As the China market continues to open up, mainland-based HNW and UHNW clients are becoming more sophisticated and attuned with their wealth-related needs – both at home and abroad.
Overseas investments are a way for them to achieve more diversified and potentially higher returns, for instance, through access to a wider selection of products and services.
Clearly, this shift in mind-set presents opportunities for wealth managers and professional services firms alike. Yet Geoff Cook, chief executive officer of Jersey Finance, believes it creates challenges that need addressing too.
“There is a general lack of diversification of assets and limited client knowledge when it comes to managing risks and available solutions, such as investment in unfamiliar markets and understanding the implications of inheritance taxes in mature markets,” he explains.
For example, while Chinese clients like the idea of setting up trusts, he says many don’t really understand that this involves the transfer of control to a trustee. The fact that they prefer to take a predominantly active role in their own investments and asset management is, arguably, at odds with the use of such a vehicle.
A helping hand
Since awareness around trust structuring and the international transparency agenda more broadly is still at a relatively early stage among PRC clients, Cook believes that specialist international finance centres (IFCs) can play an important role in helping investors understand their regulatory requirements.
IFCs like Jersey Finance can also enable these clients to fulfil their needs in terms of cross-border wealth, estate planning, investment and family offices.
“There has been a noticeable change in the attitude of the Chinese HNW and UHNW clients in recent years towards trusts, both for wealth and succession planning,” explains Cook. “But there is still a fair amount of educational work that needs to be done in this area.”