Asia continues to generate wealth at an impressive pace, even as headwinds continue to moderate economic growth. According to HSBC Global Research, wealth in Asia excluding Japan could outstrip the U.S. by 2025. The number of millionaires across Asia is projected to jump from roughly 30 million to over 76 million by 2030, with Singapore expected to overtake Australia’s millionaire population.
However, managing these expanding pools of wealth has become more complex due to a confluence of factors, from the effects of the pandemic and inflation to heightened geo-political tensions and recession risks.
In particular, fears over stagflation have adversely impacted both bond and equity markets in the first half of 2022. Rising consumer prices have forced central banks around the world to tighten monetary policy, resulting in challenging conditions for bonds. Equities, too, have been hit by concerns over a slowing economy and the threat of inflation denting the bottom line.
“This complexity impacts our clients, their current investments and long-term wealth goals, so we have been focused on providing the advice and services they need during these challenging times, both with respect to managing the risks and taking advantage of opportunities,” says Annabel Spring, CEO, Global Private Banking and Wealth, HSBC.
In light of these challenges, clients are currently focused on increasing the resilience of their portfolios, as well as managing their legacy and succession plans. A younger
generation of affluent investors is also demanding mobile convenience when it comes to managing their wealth, and incorporating environmental and social purpose into their investment decisions.
In terms of diversification, investors should seek out alternative assets such as private equity or credit, hedge funds and commodities to potentially reduce the overall risk in a portfolio, and to uncover uncorrelated opportunities.
Clients should also consider building multiple income sources, with cash flows that can reset higher in the event of rising inflation. Such income streams include infrastructure, private credit, real estate, floating rate bonds and dividend growers. Finally, investors should favor the stocks of high-quality companies that have the capacity to maintain profit margins even as costs rise.
“In an uncertain world, it is wise to build resilient portfolios to weather the likely bouts of volatility and not to ignore the wide range of opportunities,” explains Siew Meng Tan, Regional Head of Global Private Banking, Asia Pacific, HSBC.
“Our investment strategy specifically focuses on quality earnings, resilient income and multi-asset diversification to dampen market volatility and help clients to stay invested and capture opportunities. A focus on quality means selecting companies and areas with the most resilient fundamentals. Looking at income allows investors to take advantage of increased yields and helps mitigate market volatility. Lastly, diversification helps uncover opportunities in alternative assets.”
Sustainable investments are another way to build long-term resilience and capture future growth opportunities. On this front, the bank is able to deliver innovative ESG (environmental, social, and governance) solutions to its clients. These include, among many others, a biodiversity thematic discretionary mandate, sustainable core multi-asset solutions and private equity impact funds.
Leveraging a Global Footprint
Investors should not only pursue asset class diversification, but also geographical diversification, in an effort to reduce portfolio risk. With its global footprint, HSBC is well-positioned to offer international opportunities and capabilities that span numerous markets around the world.
“Our international network and connectivity across the Group are particularly valuable for our ultra-high net worth (UHNW) clients, whose complex needs and objectives are typically global in scope and span personal, family and business interests,” says Spring.
HSBC has a unique client servicing model, where a primary relationship manager leads the global coverage team of relationship managers across Global Private Banking (GPB) offices to look after clients’ global portfolio and needs. With the client’s consent, HSBC is then able to work closely with the client and their representatives globally.
“We onboarded a new client in Hong Kong recently who was impressed by our smooth introduction and onboarding process in the UK for his child, who is studying overseas, as well as our capabilities across different GPB offices to meet his asset diversification and wealth-planning needs to align with his family’s global lifestyle,” explains Tan.
As the needs of UHNW individuals extend to their families and businesses, HSBC’s universal banking model enables the private bank to provide their clients with access to capabilities in Insurance and Asset Management, Commercial Banking and Global Banking and Markets.
These capabilities are increasingly being delivered through a hybrid service model that combines advanced digital platforms with value-added human engagement. This approach, which proved to be especially effective during the pandemic, addresses a broader shift in how clients want to interact with their private bankers.
Committed to Philanthropy
In an environment where wealthy families are increasingly concerned about addressing social issues, HSBC GPB actively supports its clients in their pursuit of driving long-lasting change in their communities.
“As our clients think about their legacy and leaving sufficient resources for their children and grandchildren to enjoy, they are aligning their family business, philanthropy and sustainable investment activities so that they are reflective of the family’s values,” says Spring.
“They want to realise the synergies across all three parts of the family enterprise to amplify the impact of their work. In terms of investments, they are increasingly interested in impact investing.”
HSBC GPB is one of the first international banks in Asia to set up a philanthropy advisory team, which aims to help clients navigate a complex landscape to achieve their philanthropic goals.
A Leader in Succession Planning
As affluent Asian families expand their global reach, their wealth and succession planning needs can also become more complex. HSBC helps clients on this front through their trust business, which was established in 1946.
HSBC Trustee offers clients global coverage in Hong Kong, Singapore, Jersey and the U.S., particularly in Delaware and New York. With constant regulatory changes across jurisdictions, HSBC has the experience and expertise to not only provide best-in-class solutions, but also to ensure wealth structures remain compliant.
HSBC Trustee also creates opportunities for wealthy families by connecting them to other parts of the Group, whether for their everyday banking, credit and investment needs, or to assist them with their wealth structuring planning.
Looking ahead, HSBC GPB is set to continue to expand its capabilities and presence in Asia. HSBC unveiled its new private banking business in Thailand in 2021 and earlier this year launched a differentiated onshore private banking business in mainland China, where HSBC is the largest foreign bank offering comprehensive wealth management solutions. The bank is also looking to India as its next market for the private banking business.
Says Tan: “Capturing the massive opportunity from Asia’s fast-growing wealth creation and what is expected to be among the world’s biggest intergenerational wealth transfer events is core to the HSBC Group’s strategic pivot to Asia, where it aims to be the leading international wealth manager.”
The information contained in this article has not been reviewed in the light of your individual circumstances and is for information purposes only. It does not purport to provide legal, taxation or other advice and should not be taken as such. No client or other reader should act or refrain from acting on the basis of the content of this article without seeking specific professional advice. Issued by The Hongkong and Shanghai Banking Corporation Limited.