J.P. Morgan’s Goals-Based Planning: Preserving The Legacy Of UHNW Families

Wealth. It’s a privilege. And it’s a responsibility that comes with its challenges. Deciding where your personal priority lies with regard to its use may just be about the most critical undertaking for every ultra-high net worth (UHNW) family across Asia and beyond. This is particularly the case when it comes to determining how wealth should be managed during an individual’s lifetime and the strategies for its transition to the next generation.

Increasingly, many UHNW families are discovering the power of J.P. Morgan’s goals-based planning approach as they seek to resolve such issues. Its appeal is not hard to see—it’s a straightforward discipline that establishes the groundwork for delivering on long-term objectives.

At the heart of this dynamic and flexible practice are four pivotal considerations. First and foremost, there is the issue of purpose, essentially, “What do you want to achieve with your wealth?”

Secondly, there is the matter of stewardship, which seeks to focus the family on thinking about who is best suited to take responsibility for the management of their wealth over the longer term.

As a third consideration, there is a need to decide how assets should be held and how best to prepare them for any future transfer. It could be, for instance, that the founder’s intention is that the ownership of an existing family business is structured in such a way as to provide sufficient flexibility for future generations to decide how to deal with their respective share. Alternatively, the intent could be to ensure that the family business is collectively owned and managed in perpetuity.

Finally, there is the question of horizon—Is there a near-term, mid-term and long-term plan? At the key generational transition points, what are the assets that would be transferred and to whom?


Highlighting the benefits of the goals-based planning approach, Sameer Mehta, Head of Goal-Based Advice of J.P. Morgan in Asia says,

“Essentially, this process allows personal/family preferences to be considered and for a clear route map to be agreed upon by all stakeholders as a means of achieving these predetermined objectives.”

 


Third Party Insights and Consensus-Led Commitments

Finding satisfactory and enduring answers to these questions may require a considerable degree of reflection, but families should also be aware that their aims and preferences may evolve as circumstances change. The perspective of a neutral third party, such as advisors from J.P. Morgan, working alongside family members and their legal/tax advisors, can be of benefit here. This is especially the case when such advisors share their accumulated insights and extensive knowledge of the best practices across their field.

With the right team in place and a degree of consensus achieved, the wealth of the family can be apportioned to such priorities as liquidity, lifestyle maintenance, legacy and the perpetual expansion of an existing asset base. There are also three significant strategic areas that can be evaluated (or revaluated) via the prism of goals-based planning—investing, succession planning and family governance.

When it comes to investing, the framework allows for flexibility to be built into any growth initiatives. It also ensures that the related decision-making process is transparent for all stakeholders.

On the succession planning front, a long-term strategy should be adopted, with bespoke succession structures created to ensure the coordinated management of assets and the seamless transfer of wealth to future generations. The family governance applications, meanwhile, provide a means of ensuring all of the relevant parties remain engaged and informed. This helps minimize potential areas of conflict and paves the way for the formation of an organization dedicated to managing shared prosperity along agreed guidelines—a family office.

Family Office Founding Principles

The desire to establish and maintain a family office is frequently observed amongst UHNW families. Given that every family is different, though, there can be no one-size-fits-all solution, especially when it comes to setting up a Single Family Office (SFO)—a bespoke entity entrusted with managing the various financial and non-financial needs of UHNW family members.

Applying the principles of goal-based planning to define the structure and mandate of the SFO, the first recommended step is to agree on a set of core principles. Essentially, it enables the family to formalize the communication and decision-making process for the wider family network.

With the family’s vision and strategy already agreed in the initial stages of the goals-based planning process, three additional questions need to be asked at this juncture:
1. What functions are required from the family office on an ongoing basis?
2. Who, principally, is the family office there to serve?
3. What services does the family want (and not want) the office to provide both now and in the future?

A Joint Stake in a Shared Financial Future

With delivering clarity one of any SFO’s founding protocols, it can then address such matters as helping mitigate a family’s internal challenges (notably instances where individual family members may have incompatible wealth management objectives or needs) and preparing for any external risks that may have been identified, as well as deciding where outside support is required from third parties. This latter issue often sees specialists in legal, tax or investment sought out and appointed to provide ongoing support to the SFO.

Summarizing the importance of family members taking an active role in both the initial planning process and the formation of a family office, Amanda Lott, the Executive Director and Head of Wealth Planning Strategy for J.P. Morgan in the U.S. says, “When we have a hand in building our financial plans, we have a greater sense of ownership. The very process of building a plan makes it more valuable and drives commitment. It also highlights where the family’s strengths lie and where it is best all round to call upon the skills of specialist third parties.”


Expanding upon this, Elvin Ho, Executive Director and Senior Wealth Advisor of J.P. Morgan says,

“The first recommended step is to agree on a set of core principles, often considered the “North Star” of such an establishment. This underpinning framework should assist the family concerned when it comes to setting the policies that govern the purpose of the office, its investments and the deployment of its resources.”


 

1          LEGACY PLANNING FOR ART COLLECTORS

The passion involved with building a fine art collection shouldn’t preclude a thoughtful succession management strategy.

Given the passion involved with building and curating an art collection, it can be easy to forget it is also an asset requiring thoughtful organization, structuring and, ultimately, succession planning. As ever, the ideal first step is to define your goals—essentially, “What future do you envision for the treasures that you have amassed over the years?”

Initially, it is well worth considering who you would like to pass the collection on to, whether that be an individual or an institution. You also need to decide if you want the collection to stay intact, be divided among your heirs or sold and the proceeds shared with the next generation.

Next, it is prudent to draw up inventory of what you own and where it is located. It is then important to keep all of the related files updated, including any legal documents and dealer insurance estimates.

When thinking of passing a collection on, future costs also need to be factored in. This should include funding for tax liabilities, as well as for any insurance, transportation, storage or repair overheads.

If you intend to pass your art collection on to your children, it is best if you can discuss your strategy with them at the earliest opportunity. If they are too young to participate in any meaningful way, clearly outlining your preferences in your will is the most reliable fallback position.

Similarly, should you wish to pass the collection on intact to a designated institution, it is advisable to start the discussions early. Setting up a dedicated foundation or museum and establishing its governance structure is also best accomplished within your own lifetime.

You may also need to consider whether professional assistance is required in order to optimize the management of the collection.

2          PROTECTING A DIGITAL ASSET PORTFOLIO

Forgetting to properly plan for the succession management of your digital assets could leave your heirs and beneficiaries with a virtual nightmare.

It is easy to think that the term digital assets solely refers to items such as non-fungible tokens (NFTs) or cryptocurrencies. In fact, the term encompasses a broad array of online account or service protected by log-in security that may be valuable to a family, both from an emotional perspective (such as photos stored online) and in terms of operational needs (notably access to critical email accounts).

Essentially, planning for digital asset succession needs to consider how authorized access to any online account or service, social media platform, cloud storage service or subscription can be maintained following an individual’s demise. This extends to access to online payment processing services, proprietary domain names, medical records and any digital banking accounts.

When looking to safeguard the digital assets of a family, making a detailed inventory is always the first step. This should include a record of the names of all of the relevant accounts, as well as details of the information needed to gain access. It is prudent to ensure all such details, particularly with regards to financial accounts, are accessible by a trusted contact person, an individual identified as a suitable steward for your digital legacy.

