On Wednesday 17 July, Robert Moore, Jersey Finance’s Director – UK, hosted a breakfast roundtable at the offices of Stephenson Harwood, attended by a small group of invited London-based intermediaries. Focussed on private client financial services in Asia, the event began with updates from Maria McDermott, Market Development Consultant and Yiow Chong Tan, Director – South East Asia, followed by an insightful roundtable discussion on trends and key themes in the region.
The Asia private wealth market has experienced significant growth previously, however due to an expected outflow of High-Net-Worth Individuals (HNWI), it could provide the region with challenges. Succession and next-generational wealth management in this region is becoming increasingly prominent as wealthy families plan for the transfer, safety and preservation of their assets. These are presenting opportunities for UK and Jersey advisers to engage in the Asia market and recommend Jersey as a strong jurisdiction for legacy wealth.
Mass Millionaire Migration: 15,000 Wealthy Expected to Leave China
Maria commented that the economy in Mainland China has not changed greatly over the past twelve months, the GDP forecast has been upgraded but was below expectations. China’s ruling Central Committee Party are meeting for its third plenum which is significant as the third has historically resulted in policy change. This could prove interesting to see how any prospective changes could stimulate the economy.
Looking at private wealth outward investment in the region, a recent statistic reported that China is likely to see an outflow of 15,000 millionaires and billionaires, exceeding all other nations worldwide. This is not positive news for a property sector that is still experiencing a challenging time. Recent market data indicates a significant downturn in the housing market, with a 91% majority of major cities experiencing a decline in property values. This trend presents a persistent challenge, suggesting a pressing need for government strategies to reduce dependence on the real estate sector for economic stability.
Growth Slows in Southeast Asian Markets
Yiow provided the attendees with an update regarding the Malaysia and Singapore private wealth sectors. He highlighted that while the Singapore family office market still presents prospects for Jersey, the expansion rate of Singapore’s based family offices is experiencing a gradual decrease when compared with the growth from 2022 to 2023, as a result of the MAS’s tightening of the application and requirements for family offices following the crackdown of the S$3 billion money laundering case last year.
On the ground in Singapore, HNWIs are questioning the need for a family office and reviewing the criteria of the associated tax incentives within the region. This has resulted in the applications for family offices in Singapore to drop, which could in turn, create a window of opportunity for Jersey.
Singapore has been a strong and robust jurisdiction for funds and the double tax treaty between Singapore and Jersey will continue to work to Jersey’s advantage which is anticipated to gain increased traction in the Jersey Private Fund regime, particularly for funds for asset classes which are not within the scope of MAS’s definition of Designated Investments eg. virtual assets, luxury lifestyle assets such as art pieces, jewelleries, yachts, automobiles, watches etc.
Yiow highlighted that he is seeing a rising trend for Ultra-High-Net-Worth Individuals (UHNWIs) investing in UK properties.
Discussions and questions around the table
Wealth on the Move
As the region is experiencing significant migration of HNWIs and UHNWIs, this correlates with the relocation of family offices, a trend that has been observed among the participants.
One attendee has recently been engaging with a large US organisation specialising in family office and wealth management services, who has seen an increase in enquiries about establishing structures from distinguished Asian families over the past six months.
Capital is flowing more towards the US, UK, and Europe and it was noted that a Mainland Chinese investor consulted with a UK advisor to set up a fund aimed at investing in European property via a Channel Islands framework. This trend highlights a growing interest in diversifying investments across international borders.
Hong Kong as a private wealth jurisdiction
Although Hong Kong has been highlighted as a strong location for Family Offices, growth in this area has not materialised as anticipated. This is potentially a result of the COVID-19 impact and slow recovery time.
Families are utilising Hong Kong to set up their structures and avoid the long waiting time in Singapore. Previously, these families have migrated to Singapore, however some families are now choosing to stay in Hong-Kong as the infrastructure is meeting their current needs.
Typically, in Hong Kong private wealth structures have not been established for facilitating outbound investments. Instead, jurisdictions like Jersey have been a preferred option. This trend is now being seen in the corporate sector, highlighting a trend between private and corporate investment strategies.
“Is China’s Attractiveness on the Rise?”
The discussions around the table highlighted how China is becoming more appealing, with noticeable changes designed to draw more people to the area. For example, the change in company law offers international investors more protection and there is a plan to increase foreign capital into China via different sectors.
One interesting trend seen by some of the attendees is the continued investment into mainland China through the Middle East.
The Future of Southeast Asia
An attendee who visited Malaysia recently shared with the group that there was a lot of talk amongst the Malaysian private wealth community for a Malaysian family office regime to be implemented. Professionals are seeing this as a huge opportunity and will create jurisdictional competition regionally.
Thailand’s market for capital outflows is incredibly active, with significant interest in UK real estate as a primary investment focus. A recent visitor highlighted how these opportunities reflect the vibrancy of Thailand’s economy.
Similarly, Vietnam presents a promising market, especially in the real estate sector. Elite families in Vietnam are increasingly looking to diversify their investments by exploring property opportunities outside the region.
Yiow also pointed out that he sees vast private wealth and funds opportunities in Malaysia and Thailand. In particular, Malaysian and Thailand investors are investing heavily into UK property investments.
Succession and Transition: Managing Next-Gen Wealth in Asia
The transition of wealth was a key area of conversation. In recent years there has been a noticeable increase in discussions on wealth transition and advisers are encountering more conversations with the Gen X community in respect of risk management, asset protection and family security.
Increasing sophistication, differing values, family mobility and effective wealth management is creating discussion around international wealth planning. This carries potential benefits for Jersey, as a leading International Finance Centre, supporting advisers with cross-border complexities in their move away from Singapore.
Capacity was highlighted as a potential problem, particularly in Hong Kong. The absence of strong family governance, communication, transparency and education is having an impact on effective succession planning. Advisers are encouraging families to have open discussions on asset protection and incorporating effective planning to minimise potential issues in the future.
Asia’s Fintech and Fund Landscape
There are promising opportunities for funds and investments, particularly in booming sectors such as life sciences, technology, and digital health, which offer companies a pathway into the Chinese market. This trend has attracted Middle Eastern investments, especially through Limited Partnerships, as these regions diversify away from oil.
In Singapore, tax advisers have observed a slowdown in the establishment of new family offices and a rise in the formation of Singapore Variable Capital Companies (VCCs) or VCC sub-funds. In some cases, family offices who are due to renew their tax incentive status (which are valid for up to 5 years) under more stringent current requirements are considering dissolving their family office structures and working with Singapore regulated fund managers to set up VCCs or VCC sub-funds to manager their AUM.