Hong Kong sees a strong growth in wealth preservation planninng industry
15 April 2015
Michelle Chow, Consultant at Withers, comments on the differences in wealth preservation planning in China and Hong Kong.
Where does the wealth of Chinese UHNWs come from, i.e. what kind of businesses?
Like many UHNW individuals in Hong Kong, the patriarchs are typically in their 70s and 80s. Most of them did not inherit any wealth from their ancestors. My Chinese and Asian UHNW clients' money comes from working from a young age either in a factory or a small business and building their wealth when the economy took off in 1960s and '70s. Many of them either invested in or started their own real estate development business as the population grew and demand for better housing increased. Land became expensive too. We also have Chinese and Asian clients in shipping and manufacturing businesses.
Do you see any difference in succession planning in Asia that are different from the Western world?
I note two differences in succession planning between China and Hong Kong. First, in China, where the patriarch came into wealth late in life, his sons may not be well-educated and capable of succeeding the ownership in the family business. The patriarch would therefore consider releasing the business or donating a significant portion to help the under-privileged in China, having suffered from poverty as a child.
However, In Hong Kong, patriarchs are more protective of their business empire and typically would like the eldest son or male descendants to take over. In-laws are rarely allowed into the family business.
What do the Chinese clients buy in Europe, especially in London, and what do you think is the size of this investment?
Real estate of significant size and prime location remains a favourite option in London.
Are there any trends you’ve seen in Asia relevant to the private wealth market?
A strong trend is wealth preservation planning in case of divorce in Hong Kong: more parents are urging their children to do pre-nups, especially those families whose main assets are operating family businesses. Also, I am seeing an increasing interest in philanthropy in the younger generations. I notice that many private banks in Hong Kong are putting more resources into this area to cater for their clients' needs and to promote good citizenship. Philanthropy is definitely a growing area. Almost all my wealthy clients are doing or plan to do some charitable projects.