Should you fail to factor your digital assets into your succession plan, your heirs may well be either barred from accessing them or face considerable inconvenience when it comes to their recovery. Lack of proper legal planning here could also result in estate or inheritance tax liabilities.

It is also advisable to plan to ensure you always keep up with the latest developments in this fast-developing area. For peace of mind, it’s also best to keep your legal representatives and wealth advisors informed of any new digital activity that could affect your financial status and your family’s future well-being.

3          ENHANCING GOVERNANCE VIA A FAMILY CHARTER

A mutually agreed charter ensures all family members are on the same page when it comes to how decisions should be made with regards to a family’s wealth.

When it comes to ongoing governance, one of the primary issues family members need to resolve is whether they wish to cooperate when it comes to managing any family business or shared wealth. This becomes more challenging when family members live in different jurisdictions, with many of them inevitably having quite distinct wealth management expectations. While some will prioritize liquidity (short-term needs), others may favor lifestyle (spending), legacy or growth.

For many families looking to take a holistic approach to the future, the first step is to define a common mission for their shared wealth, often in the form of a charter that clearly outlines collective intent.

Properly implemented, such a charter can then lead to all parties agreeing to establish other family forums, such as a family assembly or council. These bodies are designed to ensure that a fair and transparent regime is maintained with regards to family wealth-related decisions. At the same time, they are also there to keep family members informed of any relevant issues or developments that may arise.


Advising on how to optimize the effectiveness of this process, Paul Knox, Managing Director and Senior Wealth Advisor of J.P. Morgan says,

“As a means of heading off any potential future disputes, it is important to have as many family members as possible participating in the development of the vision embodied in the charter, while it is also a useful way of gauging who has the appropriate skills/emotional intelligence to take a leadership role in the management of shared assets.”


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Building Cutting Edge Wealth Management Solutions

Amid ongoing geopolitical tensions and market volatility, Asia’s wealth management sector continues to leverage on the region’s growing ranks of ultra-rich. Despite the headwinds brought on by the Covid-19 pandemic in the past two years, the Asia-Pacific will see the biggest growth in the number of ultra-high net worth (UHNW) and high net worth individuals between 2021 and 2026, according to the 2022 edition of Knight Frank’s The Wealth Report.

Over the next five years, Knight Frank forecasts that the global UHNW population will grow by a further 28%, led by Asia and Australasia (+33%), followed by North America (+28%) and Latin America (+26%).

The new generation of wealthy individuals will have different demands compared to their parents when it comes to managing money. For instance, many will likely communicate with their wealth managers through digital platforms, which will facilitate remote transactions seamlessly at their own convenience. At the same time, environmental, social and governance (ESG) concerns will also be a key priority in the portfolios of the younger generation seeking to make the world a better place.

To this end, financial institutions such as HSBC and Citigroup are showing their ultra-rich clients unambiguous commitments to achieve their sustainability ambitions. Both banks are targeting to achieve net zero emissions by 2030 for their operations, while helping corporate clients across various industries to transition to a low carbon economy.

As part of a global group with corporate, investment and retail banking capabilities across an international network, HSBC’s Global Private Bank has a wealth of knowledge and expertise at its disposal to support its clients’ sustainability journey.

For Citi Private Bank (CPB) and its clients, committing to sustainable investments is a perpetual priority. In the coming years, CPB will bring their best thinking, research, analytics and fresh actionable investment ideas to help clients meet both their financial and sustainability objectives.

Besides sustainability, wealth and family governance planning has become more important due to the unprecedented intergenerational transfer of wealth expected to happen across Asia in the next few years. Institutions such as Liechtenstein-based LGT could help many of the region’s successful businesses prepare to pass on the reins to their second and third generation members amid an uncertain economic environment.

Founded over 100 years ago, LGT has established an enviable track record for helping clients with their family governance planning by putting in place governance frameworks built around common values, business goals and investment principles. The bank was founded by the Princely House of Liechtenstein, a 900-year-old business-owning family that has passed on their values and wealth across 26 generations.

As the wealth landscape evolves at a rapid pace, private banks that embrace innovation, sustainability and the evolving needs of their clients will continue to be at the leading edge of wealth management for decades to come.

A Trusted Partner In An Uncertain World

Siew Meng Tan, Regional Head of HSBC Global Private Banking, Asia Pacific

Amid ongoing uncertainties brought on by the Covid-19 pandemic, signs of optimism have emerged in global markets as economies reopen and consumer confidence returns. Yet, risks remain and these will have an impact on investment decisions and portfolio management.

Leveraging the expertise and international connectivity of a global financial institution, HSBC Global Private Banking supports high net worth and ultra-high net worth individuals and their families across Asia Pacific as they seek opportunities amid the turbulence.

“The last two years have been very volatile and our clients are looking to us for guidance,” says Siew Meng Tan, Regional Head of HSBC Global Private Banking in Asia Pacific. “As such, we are working hard to help our clients grow, manage and sustain their wealth, while opening up a world of opportunity to them.”

Another important theme is the revival of Asia in the coming years, particularly growth areas that will emerge in the post-pandemic era such as healthcare and education.

“In response to the pandemic, Asia has turned towards technological innovation, the net-zero transition, and continued growth in consumption to drive its growth in the long term,” Tan says.

Achieving Optimal Diversification

With the pandemic making risk management more important than ever, HSBC Global Private Banking aims to help investors diversify their portfolios across assets and geographies in the most optimal way possible.

Asian investors who have traditionally focused on public markets are now increasingly investing in private assets and alternative investments to help reduce volatility and improve yields, Tan says. The growing interest in alternatives speaks to one of the bank’s core strengths. Trade publication Asian Private Banker named HSBC Global Private Banking the Best Private Bank for Alternatives Advisory for the third consecutive year.

“Investing in private markets allows you to take a more medium to longer term view without being impacted by the volatility associated with public markets,” Tan says. “This resonates very well with investors who want a more diversified portfolio.”

Tan also sees rising demand for structured products which enable investors to more effectively take a view on where they believe the market is headed. “If you think a particular stock has a limited upside, or it is going down, they can express it through structured products,” she explains. “Such products can also provide access to more niche asset classes such as commodities.”

Geographical diversification has also become more important for ultra-high net worth families, Tan says. Spreading their wealth across multiple jurisdictions bodes well for these clients as their next-generation members increasingly prefer to live in different parts of the world. “We are talking about families with global lifestyles, and this is where our international network and expertise can help them diversify their wealth more effectively.”

Meeting Changing Wealth Needs

The needs of ultra-high net worth families are likely to vary and evolve over time. This is especially true in Asia where much of the wealth has been accumulated by entrepreneurs who built and continue to run successful businesses. HSBC has supported many of these entrepreneurial families through the years, developing an intimate understanding of their needs across businesses, private wealth, and even generations.

By leveraging on HSBC’s universal bank model, its private bankers are able to meet these ever-changing needs at every stage of the clients’ wealth journey by bringing to bear the full capabilities of the entire group.

“This is where HSBC is able to support them, not just on the personal front, but also in terms of their business needs through our commercial banking and markets divisions,” Tan says. “As many Asian businesses today are global in nature, HSBC’s global connectivity allows us to offer our solutions wherever our clients have a presence.”

