Today’s trust business is booming amid technological innovation and an unprecedented intergenerational transfer of wealth. As part of HSBC Global Private Banking, HSBC Trustee has evolved to support client wealth needs as it marks 75 years of operations in Asia in 2021.
Having seen the passage of wealth across multiple generations, HSBC Trustee is well versed with managing family dynamics and well placed to support clients. Its platform has grown to include services such as family governance, family office advisory and philanthropic advisory.
The traditional role of the trustee is taking the legal ownership of assets held in trust and managing them for the beneficiaries. But as asset classes become more complex and families grow and evolve, modern trustees such as HSBC Trustee find that the settlor—the person who sets up the trust—wants and can often have substantial powers at their discretion.
“I think one of the key aspects of a successful trustee is having some of the ‘softer’ skills,” says Brent York, Global Head of Trust and Fiduciary Services at HSBC Global Private Banking. “It’s about understanding the settlors’ wishes as to their legacy. Who do they want to benefit and when? What are the values they want to pass on?”
For Cynthia Lee, Head of Wealth Planning and Advisory for Asia at HSBC Global Private Banking, being a trustee means being more than a financial adviser. “I see the trustee as a confidant for the family,” she says. “When the patriarch or matriarch of a family is looking to find a trustee, our job is to understand the assets that are held in trust. Very often these are the core, could be the business, could be the core investments, could be everything. Most importantly, we understand the family wealth ambition and needs.”
HSBC estimates there will be an intergenerational wealth transfer of US$1.9 trillion in Asia over the next decade. “We’re seeing a lot more first to second generation and second to third generation change happening now,” says York. “And that’s going to continue over the next 10 to 15 years in Asia, whereas in Europe and the U.S., they have experienced more succession through multiple generations.”
Family offices in Asia can be quite different from those in Europe or North America for several reasons. “The rise of the family office is a fairly new concept in Asia,” York adds. “A lot of activity is currently focused on investment diversification. We are also seeing rapid wealth creation from the younger entrepreneurs who are moving into a phase of protecting and growing that wealth.”
Technological, environmental, generational and social changes are defining the future of wealth and legacy planning. Many clients recognise that their wealth is not measured purely by its monetary value today and tomorrow, but by the positive change that it can make in the world.
“The succession of wealth is also about the preservation and transfer of the family values, the heritage, the vision to the next generation and these are the key areas which our clients in Asia are talking about,” says Lee. “Identifying and preparing the next generation, preservation of family harmony, uniting the family, continuing the family dynasty are all common themes with our clients. This is how HSBC sets itself apart—our tools and services are focused on both the financial and non-financial aspects of wealth succession.”
Asia is quite diverse, with Japan, Hong Kong, Singapore and Taiwan considered as established wealth markets. “That’s where we have family offices that have been around for 35 years,” Lee says. “The oldest one, in Hong Kong is celebrating 70 years in 2022.” Then there are emerging wealth markets, which Lee describes as “super exciting.” China is the most obvious example, where technology and the new economy have created new entrepreneurs. Countries such as Indonesia and the Philippines have also been part of the tech revolution.
Booming Philippine Market
HSBC’s presence in the Philippines dates back 146 years. In 1875, the bank opened an office in Binondo—Manila’s Chinatown—to offer trade finance services to the community’s exporters and merchants. Today, the Southeast Asian country remains a vibrant market for HSBC, despite its financial ups and downs over the past two decades.
“The Philippines is one of the few countries that came out well from the 1997 Asian financial crisis,” says Lee. “Over the past 10 years, it has been a booming domestic market.” She says HSBC Global Private Banking clients come from all walks of life. “It could be a local food and beverage business, it could be retail industry, a biochemical plant, a hotel chain.”
York points out that families are relatively larger in the Philippines. “Often there’s a lot of concerns around the family business and the succession similar to many other Asian countries,” he says. “There might be multiple parties involved and they are also interested in looking at how we can help them with their access to non-Philippine investments and assets.”
Due to Covid-19, HSBC teams have not been able to visit clients in the Philippines—and many other countries—since 2019. “Through the pandemic, clients have had to adapt,” says York. “They’ve had to change business model or retrench, particularly some of those in hospitality and tourism, while others have seen it as an opportunity to invest.”
HSBC had to adjust as well. “Pre-pandemic, a team would arrive in Manila with a packed agenda over three days,” says Lee. “Now it’s two-hour Zoom calls spread over three half days. On the plus side, the team held a meeting with a Philippine family of almost 30 people, via Zoom, even though they were spread across the globe. Some travel is no longer necessary but some engagement by their nature has to be done face to face.”
Managing A Faster Pace
HSBC Trustee often finds that younger family members are less conservative than their elders. “The basics of the trust solution is still valid for them to safeguard their wealth,” York observes. “But being able to give them the powers to manage the assets is important.” The younger generation of business leaders is more agile, he notes. “They want things to happen at a faster pace. And that can be a little bit challenging when we need to give advice.”
The bank has adopted new technology and new ways of communicating. “With some of the more dynamic and younger clients, technology is going to become more important because they don’t use emails,” says York. “They communicate with different social media platforms and we have embraced some of that new technology.”
Additional considerations when making investments such as environmental, social and governance (ESG) and social impact investing are another important trend. “Some families might be more ambitious and more liberal, and decide to deploy a higher percentage of their asset allocation altogether into investments which incorporate ESG and social impact outcomes,” says Lee. “They might entrust the younger members of the family to make some of these decisions.”
HSBC Global Private Banking aims to build a long term and trusted relationship with clients. Its wealth planning, philanthropy and family governance service teams have been highly recognised by the industry with awards from Asian Private Banker and Wealth Briefing Asia in 2020 and 2021.
“While we don’t have a magic wand to fix all family challenges, our job is to ensure that within that established framework agreed between us and the family, we’re able to provide all the options that are on the table,” she says. “We are here to help them to preserve their wealth and leave a legacy for the next generations.”
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 and HSBC Trustee (Hong Kong) Limited.