Private Wealth Management in Hong Kong : Part 3 of our SURVEY 2019
Hubbis conducted a Survey in late January focussed on the future development of the private wealth management market in Hong Kong. We are pleased to reveal Part 3 of our series.
We did this ahead of our Asian Wealth Management Forum – our flagship event for 2019 -taking place on February 26th at the W Hotel in Hong Kong. As many of these topics will be discussed at the event.
Please view the website here.
Part 3 - How would you like to see the regulatory and compliance framework change and evolve in Hong Kong?
Respondents requested a greater differentiation of approach from the HNWI and ultra-HNWI clientele, compared to the retail and mass affluent market, in recognition of their greater financial resilience and also their generally elevated financial markets sophistication. Flexibility is central to encouraging increased business and investment.
Greater dialogue between regulators and industry participants will encourage a more practical and client-oriented approach, rather than the application of simple rule-based compliance. There is a feeling that the wealth industry has been unduly strictly regulated and monitored since the global financial crisis, rather like closing the barn door after the horse has bolted rather than encouraging a more responsible and business-focused approach.
Procedures and processes for KYC and client onboarding should be streamlined and made more user-friendly, as it represents a huge compliance hurdle and fear-factor for both wealth adviser and client alike. One respondent asked for a clear tax exemption for the wealth management industry, or easier account t opening procedures, or perhaps both in light of the huge compliance costs today.
One of those surveyed argued that while Hong Kong cannot go against the flow of global regulatory proliferation and rectitude, Hong Kong should consider being less formalistic in its application and take a more risk-basis approach.
A close eye on Singapore’s regulatory environment was advised, in order to keep Hong Kong as competitive as possible with that market. The SFC and HKMA needs to hire more people from the industry instead of lawyers and accountants
A respondent asked that whenever there are new regulatory and compliance framework changes being introduced, adequate transparency must be in place whereby the private wealth management professionals understand the rationale behind the changes. For some changes with a profound impact on the profession, it is preferable for the industry representatives to be consulted beforehand so that any implementation of the changes could be embraced with strong support from the industry. Another expert replied that he would like to Hong Kong’s regulators merged into one authority to ensure that all players are treated equally, and it gives the public more confidence.
Some of those surveyed asked for a generally less prescriptive and restrictive environment for new business, one that is open for innovation and that does not stigmatise the industry or its clientele. A more sensitive regulatory environment such as those see in mature wealth management market like Australia or Canada would be preferable.
The regulators should do more to encourage the use and application of new technologies, in order to help the wealth industry offset the rising costs and managerial burdens of compliance.
Meanwhile, the regulators should act faster to eliminate non-compliant players and encourage those well-managed, compliant players to thrive. Greater assistance in the arena of cross border rules would also help.
Hong Kong, said one of those surveyed, is supposed to be an international financial centre. This means international businesses and business people need to be able to open bank accounts and operate here if Hong Kong is to remain competitive. The pendulum has swung too far towards compliance and this is largely driven by forces outside. Hong Kong needs to sit back and take a deep breath and view what is happening with a balanced longer-term view and hopefully balance its policies to bring some common sense and commercial sense back into the equation, while of course still helping to stop the ‘bad’ operators from taking advantage of the resources and platform and therefore risk sullying the Hong Kong brand.
More from Michael Stanhope, Hubbis