Family Disputes and Loss of Control Weigh Heavily on the Wealthy as They Consider Succession Planning

Jersey Finance’s latest research into the challenges faced by China’s high net worth individuals reveals gaps in the understanding of the risks involved in failing to address key succession planning issues.

HONG KONG: Jersey Finance’s latest research identifies the key challenges facing wealth management practitioners working with China’s wealthiest individuals as the time it takes to get clients comfortable with the concept of structures such as trusts and the responsibilities involved, as well as what it means to cede control of their assets.

The research, which has been published as a thought-leadership paper, How to service Chinese wealth as it goes global, highlights the practitioners’ view that high net worth (HNW) and ultra-high net worth (UHNW) individuals in Mainland China are failing to address a number of challenges which could cause longer-term pressures on their succession plans.

Nearly half of respondents (47%) say legacy planning is the key consideration for Mainland Chinese families, but 41% of respondents say family disputes are most likely to derail estate/succession planning. Nearly two thirds (59%) say misconceptions about issues and solutions are a top factor holding them back with wealth transition. A large proportion of respondents (88%) say the biggest misconception Chinese families have with wealth structuring is a loss of control.

The survey concludes that financial advisers should be targeting the next generation, many of whom have been educated overseas and who tend to be more understanding that wealth preservation goes beyond investing assets and should be part of developing an overall business succession.

In line with this, advisers need to be aware of and comply with new global standards on regulation. Changes include the implementation of the Common Reporting Standard (CRS) and amendments to individual income tax laws and possible estate duty, as well as reforms to immigration programmes and property ownership taxation rules (such as in the UK and Australia).

Geoff Cook, CEO of Jersey Finance said: “Succession planning is a thorny issue that can sometimes take years for a wealthy individual and their family to address, even though it is one that will not go away.

“In recent years there has been an explosive growth in the understanding of wealth structuring and transition among China’s HNWs, which has led to an increased demand for the services of wealth management practitioners. As a consequence, Jersey has seen an increased demand from those practitioners for the full suite of wealth management services needed to serve the unique needs of Chinese wealthy individuals and to capitalize on market opportunities.”

In October 2016, Jersey Finance and wealth manager Hubbis, conducted detailed research into how the regulatory and cultural landscape was affecting wealthy Chinese and their approach to succession planning, wealth transfer and offshore investing. This research, which was conducted in May, collected the views of more than 60 practitioners working in the wealth management industry in Hong Kong, Singapore and Mainland China via an online survey.

The complete findings of “How to service Chinese wealth as it goes global” is available here.

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