new service centre to enable the establishment of family offices in HK by foreign investors.
According to UBS, Hong Kong still remains their first choice for the majority of mainland billionaires despite its recent troubles, Hong Kong is also the first choice for many mainland China billionaires who set up family offices and invest in their wealth for the future.
We’ll keep an eye on this competition for a piece of the Asian family office ‘cake’ between the region’s wealth hubs.
