From education to assets, Asian family wealth has a tendency to traverse multiple countries. So what impact will this have on the Channel Islands and what specialist support and knowledge is required to ensure success?
Kofi Annan once said that to argue against globalisation is like arguing against the laws of gravity. And it’s true that even pre-Covid, the world felt smaller and more integrated than it ever has.
In recent years, distance, time zones and communication challenges have all been overcome by technology and innovation, resulting in an exquisitely interconnected and, until recently, globally mobile populous.
That’s particularly the case with high-net-worth and ultra-high-net-worth individuals, who are more likely to live, work, study and own businesses and assets across continents. So much so that a second passport or permanent overseas residency is a necessity for success in these circles.
Asian families in particular have spearheaded this approach to international living, and continue to embrace it today.
“Historically, many wealthy families in Asia aspired to send their children overseas for education with a feeling that this would provide a greater chance of success,” says Mike Reed, Head of Wealth Management, Southeast Asia, at RBC Wealth Management.
“These days, Asia is renowned for high-quality schooling – so this situation is changing. But prestige and habits pass through generations.
“As such, we are now seeing many wealthy cross-border families splitting their time, as well as their businesses, between numerous jurisdictions.”
“Wealthy families all over the world put a great deal of focus on the education of their children,” agrees Alice Lau, Executive Director, Head of Private Wealth Services, at Intertrust Hong Kong.
“And for parents in Asia, this meant sending their children elsewhere to study – to the US, Canada, the UK or perhaps Australia. This isn’t by any means a new phenomenon, it started some time ago.
"As a direct result, the families in question become more international. The children have a wider wield and they speak English to an extremely high standard.
“All of this combined means the next generation is very well placed to help their parents look after assets and businesses wherever they may be placed.”
Globally, says Reed, HNW and UHNW families in Asia are also often deliberately looking to diversify their lifestyle.
“Rapid economic growth in Asia has helped propel families to fortune through business ownership and real estate, so this trend has been in the making for decades. New-to-wealth families or second generations are now making global decisions and planting roots in places they have grown to enjoy.
“This means they are looking for something different to what they have in their home base of Asia. Once the roots are established, they transition through generations and the family tree grows on both sides of a border.”
Political push
Lifestyle reasons aside, why else might families and individuals opt to operate both professionally and personally across multiple jurisdictions?
Reed believes it is the current economic and political climate that may be encouraging families to take this global approach to their finances. “Uncertainty around the world has contributed to the desire for diversification and a safety net for assets,” he explains.
Joanna Caen, MD of PraxisIFM Nerine (Hong Kong), believes HNWIs look to tie themselves to certain jurisdictions because of the specialisms those regions offer.
“Hong Kong, Singapore and Switzerland all have well-known, well-regarded wealth management businesses that attract families from all over the world. For others, favourable tax regimes may also be a reason to make ties – such as Britain’s highly successful non-dom programme.”
Regardless of the reasons for doing so, living and conducting business in this way have an impact on financial planning.
“While the concept of a global footprint may be glamorous, it is certainly complex,” says Sarajane Kempster, Director, Fiduciary Specialist Team, RBC Wealth Management.
“Each jurisdiction has its own rules, regulations and customs that may cause frustration or challenges, particularly when clients are considering tax residency, cross-border wealth transfer and estate planning, and other business needs that operate across international borders.”
Reed adds: “Any time you introduce different jurisdictions to wealth management discussions – whether it’s people, source of wealth or assets – it increases the complication of their advice needs and requirements.
“Globally mobile HNW and UHNW families in Asia may have wealth structures, business interests and properties in multiple countries. Family members could be dotted around the globe and lifestyle choices could mean spending a certain amount of the year in different locations.
“And at any time, these interests may need to be managed, bought, sold, migrated across borders or transferred to the next generation.”
The Channel Islands continue to be a popular choice for wealthy families when it comes to trusts.
Kempster explains: “Global families often have ties to the Channel Islands owing to their outstanding reputation for managing dynastic structures and estate planning, as well as facilitating wealth through the generations and their movements around the world. This is facilitated by strong access to a world-class legal framework and professional community.”
Kempster also considers the philanthropic endeavours and ambitions of HNWIs – and the fact that many wish to undertake these efforts quietly – as a driver for the Channel Islands.
“We are seeing a number of Asian families choosing to create a charitable trust or foundation to fund philanthropic projects without publicity,” she says. “As a result, families are drawn to the Channel Islands, which have built up a reputation as centres of excellence for these sorts of structures.”
The perfect blend
So, taking these complexities into consideration, what support, knowledge and experience are required when individuals and families have multifaceted trust structures established within the Channel Islands?
“Where the trust structures are more complicated, our experience is that clients might require a bit more handholding than usual,” Lau explains. “For most of our clients, this is the first time they have been positioned in this way.
“This means we will share with them our own experiences – they like to know how other clients use these structures; how, for example, we have worked with and obtained advice from other professionals, such as lawyers, in these jurisdictions.”
Marcus Leese, Partner at Ogier, also emphasises the need for a well-established team. “Asian-based clients with structures in the Channel Islands need advisers with a material presence here and with deep experience and expertise in local law, regulation and administrative practice.”
However, he is keen to stress that this is definitely not enough on its own. “These clients also need a team that includes advisers based in Asia,” he says.
“It’s imperative that they have the relevant cultural background, as well as fluency in the client’s first language. This will mean that they are able to answer client questions and concerns immediately – with empathy and understanding – and in the way that best suits the client.”
Leese adds: “The complete advisory team needs to include representatives from both these camps.”
Kempster agrees. “Servicing Asian clients with complex trust structures established in the Channel Islands requires in-depth understanding on the ground, both in the islands and in Asia, and experience managing assets across legal jurisdictions,” she says.
However, these relationships are a two-way street, she adds. “The service provider needs the knowledge and experience to ensure that the structure is created and run in a way that meets the family’s objectives; the family also needs to understand why a more convoluted structure can be a better solution than the historic simple BVI company.”
While education appears to underpin the reasons that family wealth has a tendency to be global, it is knowledge and the sharing of experience that lies at the heart of managing it effectively.
Kofi Annan himself once summed this up aptly: “Knowledge is power. Information is liberating. Education is the premise of progress, in every society, in every family.”
• This article was first published in the Asia Edition of Businesslife, published in December 2020