Investing in Digital

As private banking clients become more plugged into technology, HSBC is engaging them through various digital channels such as mobile apps that enable remote transactions or through communication platforms such as WhatsApp and WeChat.

“If we want to eff ectively serve our clients’ needs, then our digitalisation drive is of utmost importance,” Tan says. “If we are not interacting with them through channels that they are regularly utilising, then I think we wouldn’t be in a position to compete. Digitalisation is an absolute strategic priority for us. Our clients are very busy and sometimes it’s difficult for them to find the time to call us. We want them to have an online platform where they can safely discuss their investments anywhere and anytime, at their own convenience.”

Reflecting the bank’s commitment to digitalisation, Tan said HSBC Global Private Banking is investing more than US$100 million in Asia over a two-year period to build and innovate its core banking and digital platforms.

HSBC’s efforts have not gone unnoticed. Among the seven awards HSBC Global Private Banking received from Asian Private Banker this year are the Best Private Bank for Client Experience and blue-ribbon Best Private Bank in Asia Pacific, accolades that reflect the strides it has taken to deliver industry-leading client offerings and services.

Looking ahead, HSBC Global Private Banking will continue to craft solutions that are designed to support their clients as they progress on their wealth journeys in a landscape marked by constant disruptions.

“As one of the world’s leading private banks, we pride ourselves on being able to understand the needs of our clients and the market environment to bring personalised solutions,” Tan says. “This is delivered through our global network, our universal banking model, as well as the investments that we are making into digital.”

 

privatebanking.hsbc.com

 


Disclaimers

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.


 

Preparing For A Vibrant Cycle

2021 provided some clarity—economies proved resilient, markets resurgent—after the confusion of 2020. As the new year approaches, there are certainly risks to be managed—inflation, labor shortages, a persistent global pandemic.

Fundamentally, though, there is much to be optimistic about. Accordingly, J.P. Morgan’s Outlook 2022 is confidently predicting that a vibrant cycle lies ahead, with a strong foundation already in place.

Indeed, as a result of the stimulus response to the pandemic, household and corporate balance sheets have rarely been healthier, while shifts in how we work and consume are accelerating innovation. It is entirely possible that these dynamics may usher in a far more vibrant economic environment, one that dispels the sluggish growth and weak productivity that characterized much of the 2010s.

These changes could have important consequences for the markets.

Policymaker Priorities are Shifting

Of those changes, the shift in emphasis on the part of policymakers in various global jurisdictions may have some of the most far-reaching consequences. In the U.S., Congress and the White House have spent over US$4 trillion responding to the pandemic, and now politicians are debating spending another US$2 trillion over the next 10 years.

In Europe, too, fiscal stimulus will continue to be a powerful force—a marked contrast to the early 2010s, when fiscal austerity damaged already weak economies. The European Union has agreed to spend more than 2 trillion euros (US$2.3 trillion) through 2027 to rebuild after the pandemic. EU areas of focus include digital innovation, research, climate focused spending, and pandemic preparedness programs. To offset the cost: proposed financial transactions taxes, digital levies and corporate “financial contributions”. Nevertheless, we believe the spending will be a net positive for economies and markets.

On the monetary side, both the U.S. Federal Reserve (Fed) and European Central Bank (ECB) are committed to generating stronger inflation outcomes with fuller employment. The Fed’s new “Flexible Average Inflation Targeting” regime suggests its willingness to tolerate inflation overshoots to support labor market strength. We expect that the Fed will resist aggressive policy tightening—even in the face of the highest inflation readings in a decade. Similarly, the ECB has also unveiled a new strategy that should remove the assumption that the 2% target was a ceiling for inflation, not a symmetric target.

In contrast to both the U.S. and much of Europe, the picture across Asia is far more nuanced. Many of the region’s developing economies have fiscal space, while developed ones have implemented significant fiscal easing.

However, China, the largest growth driver in the region, has tightened policy in order to rebalance its economy away from real estate.

This, though, is only part of the campaign by Chinese policymakers to rebalance growth drivers and restructure the economy. Their efforts include renewed tightening in the property sector, rapidly shifting internet regulations, ambitious climate change goals and new social campaigns focused on inequality and family values.

Chinese policymakers pursuing long-term reforms and priorities have been willing to do so at the expense of short-term growth. Over the medium-term, markets will likely have to come to terms with the implications of slower structural growth in China. Growth may be more sustainable, but the transition presents near-term risks to the global economy and financial markets.

Can China Finesse a Very Tricky Transition?

For many years, Chinese growth was fueled by easy credit, especially in real estate. Now, growth is slowing significantly. Year-over-year GDP growth in China fell below 5% for the first time outside of the pandemic, after policymakers tightened monetary and fiscal policy to rein in excesses in property markets and to crack down on the digitally enabled consumer sector. In exchange for slower nominal growth, policymakers expect a more sustainable economy driven by middle-class consumption and high value-add manufacturing. The simultaneous pursuit of wide-ranging macro and industrial policies increases the difficulty around policy implementation and introduces downside risks to growth and markets.

Already, the economic and market fallout from this shift has been severe. Opportunities can be uncovered, but we need to consider the full spectrum of opportunities and risks. Remember, too, that while most central banks are either raising rates or debating when to raise rates, Chinese policymakers are probably closer to easing.

China will continue its push toward a modern, high-income economy with world-leading technology, but this path is not assured, and the process will be bumpy. In the long-run, though, the transition could lead to a more durable Chinese economy, one that is marked by higher-quality (if slower-paced) growth.

A New Era of Innovation is Driving Value Creation

Some key drivers that could support higher-quality and more sustainable growth globally in the years ahead are secular mega-trends. The pandemic entrenched some of those mega-trends: digital transformation, healthcare innovation and a greater commitment to sustainability. The question for many will be how to adapt to them and access the opportunities they present.

Digital Transformation

Although the digital transformation process will continue to have a huge impact in many sectors, one in particular is set for unprecedented change. In the auto industry—in many ways the epicenter of disruption—the electrification of the global fleet will prove to be a powerful force. One data point is telling: Electric vehicles have at least four times the semiconductor content of traditional, internal combustion engine ones.

Beyond autos, digital transformation is increasingly common in a wide variety of sectors from finance (payments and the blockchain) to retail (augmented reality), to entertainment (preference algorithms), to healthcare (predictive medicine powered by artificial intelligence). The metaverse could make most life digital, for better or worse.

In another significant development, cloud computing continues to accelerate. Before the pandemic, 20%–30% of work was done in the cloud. Executives thought it would take 10 years for that share to grow to 80%. Now, it could only take three.

In the coming years, we expect the digital transformation of the economy to continue apace: Automation both in goods-producing and service industries will likely increase, possibly catalyzed by shortages in the labor market. Artificial intelligence and machine learning will continue to enable new technologies such as voice assistants and autonomous driving. Companies are investing in innovation at a record pace, and the fruits of these investments can help to underwrite an ever more digital global economy.

Healthcare Innovation

Throughout the course of the pandemic, healthcare innovation has delivered powerful vaccines with astonishing speed. Within the sector, researchers are now looking to see whether the mRNA technology behind many of these powerful vaccines could be used to treat other diseases.

With healthcare innovation set to continue to accelerate, it is anticipated that the industry is likely to become more personalized, more focused on preventative care and more digitalized. Wearables, telemedicine and gene editing are among the other most notable areas in terms of long-term growth opportunities.

