In addition, a transparent regulatory and tech-friendly environment, as well as the availability of professional talents, further adds to the city’s appeal.
However, as clients’ demands evolve, competition intensifies and technology develops, Hong Kong should not rest on its laurels, concluded the Financial Services Development Council (FSDC) after surveying 250 PWM professionals and current and potential clients in November 2019.
In particular, the industry needs to create a strategy that incorporates trends such as the rise of wealth tech, a transforming regulatory environment and requirements for new types of talent, according to the FSDC, which was set up in 2013 by the Hong Kong government to help map out the direction of the territory’s financial services sector.
Between 2013 and 2018, the number of HNWIs in Hong Kong jumped 23%, reaching 153,310 from 124,200, according to the Capgemini’s World Wealth Report, while the territory ranked second globally in 2019 for the number of billionaires, just behind New York, according to the Wealth-X’s Billionaire Survey 2019.
Besides serving domestic clients, over half of the assets managed in Hong Kong are from non-local investors, including those from North America (21%), Asia-Pacific (ex-China) (14%), mainland China (11%), and Europe (9%), and indeed cross-border wealth booked in Hong Kong has topped the list regionally, achieving $1.3trn in 2018, according to BCG’s Global Wealth 2019.
Hong Kong’ ability to consolidate its role as the regional PWM hub is strengthened by its proximity to mainland China, which is set to see its number of millionaires reach 6.9 million by 2024, 55% higher than that in 2018.
Over one-third of survey respondents in all categories considered face-to-face access to their wealth managers an important attribute of Hong Kong as the location of choice for PWM services, as clients value the “feel and touch” of the money, and appreciate the convenience of meeting PWM professionals in person.
Almost every focus group participant echoed this point, especially given the Chinese government’s support for the Greater Bay Area development and the prospect of a two-way cross-boundary wealth management scheme.
New skill sets
Product diversity in Hong Kong was recognised by 38% of PWM practitioners (38%) as a key attributes of Hong Kong, and a higher proportion (45%) of current PWM clients applauded Hong Kong’s product variety, including efficient banking and lending support, offerings of closed- and open-ended funds, fixed income products, as well as more sophisticated and tailored structured product solutions.
However, focus group members suggested that there has been rising demand for more customised and sophisticated PWM products, such as co-investment with alternative funds, ethically-motivated investments and multi-asset strategies — especially among the “next generation’ of the HNWIs” — so Hong Kong’s private banks cannot be complacent.
Fulfilling these needs might be problematic, unless the industry can improve recruitment and training. There were about 7,600 people engaged in the PWM business, according to the FSDC, but 75% of the surveyed practitioners agreed that Hong Kong is facing a talent gap, and the gap is most pronounced in such functions as portfolio managers and investment specialists/advisers.
Moreover,the survey results suggested that about 83% of the respondents believed wealth tech could bring benefits — which would require new skill-sets. PWM practitioners said it would improve their reputation (40%), protect against cybersecurity threats (38%), and lower the cost of doing business (36%); customers reckoned it would strengthen client data analysis (43%) and enhanced client user experience (43%).
Finally, a robust and appealing regulatory regime is a key component of the foundation of a PWM hub, and survey respondents generally considered Hong Kong’s regulatory regime more “facilitative” compared with global peers, as well as compared with five years ago.
The biggest concern was in areas such as know-your-client and investment suitability, where there have been complaints about the administrative burdens of meeting regulatory requirements.
