The report, from the Private Wealth Management Association and KPMG China, gave a broadly upbeat view about what members predict for assets growth. It also suggested that they are confident that Hong Kong can face competitive challenges as it emerges from zero-Covid restrictions.

More than two-thirds of member organisations in Hong Kong’s private wealth industry expect assets under management to rise in the 6 to 10 per cent range over the next five years. A further 22 per cent of them predict a compound annual rate of 11 to 20 per cent.

The figures come from the seventh annual Hong Kong Private Wealth Management report, written by the Private Wealth Management Association and KPMG China. The PWMA has 43 full corporate members and eight associate members with a 12-member executive committee serving as the association’s governing body.

Penetrating the mainland China market has overtaken targeting the next generation and family offices as the number one growth driver for the industry. That growth is expected to accelerate as cross-border travel activities between Hong Kong and the mainland are eventually resumed.

Hong Kong’s private wealth management industry recorded net fund inflows of HK$638 billion ($81.3 billion) in 2021.

Private wealth management clients surveyed in this year’s report also ranked Hong Kong as the preferred PWM hub in Asia due to its many wealth management capabilities and attributes, in spite of strong competition.

The findings provide cheer for Hong Kong at a time when the jurisdiction is emerging from severe restrictions, including quarantines, enacted to combat Covid-19. Rival hubs such as Singapore and Dubai have more or less eased restrictions.

“We are delighted to see that PWM clients continue to see Hong Kong as an attractive wealth management hub across several key dimensions in terms of proximity to mainland China and integration with the Greater Bay Area, ease of trading and onboarding, and investment options,” Amy Lo, chairman, executive committee of PWMA, said. “As the city gradually lifts its Covid-19 pandemic regime, particularly in relation to travel restrictions, we are confident that the PWM industry will see accelerated growth, particularly in attracting new clients.”

Mainland
Mainland China is now the top growth theme for surveyed member institutions. They expect the share of AuM sourced from mainland China to rise from the current 38 per cent to close to 50 per cent in five years’ time.

In particular, 86 per cent of firms see the GBA as being either a “very important” or “important” part of the growth story. 

The Wealth Management Connect scheme launched last year is an important step, but those surveyed said that changes are needed to make the scheme more relevant to the industry, including quota sizes, the range of products, and other details. 

To attract next-generation clients, the majority of whom are digital natives, PWM firms will need to focus on increasing services that can be provided digitally. 

Some 89 per cent of surveyed members are expected to increase spending in technology and transformation.

Family offices
The industry is welcoming policymakers’ steps to support family offices. Some 53 per cent of surveyed clients said the proposed tax exemptions for family investing holding vehicles managed by single family offices would make them more likely to set up a family office in Hong Kong.

Earlier this year, Hong Kong’s government consulted the industry on a proposed profits tax exemption for family-owned investment holding vehicles managed by single family offices in Hong Kong. Subject to certain conditions, an FIHV managed by an SFO in Hong Kong would be exempt from Hong Kong profits tax for its profits derived from certain qualifying transactions and incidental transactions (subject to the 5 per cent trading receipts threshold). The tax exemption may also apply to family-owned special purpose entities (SPEs) set up by an FIHV. An election to enjoy the tax exemption is required and, once made, the election is irrevocable. (Source: KPMG.)

ESG adoption 
In other details from the Private Wealth Management Association and KPMG China report, it found that 76 per cent of surveyed member firms (72 per cent in 2021) expect the proportion of AuM invested in ESG products to be over 10 per cent, and 9 per cent of organisations (zero last year) expect AuM to be over 40 per cent in five years. 

“To achieve this growth rate, more client education, increased investment options, and a higher degree of transparency in ESG credentials, as well as regulatory alignment on ESG standards, were all found to be key to driving adoption,” it said. 

Turning to “virtual assets” such as cryptos and tokens, four in 10 surveyed clients stated that they are interested in virtual assets as an asset class, but felt that Hong Kong did not have a strong market in these assets. The main barrier for the PWM industry to greater investment in the area is concerns about the regulatory environment, while volatility and liquidity are also major stumbling blocks.