Sustainability

2021’s COP26 meeting was one of the most notable developments in climate change policy in recent years. Stronger policy support from the U.S., Europe and China, as well as more frequent and destructive natural disasters, are calling attention to the need for sustainable development.

According to a number of estimates, US$4–6 trillion per year is needed this decade to support efforts to decarbonize the global economy. Furthermore, in order to reach U.S. President Biden’s goal of decarbonizing the energy grid by 2035, the U.S. will need to invest up to US$90 billion per year in new wind and solar generation capacity.

Significant innovation is present in the clean technologies sector, most notably carbon capture, battery storage, renewable energy sources and energy efficiency. The circular economy and agricultural technology are areas that merit attention, while carbon offset markets could also present opportunities.

When assessing the opportunities presented by our three megatrends, it’s critical to diversify across regions, styles and sectors. We also can focus on the megatrends’ enablers: cybersecurity, artificial intelligence, cloud computing and semiconductors. A new era of automation not only holds promise for well-positioned individuals and companies, but could also lead to higher productivity growth across the economy, underpinning a more vibrant cycle in the years ahead.

Monitor the Cross-Currents

Against this largely positive backdrop and the many newly emerging opportunities, expectations should perhaps be a little tempered by the scale of some of the challenges that lie ahead. In addition to the ongoing pandemic-derived uncertainty, other issues commonly cited as causes for concern are the changing priorities of Chinese policymakers and rising inflation.

On the inflation front, this is expected to be a short-term phenomenon, with much of the pressure receding as the labor market normalizes and wages recover towards pre-pandemic levels. Similarly, it is thought that the shortfall in the availability of certain products (notably semiconductors), which has been pushing prices up, would diminish as global supply chains more or less resume normal operations in 2022.

Certainly, this normalization process has proven to be more persistent than many expected. The market, expecting a response to inflation dynamics, has brought forward policy normalization and lift-off expectations with regard to the Fed’s monetary policy. Much of what happens on this front will likely be influenced by how the pandemic develops in the coming year, especially in light of the uncertainties caused by the spread of Covid-19’s Omicron variant.

Coming to Terms with the Virus

While the path of the pandemic has proven very difficult to predict, investors now take the uncertainty in stride. The bad news is that Covid-19 seems likely to become an endemic disease; humans will have to continue to adapt to it. The good news is that vaccinations, immunity gained from prior infection and new treatments all reduce the risks associated with the spread of the disease.

Currently, over 42% of the developed world’s population has completed the original Covid-19 vaccination program, and booster shots are now being distributed. Most estimates suggest that over 65% of the world has some form of protection against the virus, either from inoculation or prior exposure.

However, more Covid-19 outbreaks are likely, possibly due to new variants. To understand how markets may react, we can look at the U.S. experience with the Delta wave: An unexpected rise in cases battered the stocks of companies tied to mobility (such as airlines) and oil prices. The logic: The more Covid-19 spreads, the less travel is likely to take place, so demand for oil falls.

A more complicated consideration is the extent to which certain countries pursue “zero Covid-19” policies. The longer they do, the more potential disruptions there could be to manufacturing output and global supply chains. During the third quarter, companies such as Nike and Toyota cited supply issues due to lockdowns in places such as Vietnam. At one point, up to 50% of all garment and footwear manufacturers in the country were closed. Port shutdowns in China in response to local outbreaks further snarled global shipping.

More broadly, economic growth forecasts for third-quarter annualized U.S. GDP plummeted from 6% to just 2% throughout the quarter amid disruptions to global supply chains that were exacerbated by the rise in virus cases. Business conditions in East Asia (especially China, Australia and Vietnam) further deteriorated.

Recently, increased vaccine penetration has led to a marked improvement in manufacturing operations, and there are tentative signs that global supply chain issues are starting to ease. Going forward, we expect the virus will continue to have a diminishing impact on economies and markets, even if certain sectors remain vulnerable to an increase in Covid-19 cases.

The Future is Bright

With strong foundations in place, the global economy should emerge from the pandemic era stronger than it was before. A vibrant economic cycle is already underway. Considering the unique dynamics and interplay of economies and markets, better days are ahead of us in 2022.

This article is based on J. P. Morgan’s Outlook 2022: Preparing for a Vibrant Cycle. A full copy of this comprehensive, annual forecast can be accessed here


All source and source dates quoted from this article can be referred to the J. P. Morgan’s Outlook 2022: Preparing for a Vibrant Cycle with the hyperlink added at the end.

How Social Entrepreneurs Are Repurposing Capitalism To Tackle Global Issues

Dian Kurniawati was overwhelmed by anguish every time she visited the shores of her hometown in Java, Indonesia. The waves rushing up to her feet would leave behind plastic bags—a dismal reminder of the impact of human activity on nature, which moved her to address the problem of plastic waste. She founded Tridi Oasis, a venture that turns plastic waste into multiple opportunities.

The company gives a second life to non-biodegradable material. It collects discarded PET bottles and processes the waste into high-quality plastic flakes, which are then used for the manufacture of packaging materials and textiles. The business has created many jobs, especially for those in the informal sector who were the worst hit by the pandemic. “In the long-term, I want Tridi Oasis to turn trash into jobs and useful products,”says Kurniawati.

Canopy Power, founded by Sujay Malve, is another company working towards a cleaner environment. Growing up in India, Malve experienced what it’s like to live with frequent power outages. It inspired him to find an alternative source of electricity using solar energy—a solution that achieves substantial cost savings by cutting diesel fuel usage, while decreasing pollution and CO2 emissions. The firm aims to empower people to move away from fossil fuels and use more reliable and renewable electricity supply. The microgrid and engineering services company is solving the problem of energy access and security for businesses and communities across several remote islands in the Asia Pacific.

Tridi Oasis and Canopy Power are among the many new age enterprises that are leveraging cutting-edge technology to develop innovative solutions that deliver not only commercial success, but also create a positive social impact. Other examples include ATEC which enables universal access to safe and clean cooking, and agritech ventures Listenfield which provides an application programming interface to help produce better quality crops with sustainable agricultural practices.

Unreasonable Impact

A common thread across these enterprises is Unreasonable Impact, a partnership between Barclays and Unreasonable that offers a global accelerator programme to empower mission-driven businesses to create scalable and lasting changes. Jaideep Khanna, Head of Asia Pacific at Barclays, says “Through Unreasonable Impact, we support some of the fastest-growing ventures to help scale up entrepreneurial solutions to the world’s most pressing challenges, and help profit and purpose co-exist.”

The programme is run in cohorts across the Asia Pacific, the Americas, and the U.K. and Europe. It provides resources, mentorship, and a global support network to entrepreneurs working on resolving pressing global problems profitably while sparking innovation and creating jobs.

Daniel Epstein, Founder and CEO, Unreasonable, established the company with the mission to re-purpose capitalism. He believes that entrepreneurs are shaping the future of food, energy and sustainability and that innovative ideas from small- and medium-sized businesses are key to making lasting changes. “Sometimes we need to have unreasonable goals to change the world,” says Epstein.

Changing the World One Venture at a Time

The programme is based on the belief that the power of the collective will make a lasting impact. “Business is about people, partnerships and profitable solutions, and we have to be on the side of the entrepreneurs who take on these mammoth challenges, improve social outcomes, and generate profits for shareholders,” says Lars Aagaard, Head of Mergers & Acquisitions and Financial Sponsors for the Asia Pacific at Barclays.

