28 October 2016
Hong Kong can maintain status of global financial and wealth management center with its highly transparent market, rule of law and freedom of information. Photo: HKEJ
Hong Kong can maintain status of global financial and wealth management center with its highly transparent market, rule of law and freedom of information. Photo: HKEJ

Wealth succession is all about communication

Wealth succession is not simply transferring money and company shares to the next generation.

It’s more about passing on to them the traditional experience in financial management, and letting it merge with their new ideas.

As our society undergoes drastic changes and development, even people with similar academic background and social experiences could have strikingly different views on the same issue, not to mention people from two generations who are decades apart in age.

People from the older generation who have gone through decades of ups and downs in the course of building their own business may find it hard to understand why their younger peers are always yelling for change and the fulfillment of their dreams.

They are at a loss when their children eagerly propose some high-risk investment plans in technology, social enterprises, art and new media, because they are worried that these risky investments might put their family business succession plans in jeopardy.

Many Gen-Xers and millennials, especially those who keep abreast of the latest knowledge and global trends, look forward to creating their own brave new world rather than inheriting the traditional family business from their parents.

They often complain about their parents’ old-school mindset and unwillingness to give them a free hand.

However, the huge gap between the two generations over their understanding of wealth might not necessarily be a bad thing.

It may provide an opportunity for them to have a frank dialogue, through which the issue of succession is likely to be resolved and the family business might even achieve further growth.

On the other hand, how could a prominent family continue to thrive if its members shut the door on communication? They might even take their dispute to court.

Diversifying to new industries

As some wealth management professionals have pointed out, many wealthy people who were either born or arrived in Hong Kong shortly after the Second World War are already planning to pass their business to their next generation.

Some have decided to set aside a portion of their wealth for their children and put it at their complete disposal, allowing them, for example, to invest the money in high-risk emerging industries.

By doing so, they let their children fulfill their ambitions while providing new growth momentum for their family wealth.

Through the process, the younger generation can also realize the hardships their parents went through over the years to get to where they are today. They learn the hard truth that there is no shortcut to getting rich and the only way to success is to pay your dues.

In fact, amid the fierce competition in a highly globalized world and volatile financial market, the younger and older generations within a family must communicate well with each other, or seek help from wealth management professionals, in order to guide a smooth transition in the family business.

Rising opportunities from China

It has become apparent that the emergency of an upper class on the mainland in recent years and China’s gradual opening of its capital market have provided enormous business opportunities for Hong Kong’s wealth management industry.

With a legal system that is compatible with the rest of the developed world, and no shortage of professional talent specializing in finance, taxation and foreign investment, Hong Kong is undoubtedly the best choice for mainland billionaires when it comes to arranging for offshore asset management and wealth value-added service.

As an international city and a melting pot of eastern and western cultures, Hong Kong can also provide a trading platform for jetsetters from the mainland, Southeast Asia and the West to take part in “alternative investments”, such as the buying and selling of artworks, antiques, red wines and luxury goods.

Given the rise of major mainland cities in recent years, some might think that Hong Kong’s role as China’s window to the outside world is on the decline.

The truth, however, is that Hong Kong remains the top choice as “midway station” for western investors who eye China and Chinese enterprises going overseas, thanks to the city’s highly transparent market, rule of law and freedom of information.

Besides, Hong Kong has the largest offshore renminbi capital pool in the world, which gives us a definite advantage over other cities in developing RMB-related financial products.

On the other hand, in promoting its “One Belt, One Road” strategy, Beijing would also need Hong Kong as a bridge to Southeast Asian countries.

As long as Hong Kong can maintain its institutional advantage, and continue to push back the frontiers in exploring new financial products and service in the days ahead, it is beyond doubt that our city will be able to remain the financial and wealth management center in the Asia-Pacific region, living up to our worldwide reputation as the “Pearl of the Orient”.

This article appeared in the Hong Kong Private Banking Journal on Nov. 18.

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