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Hong Kong Private Wealth Management Report 2020 Summary

Core Content

The Hong Kong Private Wealth Management Report 2020 provides an in-depth analysis of the private wealth management (PWM) industry's resilience and transformation in response to recent challenges, including the impact of the COVID-19 pandemic, US-China trade tensions, and social unrest in Hong Kong. The report highlights key growth opportunities, technological advancements, regulatory considerations, and talent development as central themes.

Main Findings

• Resilience Amid Challenges: Despite a difficult environment, Hong Kong's PWM industry has shown resilience, with significant growth in assets under management (AUM) in 2019 and continued client satisfaction during the pandemic.
• Mainland China as Key Growth Driver: Mainland China remains the most important growth opportunity for the Hong Kong PWM industry, driven by the development of the Greater Bay Area (GBA) and the potential of the Wealth Management Connect pilot scheme.
• Family Offices as Priority: Attracting family offices is a key growth focus, with recommendations for regulatory reform, tax incentives, and streamlined suitability processes to enhance Hong Kong's appeal.
• Targeting the Younger Generation: Young entrepreneurs and the next generation of high-net-worth individuals (HNWIs) are becoming more influential, requiring tailored digital propositions and services that align with their preferences.
• Digital Transformation: The industry has made significant progress in digital capabilities, with clients rating PWM institutions more positively than they rate themselves. Digital channels are becoming increasingly preferred, though legacy systems and cybersecurity remain challenges.
• Regulatory Concerns: The regulatory environment is a major concern, with firms investing heavily in KYC, anti-money laundering (AML), and sales practices. Regtech is seen as a potential solution to improve compliance and reduce costs.
• Talent Challenges: While the supply of talent is increasing, the relationship manager (RM) role is still the most critical gap. Digital skills, remuneration, and reduced administrative burdens are seen as key to attracting and retaining talent.

Key Themes

1. Resilience and Growth

• AUM Growth: Hong Kong's PWM AUM increased by 19% in 2019 to HKD 9.1 trillion.
• HNWIs Increase: The number of HNWIs (individuals with more than USD 1 million in investable assets) rose by 12% to 172,000, and the number of billionaires increased by 10% to 96.
• Growth Expectations: AUM is expected to grow at a 5-10% CAGR over the next five years, with mainland China as the primary growth market.

2. Impact of Events

• Top Challenges: COVID-19, social unrest, and US-China trade tensions were the top events affecting the PWM industry and client investment outlook.
• Client Risk Tolerance: Despite macroeconomic uncertainty, client willingness to take on investment risk remained similar to pre-pandemic levels.

3. Digital Transformation

• Client Satisfaction: 98% of clients reported that the industry is mostly meeting or exceeding their expectations in terms of digital service delivery.
• Digital Adoption: The pandemic accelerated digital transformation, with many firms enhancing remote client engagement and digital infrastructure.
• Future Outlook: The shift to digital channels will require new skills and present operational and technology risks that need to be managed.

4. Regulatory Environment

• Regulatory Concerns: The industry remains concerned about the regulatory environment, particularly around KYC, AML, and suitability.
• Regulatory Developments: The SFC has issued updated guidance on family offices and trusts, and the FSDC has proposed reforms to create a more conducive environment for family offices.

5. Talent Development

• RM Gap: The RM role is seen as the most critical talent gap, with firms struggling to find and retain qualified professionals.
• Key Attractors: Remuneration, reduced administrative burdens, and supportive IT infrastructure are viewed as essential to make the RM role more attractive.

Growth Opportunities

• Mainland China: Continued development of the GBA and the Wealth Management Connect scheme are seen as key enablers for growth.
• Family Offices: Enhancing regulatory, tax, and operational frameworks is necessary to attract more family offices to Hong Kong.
• Younger Clients: Developing a digital ecosystem and tailored value propositions for young entrepreneurs and the next generation of HNWIs is critical.

Key Takeaways

• Accelerate changes to business and operating models to capitalise on mainland China growth opportunities.
• Collaborate with government and regulators to implement measures that attract family offices.
• Tailor propositions and digital channels to meet the needs and expectations of the younger generation.