 

Unreasonable Impact fellows do not believe in settling with the status quo. Instead, they are motivated to shape progress in the right direction and design profitable solutions to create a sustainable and equitable future. These entrepreneurs can make a dent in employment trends and lead the path towards sustainability, while also innovating across sectors such as food, agriculture, and manufacturing.

“At the forefront of innovation in their respective sectors, we continue to be inspired by each entrepreneur as they challenge the status quo with their impactful solutions,” commented Alexander Harrison, COO APAC & Country CEO, Singapore, Barclays.

 

All images were taken before the Covid-19 pandemic.


Hong Kong Breaks New Ground In Wealth Management

Hong Kong’s private wealth management industry has remained resilient in the face of the Covid-19 pandemic, thanks to the sound asset management of established groups and the tech-fueled boom by first-generation entrepreneurs.

Total assets under management rose 21% to HK$34 trillion (US$4.4 trillion) in 2020 from the year before, while private banking and private wealth management increased 25% to US$11.3 trillion, data from the Securities and Futures Commission (SFC) show. “Hong Kong is already well in the game but the question is how we can remain relevant amid the stiffer global competition,” says Laurence Li, Chairman of the Hong Kong Financial Services Development Council (FSDC).

FSDC believes the Wealth Management Connect (WMC) would enhance the special administrative region’s already transparent regulatory framework, technology-friendly environment and professional talent pool. With its proximity to the mainland and experience in serving the China market, Hong Kong is poised to maintain its premier position in the wealth management market.

Major Breakthrough

The WMC is a major breakthrough in which retail investment funds domiciled in Hong Kong and authorised by the SFC will be eligible for the scheme instead of the traditional product by product approval approach. “With the abundance of a 1.3 million high net worth individual (HNWI) population and US$6.5 trillion of HNWI wealth, China offers tremendous demand for private wealth management services,” FSDC said in a report.

Hong Kong’s family offices—which comprise a high-end subset of the private wealth management business—are becoming increasingly important to the whole financial services industry because of the business potential inherent in their massive AUM as well as financial centre’s overall wealth management capabilities.

There has been robust growth in family offices globally in recent years, with the number of single family offices worldwide climbing 38% to 7,300 in 2019 from the 2017 level, according to Campden Research. Asia led the increase, recording a 44% growth in the same period, the fastest in the world. Hong Kong can leverage this strong regional growth momentum and further develop into Asia’s hub for family offices.

With its mature and sophisticated financial markets, Hong Kong can meet the investment needs of wealthy families. These families can depend on Hong Kong’s robust regulatory and legal framework as well as its predictable tax system that helps to ensure protection for their assets. The city’s close ties with the mainland also makes it the ideal investment gateway into and out of China.

Key Growth Segment

After FSDC published a report on “Family Wisdom: A Family Office in Hong Kong” in July 2020, Chief Executive Carrie Lam acknowledged in her policy address last year the high growth of the family office business, which she says has become an important segment in the wealth and asset management industry.

FSDC has provided recommendations to further develop Hong Kong as a hub for family offices, encompassing four key areas: regulatory requirement, tax considerations, talent development and setting up of one-stop liaison and services centre. In line with the recommendations, FamilyOfficeHK was established under InvestHK to promote Hong Kong in local and major international markets, while offering one-stop support services to family offices seeking to establish their presence in the city.

The private sector has also expanded their services in the city. For instance, HSBC has launched a new institutional family office service in Hong Kong. The bank is also investing US$3.5 billion and hiring more than 5,000 new wealth planners to grow its business in Asia over the next three to five years as part of a broader regional expansion.

Greater Asian Interest

“We are seeing greater interest from Asian clients who are setting up and expanding family offices to adopt institutional approaches to build continuity, diversification and resilience in their investment portfolios,” said Siew Meng Tan, Regional Head of HSBC Private Banking, Asia Pacific.

Other international banks including UBS, JPMorgan and DBS are also building their family office units in Hong Kong. “When I first joined the bank, private banking was mainly about managing our client’s personal investments,” says Amy Lo, Co-Head of UBS Wealth Management for Asia Pacific and concurrently Head and Chief Executive of UBS Hong Kong Branch. Over time, the industry gradually transformed into wealth management, says Lo, who is also a member of FSDC’s council board. “Now, we have to take care of the clients’ needs including their families and businesses. It goes beyond investment. It is a holistic approach to managing their total wealth.”

With Hong Kong offering a broader spectrum of green and alternative investment opportunities that are popular among family offices, such as wine and art investments, the city is well placed to accommodate the diversified investment needs of family offices. These unique advantages make Hong Kong a natural choice for family offices looking to deepen their presence in the Asia Pacific region.

Hong Kong broadly defines family offices as single family offices (SFOs) and multi-family offices (MFOs). SFOs are set up by a single family and exclusively serves the needs of that family, while MFOs serve multiple families who may or may not be related to each other. Some MFOs are owned by third parties and operate like asset management companies.

In January 2020, the SFC issued a circular on the licensing framework for family offices, which provided guidance on regulating family offices intending to carry out asset management and other services in Hong Kong. If an SFO is not being run as a business, a license isn’t required, according to the regulatory framework.

Hong Kong’s wealth management industry is leveraging technology to tap increasing opportunities amid a rapid growth in wealth across Asia. With new technologies such as robo-advisors, artificial intelligence and virtual reality transforming the industry, asset managers are embracing technology to keep up with the latest innovations.

 

           To find out more      Follow FSDC on LinkedIn

www.fsdc.org.hk

 

Paving The Way For A Seamless Succession

The HSBC building, facing the picturesque Victoria Harbour in Hong Kong, serves as the bank’s regional headquarters.

With the impending transfer of wealth in the next decade, many high-net-worth families around the world have turned their attention towards the critical issue of succession and legacy planning. The so-called “great wealth transfer” is particularly relevant to Asia, one of the world’s fastest growing regions.

“Wealthy families in the region are dealing with many of the same issues as their counterparts in the West in transferring wealth from one generation to the next, and ensuring that their needs are met across multiple stakeholders with different motivations,” says Steven Weekes, Head of Trust and Fiduciary Services for Southeast Asia at HSBC Global Private Banking. “The key question we help clients answer is: How can we ensure that the family’s wealth and legacy is preserved, to last for generations to come?”

According to recent research by Wealth-X, by the year 2030, it is expected that more than US$15 trillion of wealth will be handed down to the next generation—with much of this wealth expected to change hands within the next five years.

Transition in a family-owned business can be a challenging, multi-faceted process. Families should begin conversations about succession early, encompassing everything from handing over the business, investment goals to values and purpose, Weekes says.

He adds that external advisors may need to be involved in these discussions as independent parties to help address differences of opinions, as well as seemingly divergent concerns and preferences.

Philip Kunz, Head of Global Private Banking, South Asia, HSBC
Steven Weekes, Head of Trust and Fiduciary Services, Southeast Asia, HSBC Global Private Banking

The Role of Family Offices

Clients are also increasingly establishing family offices to ensure a smooth transfer of wealth as the task of creating meaningful legacies for affluent families becomes more complex and challenging.

