Last month marked the 20th anniversary of the start of the Asian financial crisis. Whilst for most of us the global financial crisis was something that emanated in the US in 2007, the collapse of a number of Asian currencies a decade before (July 1997) as a result of over-dependence on foreign flows was a hugely impactful event too, and saw economies in the region seek emergency rescue packages from the IMF and endure years of economic turmoil.
20 years on and the Asian picture is quite different. The latest Global Wealth 2017 report compiled by the Boston Consulting Group ‘Transforming Client Experience’, for instance, shows that Asia Pacific was the fastest growing region globally last year in terms of private financial wealth with almost double-digit growth (9.5%), considerably outstripping the global average of 5.3%.
That upward trajectory is expected to continue and, equally significantly given the Asian experience in the late 90s, the propensity to look to overseas markets is as strong as ever. The China Private Wealth Report 2017 (Bain & Co. and China Merchants Bank), for example, shows that the proportion of HNWIs with overseas investment has risen to 56% in 2017, up from 19% in 2011.
This is pertinent to outward looking international finance centres (IFCs) like Jersey, which has invested significantly over the years in extending its reach to emerging markets. Today, 50% of the work done in Jersey comes from outside of the GMT time-zone, with the Far East, in particular Greater China, as well as member states of the Gulf Corporation Council (GCC) are now key markets for Jersey. Indeed, the Boston report also highlights that private wealth growth in the Middle East (8.5%) is not far behind Asia Pacific.
If the past few years have taught IFCs anything, though, it’s that resting on your laurels is not an option – jurisdictional differentiation is key to maintaining a positive reputation, particularly in the Asian markets.
Jersey has taken this head-on by providing fresh insights into global financial flows to develop a compelling and honest narrative for IFCs, and to give international investors the confidence they need in an increasingly complex environment. And it’s why we continue to invest in independent data-driven research.
Two recent white papers produced in conjunction with Hubbis are a case in point, and particularly relevant when reflecting on Asia’s transformation over the past 20 years. The “How to Service Chinese Wealth as it Goes Global” and “Driving Forces Behind GCC HNW Investors” reports identified some key challenges facing wealth management practitioners supporting HNWIs in China and the GCC.
In particular, the research showed a real drive by wealthy individuals in both regions towards the globalisation of their wealth and an acknowledgement of the importance of asset protection for future generations, with legacy planning being the main priority (47%) amongst Chinese investors and business succession planning being the main priority within the GCC (56%).
At the same time, the reports also found a real gap between this desire for succession planning and how to achieve it, including some real misconceptions around wealth planning. Most significantly, the overwhelming sense was that wealth planning involves a loss of control over their assets – an attitude shared by 88% of Chinese and 56% of GCC HNWI clients.
Meanwhile, in both regions, wealth practitioners also revealed a key concern in advising families around reporting requirements such as Automatic Exchange of Information (AEOI) and the Common Reporting Standard (CRS) was that clients don’t reveal enough information about their situation and assets (23% in China and 42% in GCC).
These are a snapshot of the reports’ findings, but combined they have provided some valuable insights into the role IFCs can play in supporting the growing demand for global wealth and succession planning amongst HNWIs in the Far and Middle East.
They have also articulated some real challenges, as a new generation of wealthy Chinese and GCC individuals are having to grapple with the concept and practicalities of international succession planning.
There’s no doubt that Asian markets are considerably more experienced and sophisticated than they were 20 years ago, and against that backdrop it’s understandable that there is an air of caution amongst some HNWIs when it comes to venturing into global wealth and succession planning.
The professional support those markets receive now from advisers on and offshore will be instrumental in re-shaping the region’s attitudes towards global structuring, and Jersey’s commitment to providing insights in this area should position us as a key player in helping to do so.
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