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The New World of Transparency that Asia’s HNWIs Must Today Inhabit

The New World of Transparency that Asia’s HNWIs Must Today Inhabit

The diverse needs of wealthy Asian Families as they consider and then execute legacy and succession planning are fraught with many emotional, family-specific and also technical considerations. A panel of experts assembled by Hubbis in Hong Kong debated the whys and wherefores and how insurance solutions can play their part.

Executive Summary

The new era of transparency and compliance is here to stay. The days of hiding assets in some esoteric structure in an exotic location and hoping no one will find out are well and truly over.

Asia’s high-net-worth individuals (HNWIs) and their families must be made aware that they need to be more open with their wealth management and other advisers in order that those professionals can help them devise the best solutions for asset protection, estate transition and more broad succession planning. Structures and trusts can help achieve these goals, often supported by tailored insurance solutions that both protect assets and achieve liquidity in the event of a death.

The diverse needs of wealthy Asian Families to plan and execute legacy and succession planning are fraught with many emotional, family and also technical considerations. Moreover, Asia’s wealthy are increasingly global in their spread of businesses, property, investible assets, lifestyles and family members, all bringing more complexity and potential pitfalls to the process.

The thinking surrounding the needs of wealthy families in Asia as they seek structures and processes to transition their wealth to the next generations have become, by necessity, far more sophisticated due to the proliferation in recent years of new regulations and often arduous compliance requirements. Transparency is no longer a vague concept, it is an essential instrument without which the best-laid plans will go awry, torn asunder by the authorities here or there, and sooner or later.

Structures put into place that might appear to have as their primary objective the avoidance or even deferral of tax obligations in any jurisdiction are now shunned by the private bank and wealth management community, or at least they should be. Any planning conducted for HNWIs and their families must be above board and transparent, with a clear and distinct non-taxation purpose. For example, succession planning and asset protection are ‘bona fide’ reasons.

Each family is different, everyone within each family is unique, so a core challenge - possibly even a major responsibility - for the private bankers and wealth advisory community is to be bold enough to raise matters of life and death with the founder patriarchs or matriarchs, as well as with the younger generations. And then they must be imaginative and competent enough to structure transparent and regulatory compliant structures that will withstand the possible inspection of authorities in any of the relevant jurisdictions in which those families operate, reside or hold assets.

But to do this effectively, the bankers and other wealth management advisers must be highly sensitive to the cultures in which they operate, and the feelings of the individuals and the families concerned. This is far from easy, requiring the advisers to almost think like psychologists as they approach these delicate matters.

Hubbis invited a group of experts to a private, off-the-record discussion in Hong Kong to discuss precisely these topics and to debate how, for example, to incorporate insurance solutions into broadly-based HNW family estate and succession planning.

The thinking surrounding the needs of wealthy families in Asia as they seek structures and processes to transition their wealth to the next generations have become necessarily more sophisticated due to the arrival in recent years of reams of new regulations and compliance requirements. Transparency is no longer a vague concept, it is an essential instrument without which the best-laid plans will go awry, torn asunder by the authorities here, or there, and sooner, or later.

The discussion began with one guest recounting the parable of a typical mainland Chinese family. Having built up a successful manufacturing enterprise, they sent their oldest son to America a decade ago to expand the business there and he has subsequently secured a US passport. They also have two daughters for whom the father bought properties in Hong Kong.

The bank which has been working with the family on wealth management has so far focused only on the investible assets the family has with the bank, the expert continued. The father wants to follow the Chinese tradition of leaving all the assets to the eldest son, but if he inherits everything then the entire business empire will become subject to American tax. Further complicating the picture is the son wants a more rapid expansion plan, so he wants to sell the Hong Kong properties and reinvest in another factory.

Courtesy of hubbis.com

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