The family office deals with the organisation, administration, management and maintenance of the family wealth and affairs. More importantly, it provides a platform for the family to professionalise their long-term wealth management and increase family member engagement.

“Establishing a family office is a big undertaking,” Weekes says. “Ultimately, a family office is and will always be as distinctive as the families that set them up.”

Family offices also face a unique set of challenges when it comes to succession planning, as family dynamics can complicate matters. Succession planning for both the family office and the family enterprise must be planned in a holistic manner, in line with the family’s long-term objectives, to ensure effective transition.

“Often, the family enterprise may lack the governance structures to manage these complex situations,” says Philip Kunz, Head of Global Private Banking for South Asia at HSBC.

A properly structured family office and succession plan is thus crucial to overcome these obstacles and establish an orderly transfer of the management and ownership of the family enterprise.

“We always encourage our clients to start planning and preparation early. Families can embark on the journey by communicating openly, building trust, and work towards balancing the needs of the business whilst satisfying family members’ expectations,” Kunz adds.

Aligning Next Generation Priorities

Against the backdrop of these challenges to the transfer of wealth is a new and rising generation preparing to take the reins of their family legacy. Research by HSBC has shown that this unique group of individuals are increasingly driven to influence the world and exert a positive social impact compared to their parents.

“Our goal is to give these next generation of family members and entrepreneurs the support they need to plan strategically for the wealth that they will manage and the businesses they will operate or influence,” says Kunz.

Over the years, HSBC has actively engaged its next generation of clients through various initiatives—including the Next Generation Conference and Next Generation Sustainability Leadership Programme—to facilitate networking and provide a platform to discuss their challenges and ideas. “We have even brought our next gen clients to the jungles of Borneo so that they can see first-hand what impact our behavior has on nature and sustainability,” Kunz says.

Driving Sustainable Outcomes

Indeed, leveraging their wealth to achieve sustainable outcomes is a top priority for many of the next generation clients. To support these aspirations, HSBC launched the Sustainable Investment Academy, a collaborative effort with the group’s asset management, wealth management and private banking arms.

“We have handpicked the most relevant in-house and external content to facilitate effective conversations with clients about sustainable investments—supporting them as they choose to make a positive change to the world,” says Kunz. “Whereas in the past private banking clients were more focused on ethical exclusions from their investments, we are now seeing that clients are generally interested in ESG (environmental, social, and governance) from multi-asset approach, and want to include ESG criteria in their portfolio, without incurring additional risk.”

On the other hand, clients who are keen on impact investing—and intentionally seek to create a direct social or environmental impact—may be prepared to get personally involved.

Serving More Complex Needs

Technological, environmental, generational and social changes are defining the future of wealth and legacy planning. While the needs of families and individuals with significant wealth are becoming more complex, these clients also recognise that their wealth is not measured purely by its monetary value but by the positive change it can bring.

Likewise, HSBC understands that the bank’s role goes beyond simply managing their wealth, but more importantly to ensuring future sustainability and growth.

With Asia being at the center of this global wealth shift, Kunz believes that HSBC is well-positioned to provide its regional clients with holistic and comprehensive solutions that meet their increasingly global needs.

This spans across a client’s basic retail and transactional needs, to constructing a long-term investment strategy and portfolio, to considering generational planning needs, and perhaps even embarking on their philanthropic ambitions.

“It has been a privilege for us to have worked with many of our clients for over 75 years in Asia, from one generation to the next,” Kunz says. “We will continue to build these bridges, forging stronger bonds with Asia’s entrepreneurs and families in helping them achieve their long-term ambitions.”

Disclaimer

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.

Collaborative Philanthropic Action: The Time Has Come

Every day we are reminded of just how vulnerable individuals and whole societies have become within our damaged environment. Whether via social media or rolling broadcast news, our awareness of the global challenge represented by extreme weather events and social inaccessibility grows by the day. Our world has never seemed so fragile as it struggles to contend with mounting climate change and heightened social inequality.

Amid all this, Covid-19 has manifested a yet more visible and tangible understanding of these social and environmental issues. Most notably, the pandemic has amplified the importance of delivering relief to those parts of the world where the need is greatest but where vital resources are the hardest to come by.

It is all too easy to be daunted by the sheer scale of challenges many people are facing in disparate parts of the world. Increasingly, though, collaborative global action is coming to be seen as an effective partnership to address the needs of those who are marginalized.

Philanthropy as a Responsibility

In an era where social inequality is at its height, philanthropy has become a global and collective responsibility.

At the international level, businesses, families and individuals are showing their commitment to helping transform lives and communities. This, though, is not achieved through random acts of charity, but through intention and focus, as well as via expertly implemented strategic programs that dig deep into the root cause of many of these issues, ensuring purposeful outcomes and trackable improvements.

Acknowledging the significance of the growing donor capacity, Jean Sung, Executive Director and Head of The Philanthropy Centre at J.P. Morgan Private Bank for Asia Pacific, says, “As societies across the world have had to contend with an ever-escalating number of health and education issues, corporate, family and individual giving is playing an ever more important role in tackling these problems. We truly are in a golden era of philanthropy.”

The Importance of Collaboration, Evaluation and Precision

This golden era has been characterized by a new emphasis on collaboration, evaluation and precision targeting, as well as by a considerable increase in the level of available philanthropic capital. It has also seen an increase in the desire to give back and to make a positive and lasting impact, something that has become a core component of corporate strategies and a priority for many ultra-high net worth (UHNW) individuals.

In the U.S., philanthropists are no stranger to the headlines, with the likes of Bill Gates, Melinda French Gates and Jeff Bezos regularly feted by the media for the scope and scale of their commitment to good causes.


“As societies across the world have had to contend with an ever-escalating number of health and education issues, corporate, family and individual giving is playing an ever more important role in tackling these problems. We truly are in a golden era of philanthropy.”

– Jean Sung, Executive Director and Head of The Philanthropy Centre, J.P. Morgan Private Bank, Asia Pacific


These high-profile donors have succeeded in establishing philanthropy as a primary responsibility, rather than as a secondary option for many of the world’s wealthiest individuals and most profitable corporations. One initiative that clearly encapsulates this is the Giving Pledge, a program jointly launched by Bill Gates and Warren Buffet in 2010. 

Seen as revolutionary at the time, the scheme set out to inspire the wealthiest to donate at least half of their net worth to philanthropic causes. Within months of its launch, some 40 billionaires had taken the pledge. As of August 2021, there were 223 pledges from 27 countries.

Another key benefit of this highly public and largely transparent take on philanthropy has been the move towards greater collaboration. While, historically, many donors gave individually, contributing without any prior understanding of their peers’ initiatives, there is now an acceptance of the importance of collective and coordinated action.

The Asian Charitable Culture

In Asia, such giving tends to be more discreet, with many of the region’s wealthiest individuals favoring a lower profile.

Sharing Resources, Unifying Goals

The region also has its own charitable culture and unique structural characteristics. Most notably, Asian benefactors tend to have, traditionally, a distinct preference for contributing to their local communities and to addressing the specific needs of their home countries. Collaboration, though, is still very much at the heart of giving in Asia. This has seen a growing understanding that working in partnership with like-minded individuals and corporations will hugely enhance the effectiveness of philanthropic capital. Not only does such an approach minimize duplicate targeting, it also allows for shared resources, aligned goals and a more comprehensive evaluation of short- and long-term measures of success.

