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Loss of control the big misconception in Chinese succession planning

By James Beech

The misconception that wealth structuring means losing control is the biggest obstacle facing wealth managers when dealing with ultra-wealthy Chinese families and investors, says Jersey Finance.

The international finance centre found 88% of practitioners it surveyed pointed to the loss of control as their greatest challenge in advising Chinese clients.

Nearly two thirds (59%) said Chinese misconceptions about issues and solutions were holding them back with wealth transition. Nearly half of respondents (47%) said legacy planning was the key consideration for mainland Chinese families. However, 41% of respondents say family disputes were most likely to derail estate or succession planning.

How to Service Chinese Wealth as it goes Global was conducted by Jersey Finance in conjunction with international wealth management firm Hubbis and launched before more than 200 finance professionals at Jersey Finance's Asia Roadshows in Shanghai, on 6 June, and Hong Kong, on 8 June.

Reflecting the views of wealth management and professional services practitioners working across greater China, Hong Kong and Singapore.

The Chinese Wealth research identified a failure amongst clients to approach succession planning as part of a holistic strategy, misunderstanding the solutions available to them, and misinterpreting what it means to cede control of assets.

The survey concluded that financial advisers should be targeting the next generation, many of whom have been educated overseas and who tended to be more understanding that wealth preservation goes beyond investing assets and should be part of developing an overall business succession.

Advisers needed to be aware of and comply with new global standards on regulation. Changes included the implementation of the Common Reporting Standard (CRS) and amendments to individual income tax laws and possible estate duty, as well as reforms to immigration programmes and property ownership taxation rules, such as in the UK and Australia.

Geoff Cook, chief executive of Jersey Finance said: “We commissioned this report to help inform and illustrate how Jersey's expertise can support the changing needs of and challenges faced by investors in the Far East.

“It builds on our growing suite of thought leadership materials, particularly the Internationalisation of Chinese Wealth paper we launched last year, whilst our Roadshow events, which we have been staging in key centres in the region since 2014, gave us a fantastic opportunity to showcase these latest findings.

Cook said succession planning was a “thorny issue” that could sometimes take years for a wealthy individual and their family to address, even though it is one which will not go away.

“In recent years there has been an explosive growth in the understanding of wealth structuring and transition among China's HNWs, which has led to an increased demand for the services of wealth management practitioners. As a consequence, Jersey has seen an increased demand from those practitioners for the full suite of wealth management services needed to serve the unique needs of Chinese wealthy individuals and to capitalise on market opportunities.”

Major survey findings

·         Legacy planning is the key consideration for Chinese families today - 47%

·         The biggest concern when advising Chinese families around the Automatic Exchange of Information (AEOI) and CRS is that clients don't reveal sufficient information - 35%

·         The top factor holding Chinese clients back with wealth transition stems from misconceptions about the issues and solutions - 59%

·         The biggest misconception Chinese families have with wealth structuring is loss of control - 88%

·         The most popular structure among Chinese families today is trusts - 47%

·         Family disputes are most likely to derail estate/succession planning for Chinese clients - 41%

·         When choosing their fiduciary providers, Chinese clients mainly seek confidence that they are in safe hands - 70%

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