Hong Kong update with Clifford Ng, Zhong Lun
Already the largest wealth management hub in Asia, Hong Kong is on track to replace Switzerland as the largest wealth management hub globally by 2023, according to BCG.
Ahead of the IFC Awards on the 26th January 2022, Citywealth spoke to Clifford Ng, head of the private client practice at law firm Zhong Lun’s Hong Kong office to discuss the growing prominence of Hong Kong as a booking centre for clients, succession planning and compliance.
Citywealth: Tell us about your role and the firm.
Clifford: I joined Zhong Lun about 10 years ago and lead their private client team. At the time, it was quite revolutionary for a quick growing Chinese firm, as many international firms had shunned the practice area. It is becoming apparent that considerable wealth and business power is concentrated in private hands in Asia and elsewhere. The benefit we bring to clients is that by being a part of a Chinese firm, we can offer Chinese law capabilities in-house for onshore (inside Mainland) and offshore (outside Mainland) services.
Citywealth: Describe your typical client base.
Clifford: Our client base can be divided into two groups: China-based new wealth and rest of Asia older wealth. It’s a logical outcome given the evolution of the markets these past 30 years.
Since China opened its markets in the 80’s with hyper charged capitalism, massive wealth has been created. That wealth is more mobile, perhaps more than ever, but the geopolitics of the past five years have dramatically changed how that wealth and those who wield it are viewed. This is not just a China phenomenon but a global one – we are seeing the emergence of wealth tax and global minimum tax as governments try to cover their pandemic spending.
Citywealth: What’s currently on your desk?
Clifford: Succession planning of all kinds. Clients are not as mobile as they were in the “before” times and more rooted wherever they go. That has an impact on tax, succession and family laws that apply, and other factors that clients did not need to consider before.
Citywealth: The Hong Kong IPO route has created a new crop of Chinese UHNWs. Is listing in Hong Kong still the top choice? Why?
Clifford: The Hong Kong market has been a beneficiary of much of the tightening of the rules of Chinese listings in the US. I do not see that changing.
Citywealth: How has Hong Kong evolved as a hub for private wealth management?
Clifford: Hong Kong has become a wealth management gateway for Chinese clients. If offers these clients a good concentration of banks, experienced bankers and professionals in the private wealth arena to assist with their matters, and it also has a very advantageous tax regime.
Looking forward, Hong Kong will be even more focused on the Chinese market both for wealth from China as well as overseas funds investing in China through Hong Kong and the Hong Kong Stock Exchange.
Citywealth: Are the next generation involved in wealth planning?
Clifford: The “next gen”, if we are referring to those in their 30’s or lower, are rarely involved. Many want to pursue their own careers and interests, and are often encouraged by their parents to do so. Unfortunately, in many instances the ‘family business’ is seen as a responsibility – the burden of which outweighs the benefits.
Citywealth: What do clients need to know about compliance and enforcement?
Clifford: Two things:
Get advice from the right advisors. It astounds me how often clients have misconceptions on the law because they heard it from a friend or over dinner. Do not expect the advisor you went to for real estate deals for the past 20 years will know how to protect your assets if your child gets married.
Deal with it. Governments need more money and have the power of big data and information exchange to enforce laws. Hackers and media are also constantly hunting the rich and powerful.
Citywealth: What opportunities and challenges have emerged as a result of the COVID-19 pandemic?
Clifford: The pandemic was and continues to be a giant standardized exam for everyone around the world. Our biggest lessons from the pandemic which we are still learning daily:
1. Shit happens (and happens unexpectedly or else it wouldn’t…).
2. One cannot rely entirely on governments even on these big issues.
Our clients are rethinking their priorities on how they allocate their resources. Their most important resource is time and they are rethinking how they want to spend their time, where and with whom. Everything else flows from there. We have to help them reassess their current structures in the context of these changes and transition them to the post-pandemic world. That has implications on immigration, tax, matrimonial and divorce, wills and estate as well as how existing structures stand up to these changes.