Such collaboration, especially among low-profile donors, requires coordination and this is where philanthropic advisory support can often be essential. Highlighting the need for such a service, Sung says, “Among the questions I’m most frequently asked by philanthropists are ‘How do I know what everybody else is doing?’ and ‘How do I know I’m not just replicating what someone else is already doing?’

“Fortunately, through our connectivity; knowledge and experience; industry contacts; and understanding of global and regional priorities, we can help our clients maximize their philanthropic impact. We can also help bridge the gap to align their passions and pursuits with other philanthropic entities and individuals that share their values and have compatible philanthropic priorities.”

Nurturing Social Commitment

With many Asian businesses now in their second or third generation of family ownership, philanthropy also tends to be a more personalized family matter than in corporations with a more varied stakeholder hierarchy. This makes the creation of an enduring and positive legacy an imperative for such families and their companies, as well as a matter of shared concern among its family members.

With nurturing social commitment now seen as key to instilling legacy values into emerging generations, education remains the number one priority for Asia’s philanthropists and accounts for a considerable proportion of all such spend. Historically, it has been well above the allocation for alleviating poverty, inaccessibility to healthcare and addressing climate change.

Addressing Immediate Needs

Evaluating the particular challenges of the region and highlighting the need for coordination, Sung says, “While we all agree that education is essential and is the key to financial and social independence for many of those currently living below the poverty line, there is also the problem of immediate need. For someone living below the poverty line, their next meal is more of a priority than their education.

“This is where The Philanthropy Centre at J.P. Morgan Private Bank can really help. We facilitate, introduce and ensure that donors can work in partnership with one another, coordinating contributions that can be complementary and help deliver programs and services that can respond with immediate and longer term solutions to the pressing social issues. This ensures no one falls through the net and outcomes are not undermined by factors outside the remit of any individual initiative.”

Philanthropic Veteran Jean Sung Talks About How To Make Philanthropy Truly Impactful

In many ways it is easy to understand why there is now such a widespread need for the portfolio of services offered by The Philanthropy Centre. Amid all the challenges facing the world—from climate change to social inequality of opportunity and emerging public health threats—we are also on the verge of the greatest transfer of wealth of all time. By 2030, some US$15 trillion will be inherited by the next generation—a generation of young entrepreneurs and businesspeople committed to both honoring the philanthropic legacy of their forebears and to championing their own causes.2

Explaining why there is now such a widespread need for a holistic and sophisticated understanding of how to effectively do good, Jean Sung, Executive Director and Head of The Philanthropy Centre at J.P. Morgan Private Bank for Asia Pacific, addresses the importance of tailored and holistic philanthropic planning.

Q: What differentiates The Philanthropy Centre at J.P. Morgan Private Bank?

Sung: We emphasize the importance of tailoring our advisory service to clients at different stages of their donor journey. For example, when working with first-time philanthropists, we focus on helping them to identify and articulate their passion, with a focus on understanding their primary giving interest and the social issues closest to their hearts. Often, we find ourselves helping build upon a framework passed onto them by their predecessors and coming up with a refined plan for outlining specific and measurable goals—whether geographic or time-specific—that address issues they are most passionate about. In addition, we also assist with deciding which vehicle should be adopted.

Q: How about those in the later stage of their philanthropic journey?

Sung: In the case of those who are more matured in their philanthropic journey, we may be more involved with succession planning or with conducting a mission audit, assessing the achievements to date and allowing for strategic readjustments to be implemented should they be required. At every level, we are there to ensure there is a defined and deliberate approach to each client’s philanthropic journey. We are also there to help and to assist families and/or individuals in formalizing and implementing their philanthropic goals.

Q: What is the one thing that is shared at all stages of a philanthropic journey?

Sung: Regardless of which philanthropic stage the donor client has reached, The Philanthropy Centre is also a firm advocate of the importance of networking. Given J.P. Morgan’s reach, depth and the breadth of its global, regional and local networks, access to the most influential and innovative private foundations is assured, as is social sector engagement with the most effective non-profit organizations active within a diverse range of communities and social issues.

Our philanthropy advisors can be the bridge that connects like-minded individuals and their families with each other so that when they collaborate, they can hear from each other; they can also stand by to offer each other’s global contacts and networks that can assist with [like] objectives; that can deepen impact. Collaboration can be meshed to deliver measurable solutions to social problems.

Q: Why are such networking opportunities important for philanthropy?

Sung: They are hugely beneficial as they are the key means for our clients to interact on an exclusive platform with other like-minded philanthropists. Often, they want to hear what others are doing and discover what has previously worked well, allowing them to hear and to learn from the success (and even failures) of others. These events also reflect the importance The Philanthropy Centre places on understanding the differing priorities and charitable cultures that coexist across Asia. This allows for tailored, informed and up-to-date advice to be provided with regards to optimized giving parameter across the region’s constituent jurisdictions.

Q: What is the essence of successful philanthropy?

Sung: I’m a firm believer that giving back is most effective when professionally managed. Philanthropy is multi-billion-dollar concern. It changes lives and shapes destinies at an
individual, regional, and global level. Given its scale and potential impact, families and corporations have also recognized the need for their philanthropic giving to be effectively managed; properly implemented and be fully evaluated and accounted for.

Philanthropy is not a new phenomenon—it has the power to nurture, to stir collaboration between the private, social and public sectors—developing successful models that can stimulate and advocate positive change.

When we can step up with philanthropy and help solve pressing challenges in our own backyards, in our communities, and in our common home—we can build vibrant and healthy societies that are fair and works for everyone—this is good business!

Philanthropy can truly be transformative. We pride ourselves on being the advisory partner for those looking to leave a legacy of caring values, those who genuinely want to make a difference and build back better. We realize and understand that every philanthropic journey needs to start somewhere and we are here to help and support donors through their own individual journey of transforming charitable giving into effective philanthropy. We, at J.P. Morgan, are so proud to work with our clients and their families to help explore options and develop strategies that would work well for them and ultimately deliver their philanthropic goals.


1. Source: https://givingpledge.org/About.aspx. Data as of August 2021.
2. Source: https://www.wealthx.com/report/wealth-transfer-report-2019/. Data as of June 26, 2019.


Learn More

learn.more@jpmorgan.com 

Hong Kong: China’s Financial Gateway To The World

As the most important gateway to China, Hong Kong is constantly strengthening its connectivity to enhance cross-border transactions. With its free port status and an autonomous customs territory, the city is building financial linkages across Guangdong, Hong Kong and Macau, which together comprise the Greater Bay Area (GBA).

Hong Kong facilitates about two-thirds of China’s inbound and outbound foreign direct investments and provides a channel for the global trade of Chinese goods and services. The financial hub has helped boost the international usage of renminbi (RMB), which is now the world’s fifth most active currency, accounting for 2.2% of international payments as of August, data from Swift shows.

Banks in the city currently handle 75% of RMB flows around the world and that figure is poised to grow with China and Hong Kong promoting cross-border RMB investments and financing activities. Mainland enterprises are also issuing green and sustainability related products in Hong Kong, aiming it to become a hub for green finance within the GBA.

