New regulations mean wealth creation is becoming less of a priority for Asian families. Instead, they are turning to simple wealth preservation to protect the future, writes Rudy Tan, Managing Director at Singapore Trust Company, a subsidiary of Ocorian.
As technology brings more opportunities and governments tighten regulations, it's often the wealthy that must re-think their approaches. Certainly, where once wealth creation was the aim of private wealth managers in Asia, it seems the modern world is causing attention to turn to simply preserving family wealth - this being preferable to falling foul of increasing barriers to growth.
That growth in complexity, though, adds time and effort to wealth management, as too does the increasingly global spread of Asian wealth and assets. Where once the wealth was concentrated in the region, even a single country, it's now to be found throughout the world: properties purchased for children to use while studying abroad, pleasure craft leased in far-flung places, offices to manage in key strategic locations.
Adding to the challenge for wealth managers today is continued Asian expectations for low fees despite the additional complexity; more for less adds pressure to the industry, and competition between managers can lead to less attention to detail.
With the wealth preservation industry in a state of transition as we face a full-blown global Common Reporting Standard (CRS) regime, costs will inevitably creep up with the barrage of additional work to be done. That means smaller structures will become more expensive. The challenge for wealth managers is to be efficient as time goes on and to streamline to allow structures to be effectively run. So how can they do this?
The reporting challenge
Much has been written on the increase in regulation, and the burden it places on businesses and wealth around the world. Know Your Client (KYC) requirements mean families must be clear and keep track of everything they do. More than ever, the need to be efficient and streamlined is key - as is the paper trail so necessary to back things up.
Technology helps here, with many formerly manual tasks becoming automated and taking less resource. This does not mean, though, that the job of a wealth manager becomes easier. On the contrary, there is more for them to monitor - and there is more information for them to analyse to better help their private wealth clients. The challenge is to utilise technology and dashboards to prepare and automate as much reporting as possible so that the wealth manager can have an oversight of compliance globally, giving them room to identify any potential issues before they become threats.
The property challenge
The globalised world affords more freedom to roam, but this also means a greater demand for international property among Asian families. Unfortunately, not all property markets operate in the same way; each country has its own unique taxes and regulation to deal with.
It's the job of the wealth manager to work with the Asian family as they identify the property, or structure of portfolio, that works best for them and their needs, while keeping them informed of any charges they may incur in-country. Then there's the matter of tax implications - both in the country of the property, and any knock-on effects to the wealth portfolio as a whole. There could be limits to foreign ownership, or additional taxes - or, indeed, tax breaks and incentives.
Working in step with an expert partner can ensure the right choices are made for the family portfolio as a whole.
The generational challenge
With the freedom to roam that fuels booms in foreign property ownership comes the challenge of a family spread as far as the property. Once was a time all generations of a family were within reach, at most spread across a few Asian countries. Now, though, there is study in London, internships in New York, a new generation raised in Sydney. The Asian wealthy family has truly become international.
This, of course, adds even more complexity to wealth preservation as multiple countries come into play. Just as the wealth manager can work with the families as they move through the minefield of property ownership, so to can they keep up-to-date with regulation and requirements for the wealthy in every country the family resides. There could be additional taxes, or charges for visas - indeed, renewals of visas - to take into account; having one body monitoring this complexity takes a burden away from the family, allowing the family to enjoy their wealth rather than monitor it.
Don't take the risk; work with an expert partner
To help mitigate these risks and challenges, you need to work with a partner who is hands-on, personal and responsive. Ocorian's private wealth experts can create the right structure, governance and planning to help preserve your family wealth for generations to come.
Get in touch for a conversation about how we can help your family.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.