One of the most notable obstacles to capitalising on the growing need for wealth planning for Asia’s ever-wealthier and increasingly international families continues to be education – at both the adviser level as well as for high net worth (HNW) clients.
Date: May 17, 2012
Tags: Wealth planning, Trusts, Education, Estate planning, Succession planning, Regulation
One of the most notable obstacles to capitalising on the growing need for wealth planning for Asia’s ever-wealthier and increasingly international families continues to be education – at both the adviser level as well as for high net worth (HNW) clients.
There is increasing urgency to ensure relationship managers (RMs) at private banks and other advisory firms better understand the various tools and structures, and their applications, to ensure the industry makes the most of the current “bull market” for wealth planning.
Without this understanding, these frontline individuals won’t be able to provide suitable and appropriate advice or solutions to address the increasingly complex and bespoke needs which clients face.
And in turn, clients won’t properly understand how to use and apply trusts and various other tools to meet their business and succession planning needs.
The challenge has become so acute in certain emerging markets, for example China, that this is now something which keeps some wealth planning business heads awake at night.
These were some of the key outcomes from two thought-leadership discussions last week in Hong Kong and Singapore – hosted by Hubbis in partnership with by Amicorp Group – on the future of wealth planning in Asia. Both roundtables involved high-profile wealth planning practitioners and senior management within Asian wealth management and private banking, as well as relevant trust professionals.
Breeding greater awareness
Inevitably, the vast and ongoing inter-generational shift is impacting the way that HNW clients and families think about how they manage their wealth.
Yet the need for wealth planning solutions in Asia has been apparent for the last 15 years or so, and – as roundtable participants noted – the families are now 15 years older.
As a result, some of those families who haven’t put in place effective structures are now facing big problems – especially if the publicity around high-profile and public divorces and family disputes which make their way into newspaper headlines and articles is anything to judge the situation by.
This media coverage shows how many accidents are out there waiting to happen, warned practitioners. But at the same time, these situations highlight the potential for clients to become more aware of the need to start planning properly.
Seeing the real detriment of not planning, or of having a plan not administered in a very robust way, seems to be a catalyst, therefore, for a growing realisation of the need for planning for family businesses and succession issues.
Enforcement actions are another way to help clients realise the implications of poor planning, added participants.
Cultural influences
The hierarchical structure of many Asian families is another significant contributor the the lack of action being taken by these clients in terms of wealth planning.
For example, said practitioners, in many family meetings, sons, daughters and other family members simply agree with with the views of the patriarch. This stems from a culture of following orders without question.
By comparison, there tends to be more discussion among family members, in a family-office type environment, in Europe and the US.
It is also often the case in Asia that children don’t really know much about the family wealth or business in any detail. Or they just don’t want to ask.
Raising standards
Disputes and cultural characteristics simply highlight the pressing need for the frontline to do more – meaning becoming more knowledgeable and engaged in the solutions available to facilitate this wealth shift, as well as having more proactive conversations with their clients.
Some participants proposed more supervision, to give a benchmark and therefore floor to how advisers must conduct themselves and ensure they offer appropriate solutions to clients.
A concern raised, however, was that regulations or global standards alone won’t achieve what is required.
Ultimately, without proper education, there will be increasing instances of clients not understanding the structures they are buying – or as a worst-case – structures being mis-sold.
For example, said practitioners, it has been the case that many HNW clients end up having multiple BVIs because they think this is the best way to manage their assets, or because this is what their friends have done. Some HNW individuals might even consider them to be status symbols based on the way they have been portrayed by some advisers.
The education that many advisers need, both for themselves and their clients, includes making clients realise the implications of not planning or using certain wealth planning tools. For example, if they have their account in their personal name, then this is a public account, not a private one – given that when they die, whether they do or don’t have a will, the account will go in front of the probate court in Singapore.
An approach that one large bank said it has brought in to monitor and manage the interactions with clients in relation to wealth planning solutions, is an internal policy stating that an authorised specialist must be involved in any planning and structuring. This puts it in the hands of the wealth planners, rather than the RMs.
The aim is to get the right person in front of the client at an early stage to avoid any potential for mis-understanding, mis-managed expectations, or mis-selling.
Regulatory drivers
The need for wealth planning, along with advisers who can discuss options and solutions in the right ways, is greater today than ever before.
Regardless of any improvements in the global economic environment which may or may not be on the horizon, the current spotlight stemming from recent crises on tax and transparency will remain amid the new regulatory and compliance minefield.
In relation to this, costs will rise in line with the greater complexity – which is something the industry will most likely need to absorb, agreed participants.
A further trend which presents a challenge to the industry is the fact that solutions are getting much more bespoke in the way they are structured. This is creating a significant shift away from standardised documents being used for any solutions of material value.
As a result, warned practitioners, either ignoring the problems, or hoping they will go away, cannot be part of any client’s strategy.
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