Asia’s wealth management hub
Consistently ranked as one of the top global asset and wealth management centres by the Global Financial Services Index — the world’s most authoritative comparison of the competitiveness of the world’s leading financial centres — Hong Kong today has the infrastructure and the talent to maintain its leadership position in the years to come.
“Hong Kong’s rule of law, its independent judiciary and mature, transparent regulatory environment are the backbone of its success as an asset and wealth management centre,” says Jeremy Lam, partner and head of financial services at the Deacons law firm in the city. “Hong Kong’s international talent base … is also a key component in Hong Kong’s success.”
According to data collated by the FSDC, Hong Kong boasts the highest concentration of investment professionals, advisory businesses and private banks of any Asian city and more than 70 of the world’s 100 largest banks maintain a presence. More than 270,000 people were employed in Hong Kong’s financial sector by 2020, the FSDC says, accounting for some 7 per cent of the total workforce. Hong Kong’s asset and wealth management sector managed US$4.55tn by the end of 2021.
According to Amy Lo — chair of the executive committee of the Private Wealth Management Association in Hong Kong; co-head, wealth management Asia-Pacific, at UBS Global Wealth Management, and head and chief executive at UBS Hong Kong — a 2021 survey jointly held by the PWMA and KPMG found that Hong Kong’s private wealth management sector recorded net fund inflows of HK$656bn (US$83.6bn) in 2020 alone, leading to assets under management growth of 25 per cent to HK$11.3tn (US$1.4tn).
Lo says Hong Kong is home to one of the largest clusters of ultra-high-net-worth individuals in the world. “They represent a high concentration of family wealth, with most of them still being first generation, indicating an increasing need for wealth and succession planning in coming years,” she says.
Where China and the world meet
Asia has witnessed the world’s fastest family wealth accumulation in recent decades and Knight Frank’s 2022 Wealth Report says the region will see the fastest growth in UHNWIs — defined as people with net assets of over US$30mn — in the coming five years, representing a jump of 33 per cent compared with a predicted global average rise of 28 per cent.
Much of this jump is expected to stem from southern China’s ambitious Greater Bay Area (GBA), which is a 56,000 sq km integrated economic zone comprising 11 major cities, with Hong Kong playing a starring role. The GBA is already home to more than 86mn people with a combined gross domestic product of US$1.88tn, making it the world’s wealthiest region in 2022.
“Hong Kong is not only a gateway for international investors to access vibrant investment opportunities in mainland China, but also a unique market with huge GBA opportunities,” says Lo. “Hong Kong’s solid and robust legal network further added its attractiveness to local and foreign professional financial talents and experts.”
To meet the demand for cross-boundary wealth management and investment services from GBA residents, in 2021 Hong Kong introduced its GBA Wealth Management Connect scheme, making the city a go-to hub for wealthy investors from the GBA as they aim to diversify their portfolios globally.
And as China has moved to open up its financial markets, international investors have tapped into the rich potential of the mainland economy. The Stock Connect programme allows Hong Kong and international investors to access the Shanghai and Shenzhen stock markets and qualified mainland investors to tap the Hong Kong bourse. More than 2,000 eligible shares in Shanghai, Shenzhen and Hong Kong are covered by the scheme, according to Hong Kong’s Securities and Futures Commission.
Similarly, Hong Kong’s Bond Connect scheme has approved more than 2,700 accounts for institutional investors from 34 jurisdictions since its 2017 launch, giving them convenient access to the mainland China bond market via Hong Kong, according to Hong Kong Monetary Authority data.
“The rapid increase in wealth within the mainland has effectively positioned Hong Kong as China’s offshore financial services centre,” says Lam. “There is also an increasing focus around implementing the transition of wealth to the next generation, and this requires significant planning across multiple areas ranging from tax, inheritance planning, asset and wealth protection, education and philanthropy.”
Flexibility in changing times
According to the FSDC, other moves are afoot to cement Hong Kong’s position, with the city exploring new fund structures, tax concessions, streamlined processes and subsidies to help service companies — including real estate investment trusts, private equity firms and family offices — prepare for the future.
Lo says she is seeing a rise in the importance of family offices in Hong Kong, adding that the FSDC has made practical recommendations to help the industry attract these operations to the city.
Lam and Lo agree that the sector will face immediate challenges, however, with Lam citing the tense geopolitical environment, the perennial issue of sourcing talent, and the need for “Hong Kong’s key regulators to strike the right balance between investor protection and market innovation”.
Lo highlights the ongoing task of industry digitalisation, and the need to embrace innovative technological solutions. “As financial professionals, we need to be agile and be able to adapt quickly,” she says. “Trends such as environmental, social and governance, or ESG, the new economy and disruptive technologies have been gaining popularity among investors in the past few years.”
