25 February 2020
Hong Kong is well placed to cement its position as a wealth management hub in the Asian region. Photo: Reuters
Hong Kong is well placed to cement its position as a wealth management hub in the Asian region. Photo: Reuters

Family councils and wealth succession planning

It is normal that the rich want to see their wealth pass from one generation to the next to ensure a comfortable life for all the descendants.

The distribution of assets, however, requires careful planning, as the process could easily lead to discord and fights among the family members.

An entrepreneur spends a lifetime to create a successful business and amass enormous wealth. But often we find that such people fail to plan wealth succession well ahead, leading to court battles among the descendants.

Family cohesion falls apart as siblings may have different expectations about the rewards due to them.

To resolve such cases, family councils are a good way to manage the wealth and lay out powers and responsibilities to each family member.

The councils can also play a critical role in ensuring the growth of the family business, particularly in cases where individual family members have different opinions and talents.

The individuals can manage the family business, charity funds or investment firms based on their abilities and interests. This way, they can all help grow the family assets.

Also, a modern family council can help break the traditional “rule by the voice of one man alone” in family business. Young members will be able to express their views.

And those who have little interest in the family business can start their own ventures with family capital.

Family councils and family constitutions will enable business succession in a highly transparent way, and maximize the benefits for all family members.

They will work for the interests of the overall family, being fair to all the members.

Setting up a family council involves many legal and business aspects. People interested in such arrangements should seek advice from scholars and professionals.

Asian wealth management hub

Hong Kong has a vast pool of talents who have deep knowledge in finance, taxation and onshore and offshore investment. The professionals can help the rich in the region to tackle the issue of wealth succession and family business transition.

Hong Kong has a world-class legal system, which makes the city a good place for investors, be it locals or people from mainland China or Southeast Asia, to offer asset protection trust and added-value services.

The city’s wealth management industry has kept expanding over the last few decades. A highly-efficient and prudent financial system and interaction among different private banks has enabled the sector to ride through market ups and downs.

Private banks in Hong Kong should not only attract local and mainland customers, they should also lure more high-net-worth individuals from Southeast Asian nations. That will help cement the city’s role as a wealth management hub in the Asia Pacific.

China’s Belt and Road initiative will enhance trade and investment activities of Southeast Asian investors, which should help corporations and investors to create and expand their wealth.

Such wealth will, in turn, become a new growth engine for the private-banking industry.

Hong Kong has been actively pushing for Fintech development in recent years, an initiative that will help improve the user experience for private bank clients.

The special administrative region has been mired in various conflicts and fights in recent years, sparking concern that the events might reduce its commercial competitiveness and weaken investor confidence.

However, we should bear in mind that free speech and free flow of information are the cornerstone for Hong Kong’s success. As an open and diversified global metropolis, the city is fortunate enough to have room for controversial debate.

If people remain diligent and continue to work hard, there is no reason why the city will not see many new achievements in various walks of life, leveraging on the advantages of its system.

This article appeared in the Hong Kong Private Banking Journal on Nov. 16.

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Chief reporter at EJ Insight