“For the entrepreneur, Asia is an easy proposition”
Vincent Duhamel, Head of Asia at Lombard Odier, talks about his experience of rise of UHNW clients in China.
Is the uncertainty in Europe causing your clients to move or seek to start their businesses in Hong Kong?
There are a number of factors at play in Europe with regards to regulations, taxation and the debt burdens of certain EU nations. The sluggish EU growth picture has also added to the push factor prompting more Europeans to settle in Hong Kong and Singapore in recent times. This has been great for Hong Kong. Anecdotally, the trend has been palpable in the restaurant scene, with a new proliferation of French and Spanish restaurants that has been very exciting. The ease with which one can set up a business has provided additional incentives: it literally takes 2-3 days to do this in Hong Kong, something unheard of in Europe. In Hong Kong, income tax runs at 15% versus more like 50% on average in Europe. In addition, Asia is still growing whereas in Europe, you have the high cost associated with setting up a business plus low growth. For the entrepreneur, Asia is an easy proposition.
Where does the wealth of Chinese UHNWs come from, i.e. what kind of businesses?
Many of the Chinese UHNW individuals with whom we deal are successful entrepreneurs who have created their own businesses not only locally, but globally. They have already expanded outside of China. They have typically done IPOs in New York, London or Hong Kong and have both local assets in renminbi and global wealth. For us as a global asset manager and private bank, we support Chinese clients with the management of their global wealth as we are not authorised to deal with the renminbi and because of our global platform.
Do you see any differences in succession planning in Asia that are different from the Western world?
Amassing wealth in Asia compared with Europe remains relatively new, with many questions on the future control of assets still on the rise for first generation entrepreneurs. Many in the first generation may not feel more comfortable with common trust structures while the younger second generations are typically more open minded when it comes to succession issues. For them, they are open to thinking about long-term risk protection and diversification on a global basis. Asia is not where Europe is in terms of the approach to succession planning yet, but it will get there.
What do the Chinese clients buy in Europe, especially in London, and what do you think is the size of this investment?
Our observation is that Chinese clients like real estate and particularly trophy properties in landmark cities such as London and Paris or chateaux in France or villas in Italy. They do this probably because of their appreciation of these countries’ heritage and legal systems.
Are there any trends you’ve seen in Asia relevant to the private wealth market?
There is clearly a growing trend away from the pure execution, transaction-based type of private banking approach — which has proved to be expensive and disappointing in terms of delivery ‚Äì to one based on discretionary portfolio management (DPM), whereby wealth is managed as a fiduciary on behalf of private banking clients for long-term gains.