“Different stakeholders have been engaging in conversations and preparatory work to enhance Hong Kong’s connectivity as well as standards of financial services and product offerings,” says Laurence Li, Chairman of the Financial Services Development Council (FSDC), a high-level cross-sectoral advisory body set up by HKSAR Government in 2013 to promote Hong Kong’s financial services industry. “With some favourable measures being introduced and implemented in an orderly manner, the industry believes the ever-improving connectivity of financial markets will lead to uncharted market potentials.”

Capturing Opportunities

To help Hong Kong’s financial services industry capture market opportunities in the GBA, the FSDC has recommended and advocated for connecting cross-border payments and transfer infrastructure; enhancing the convenience of remote account opening procedures; and fostering cross-boundary mortgage financing, insurance and wealth management businesses.

The recently launched Wealth Management Connect scheme will help mainland investors diversify investment portfolios through exposure to overseas markets via retail funds domiciled and regulated in Hong Kong, while attracting offshore investments to onshore wealth management products in Mainland. It will also allow Hong Kong investors to broaden their mainland exposure.

Accelerating Internationalisation

Coming after the Hong Kong stock connect with Shanghai in 2014 and Shenzhen in 2016, the scheme will deepen the linkages between the two markets. These significant developments in the liberalisation of China’s capital markets would accelerate RMB’s internationalisation and strengthen Hong Kong’s position as a global offshore RMB hub, KPMG said in a recent note to clients.

The new southbound leg of China’s Bond Connect programme will further stimulate demand from mainland Chinese investors for Hong Kong and U.S. dollar-denominated bonds, boosting liquidity and facilitating a more efficient price discovery process. It could also broaden the investor base for both Hong Kong dollar and offshore RMB bonds.

The constant improvement of Hong Kong’s financial market linkages to China will help establish the territory as the future hub for fintech and digital assets across the GBA. As more cross-border products and services become available, Hong Kong will steadily march towards its vision of becoming the world’s premier wealth and asset management centre.

           To find out more      Follow FSDC on LinkedIn

www.fsdc.org.hk

 

HSBC Global Private Banking Aims For Mainland China Market Leadership

Jackie Mau, Head of Global Private Banking, Mainland China at HSBC

With a substantially bigger and better-resourced presence in mainland China than any other foreign bank, HSBC has made no secret of its ambition to establish its private banking business as the country’s foremost international wealth manager, a key milestone in its mission to achieve a similar dominance across the wider Asian region.

To achieve this, HSBC has committed one third of its total planned Asia-focused private banking development spending to expand its onshore resources in China. HSBC Global Private Banking is set to extend its presence in mainland China well beyond its current Shanghai, Beijing and Guangzhou hubs in the next five years.

As part of this strategic expansion, a massive pan-Asian recruitment drive is underway, a move that will add 5,000 client-facing wealth management and private banking staff by 2025. With the hiring of relationship managers, investment counsellors and specialists, HSBC can better support affluent, high-net-worth (HNW) and ultra-high-net-worth (UHNW) clients in mainland China, Hong Kong and Singapore. This commitment will also double the size of HSBC Global Private Banking’s wealth management staff in the mainland.

Key Strategic Appointment

Perhaps the most crucial move with regards to achieving the bank’s aspirations is the appointment of Jackie Mau in August as Head of Global Private Banking, Mainland China at HSBC.

Previously Regional Head of UHNW for HSBC’s Global Private Banking Team, Mau believes the time is right to further enhance the group’s private banking and wealth management services in China.

“While it’s fair to say that the market has been quite volatile, a development that has made many of our high-net-worth clients take a defensive stance, we are now at what I’d term the mid-cycle phase,” Mau says. “This is the point where risk diversification becomes highly advisable, something we can clearly help with. At the same time, China’s domestic consumption is surging. Shopping malls are teeming and demand for luxury goods remains impressively robust. For our global clients, a little exposure in China would definitely help bolster their portfolios.”

Mau also believes that mainland China’s ongoing macro-economic development will, ultimately, usher in increased demand for HSBC Global Private Banking’s diverse service offerings.

“HSBC Global Private Banking positions itself across a wide client continuum from high-net-worth individuals to their ultra-high-net-worth counterparts,” Mau says. “For our more affluent investors, we have a dedicated raft of professional consultants and investment advisers available. They can help with any arising wealth management issues, while also leveraging the support of our Hong Kong- and Singapore-based specialists from the philanthropy advisory and charitable service teams for those families or individuals looking for the most efficient and effective ways to give back to their communities, shaping a better and more sustainable future.”

Digitalisation, ESG and the GBA

Three factors are widely perceived to deliver significant changes to mainland China’s massive wealth management market. These are the growing preference for enhanced digital engagement channels, an increased commitment to Environmental, Social and Governance (ESG) aligned opportunities on the part of mainland investors, and the prioritisation of the huge Greater Bay Area (GBA)—comprising Guangdong, Hong Kong and Macau—as one of the country’s key growth drivers over the coming years. Mau sees all three as representing an opportunity for HSBC Global Private Banking to take a lead, distinguish itself from its competition and deliver clear benefits to its clients.

On the innovation front, the bank is heavily investing to develop a new generation of digital capabilities that will meet—if not exceed—the expectations of the country’s highly tech-savvy investors. “China’s second generation HNW individuals, as well as successful new economy entrepreneurs, all want to interact with their banks in quite a different way to the channels private banks have been accustomed to,” Mau says. “Looking to meet this challenge head on, we are developing a new generation of robust digital platforms that will allow our clients to access a host of online services, including virtual meetings with relationship managers, and the execution of any required transactions.”

In terms of ESG, HSBC Global Private Banking again prides itself on taking a proactive approach, anticipating its client requirements and evolving the required products, services and solutions in time to meet emerging demand.

Acknowledging the growing importance of ESG in investment portfolios, Mau says, “While our unparalleled global and regional reach allows us to onboard a comprehensive portfolio of ESG funds, our commitment goes beyond that. As a group, ESG is very much part of our DNA. This is reflected in our sustained support for a wide variety of related communities, education and environmental protection projects.”

The GBA is also very much a core element in HSBC Global Private Banking’s onward strategy. Recognising the opportunity offered by a region that is already home to one fifth of China UHNW individuals, plans are already in place to significantly expand the bank’s presence within its borders.

“In addition to our existing strengths in Hong Kong and our GBA Wealth Management Connect service, we’re recruiting up to 3,000 personal wealth planners within four years to scale the Group’s mobile wealth planning service in mainland China,” Mau says. “We are also looking to help meet the needs of entrepreneurs via such capital management initiatives as HSBC GBA Business Credit Connect. In short, we believe we have the key building blocks to emerge as the dominant player within the region.”

Talent, Talent, Talent

As to the wider challenge of securing an equally preeminent position across the mainland China market, Mau is confident that one key element of HSBC Global Private Banking’s strategy that would allow the bank to achieve its goal is talent.

“Recruiting, developing and retaining the right talent is at the very heart of our strategic growth plan,” Mau says. “As the wealth management sector in mainland China is still in its infancy, we will work with local talent and supplement with the best from Hong Kong and throughout Asia. We will also nurture a new generation of graduate trainees from local universities in mainland China as a sign of our long-term commitment to the country. In the end, whether you are a local client looking to go global or an overseas investor looking for an exposure in the China market, you can be confident that HSBC Global Private Banking’s depth of resources, experience and reach will more than exceed your expectations.”

 

privatebanking.hsbc.com

 


Disclaimers

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.