Clearer licensing rules, Greater Bay Area opportunities can turn Hong Kong into a family office hub, industry players say

The securities regulator’s recent clarification of rules surrounding licensing is likely to attract more family offices – wealth managers who deal with ultra-rich dynasties
The bay area could generate US$185 million worth of wealth management revenue by 2025, a sign of ‘how large and important’ the market will be, says Raffles Family Office boss

Greater Bay Area

Enoch Yiu

Published: 2:30pm, 14 Sep 2020

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New regulatory clarity and business opportunities arising from the Greater Bay Area could turn Hong Kong into a hub for family offices, according to industry players.

The Securities and Futures Commission introduced guidance this month to clarify the licensing requirements for family office operators.

Family offices manage the wealth of either a single super-rich clan or a group of wealthy families.

One set up purely to invest only for one or a handful of wealthy families will not need a licence from the SFC. However, should the family offices run as a business by accepting fees to invest for many families or other investors, it will need to get a licence from the SFC, the watchdog said.

“The new SFC guidance has removed uncertainties about the licensing requirements for family offices. Previously, many operators were not sure if they needed to have a licence. A clear regulatory regime and a vibrant capital market will attract more family offices to set up in Hong Kong,” said Au King-lun, executive director of the Financial Services Development Council, a government advisory body for the strategic development of Hong Kong as an international financial centre.

Raffles Family Office founder and chief executive Kwan Chi-man agreed that clear regulation would help promote the city as a family office hub.

“A dedicated SFC regulatory framework is important as, unlike Raffles Family Office, many family offices are not licensed. SFC regulation is key to the healthy development of family offices in Hong Kong,” Kwan said.

Raffles Family Office, which was set up in Hong Kong by Kwan in 2016, has secured two investment licences from the SFC. The company expanded into Singapore in 2018.

It currently invests on behalf of around 90 wealthy families through its Hong Kong office and about 50 via its Singapore office, and has total assets under management in Asia of over US$2 billion.

Even as Hong Kong’s economy faces its worst economic recession on record while Beijing’s enactment of a controversial national security sparked worries about the future of the city as an international financial centre, Kwan still has confidence in Hong Kong.

“As we are based in Hong Kong, our staff can easily access all of the mainland cities in the Greater Bay Area within an hour. The GBA could generate US$185 million worth of wealth management revenue by 2025, a sign of how large and important this market is going to be for us,” Kwan said.

With a population of over 70 million, the bay area has a combined gross domestic product of US$1.65 trillion, making it the 11th largest economy worldwide, bigger than Russia’s and behind Canada’s, if the region is counted as a single entity. The bay area has GDP per-capita of US$23,000, which is comparable to some middle-income countries.

Guangdong province, where nine of the 11 bay area cities are based, is China’s manufacturing hub, boasting the second-highest number of households, with investible assets of more than 6 million yuan (HK$6.57 million), just shy of Beijing, according to Hurun.

He Xiangjian, the billionaire who founded the world’s biggest home appliances maker, Midea Group, and a victim of a recent botched kidnap attempt, lives in Foshan city. Pony Ma Huateng, China’s richest man according to Forbes and founder of Tencent Holdings, lives in Hong Kong and has the head office of his giant games company in Shenzhen.

Kwan said the Wealth Management Connect scheme, which Beijing announced in June to allow cross-border sales of wealth management products through banks in the bay area will also create more investment opportunities for family office operators.

Raffles Family Office has signed a partnership agreement with Italian football club Juventus. As Juventus’ official partner in Asia, it is entitled to offer exclusive engagement opportunities for its clients across Asia, a region with one of the largest fan bases for the club.

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