CGj highlights the key takeaways from a recent Institute seminar looking at the roles that governance professionals can play in supporting local and global family offices as they set up or expand in the Hong Kong market.

The HKSAR Government has launched a number of initiatives to attract more family offices to set up in Hong Kong. It is likely, therefore, that the opportunities for governance professionals to get involved in supporting family offices will rise in the years ahead. In this context, the Institute has been stepping up its guidance and training in this area of practice. The Institute is keen to broaden understanding, not only of family offices, but more broadly of wealth management and succession planning and the crucial importance of good governance to all of these. 

Since its creation in 2022, the Institute’s Wealth Management Interest Group has published two guidance notes covering Hong Kong’s new foreign-sourced income exemption (FSIE) regime and its new tax concession regime for single family offices. In the same vein, the Institute recently held a seminar – Family Office: Governance Aspects, Thoughts and Opportunities – offering valuable insights for governance professionals interested in getting more involved in this type of work.

Promoting family offices in Hong Kong 

The seminar first addressed what the government is doing to attract more family offices to set up in Hong Kong. The Guest of Honour, Joseph Chan JP, Under Secretary for Financial Services and the Treasury, the HKSAR Government, focused his presentation on the government’s new tax exemption, effective for the year of assessment 2022/2023 and onwards, applying to investment holding vehicles owned by single family offices, as well as a recently launched dedicated family office service provider network.  

Mr Chan stated, however, that these initiatives are part of the government’s broader strategy to further develop Hong Kong as a family office hub. He cited a number of other initiatives under this strategy – for example, the government held a Wealth for Good in Hong Kong summit in March this year. It has also allocated HK$100 million to InvestHK over the next three years to attract more family offices to Hong Kong.  

There can be little doubt about the government’s determination to nurture and support family offices based in Hong Kong, but the competition to attract wealthy families to set up offices is intense globally. Nevertheless, speakers at the seminar also emphasised that Hong Kong has significant advantages when it comes to attracting family offices and developing as a wealth management hub. These include the high number of wealthy individuals based in the city, a thriving stock market, and, of particular relevance to readers of this journal, abundant and highly qualified professional talent.

What expertise and skills are needed?

Speakers at the seminar, together with the panellists, shared their insights into what practitioners can expect in terms of the skills needed and the nature of the work involved in setting up and supporting family offices. They emphasised that this area of practice is not just about tax. While tax considerations clearly play a central role, governance issues and an understanding of the personal aspirations of the wealth owners concerned are just as relevant.  

Peter Lee, Partner, Family Advisory, Private Enterprise Practice, KPMG China, pointed out in his presentation that governance professionals have highly relevant expertise to help family offices and family-owned enterprises to establish and maintain good governance controls, and to remain compliant with legislative and regulatory requirements. Governance expertise is also essential, more broadly, in transitioning wealth from first-generation wealth owners to successive generations. 

The skills and experience needed by practitioners involved in this type of work, however, go beyond these considerations. Every family is different and practitioners will not be able to progress very far in wealth management and succession planning for family-owned enterprises without developing a good sense of the personal aspects involved. 

Willa Chan ACG HKACG, The Founding Principal, Willa Legal, pointed out that a successful family office not only helps preserve and grow wealth for future generations, it also gives a formalised structure to maintain the values and ethics of the family. ‘The family office effectively and efficiently communicates the value and vision to all family members in a systematic and structured manner,’ she said. ‘This is what we refer to as the family constitution. Although it is not legally binding most of the time, the constitution outlines the family values, vision and rules, especially for decision-making and conflict resolution, and provides a governance framework for making decisions on family-related matters.’ 

She added that governance professionals can play a crucial role in assisting with the drafting and design of such constitutions, ensuring that the family principles align with legal requirements and best practice. Other speakers added that knowledge of, and experience in, environmental, social and governance (ESG) matters are also increasingly relevant in family office and wealth management work. Members of the younger generation inheriting the family business generally have more awareness of the importance of ESG considerations and are often keen to ensure that good ESG practices are incorporated into the family ethic. 

Broadening horizons

Another key seminar takeaway for governance professionals was that wealth management work is more diverse than practitioners may assume. Mohan Datwani FCG HKFCG(PE), Institute Deputy Chief Executive, and Panel Chair for both sessions of the seminar, mentioned that his own experience of working in this area was not only focused on technical issues – it was also about helping to preserve the family legacy.

Wealth owners are often as concerned with passing on their legacy and vision as their wealth. In particular, they are at a stage of life where they want to give back to society. Having focused for many decades on establishing a profitable business, they now want to focus on setting up their own charities. So family office work can be as much about impact investing, social finance and philanthropic activities as it is about financial and tax considerations.  

‘The charity purpose is one of the most important non-tax considerations for many families nowadays,’ said Wise Lam, Partner, Tax Services – Private Client Services, PwC Hong Kong. She added that some large families may even have designated family members, or a dedicated team in their family office, to be solely responsible for philanthropic activities.  

The seminar reviewed in this article – Family Office: Governance Aspects, Thoughts and Opportunities – was  held on 22 September 2023. More information on the Institute’s ECPD seminars is available on its website: www.hkcgi.org.hk.  

SIDEBAR: Credits

The Institute would like to thank everyone involved in the seminar reviewed in this article. From the Institute, Ernest Lee FCG HKFCG(PE), Institute President, and Technical Partner, Deloitte China, gave the welcoming address, and Mohan Datwani FCG HKFCG(PE), Institute Deputy Chief Executive, was the Panel Chair for both sessions. 

The speakers and panellists (in order of appearance) are listed below.

Guest of Honour

Joseph H L Chan JP, Under Secretary for Financial Services and the Treasury, the HKSAR Government 

Session One

Edmond Chiu FCG HKFCG(PE), Council member and Co-chair of the Wealth Management Interest Group under the Institute’s Technical Consultation Panel, and Head of Corporate & Fund Services, Vistra Corporate Services (HK) Ltd

Peter Lee, Partner, Family Advisory, Private Enterprise Practice, KPMG China

Anthony Lau, Hong Kong Leader and Hong Kong Financial Services Industry Tax Leader, Deloitte Private, and Partner, Tax and Business Advisory Services, Deloitte China

Leon Mao, Head of Advisory – Managing Director, North Asia, Vistra

Karmen Yeung, Leader of People & Enterprise/National Head of Private Enterprise/Head of Private Enterprise, Hong Kong, KPMG China (panellist)

Dr Au King-lun MH, Executive Director, Financial Services Development Council (panellist)

Winnie Shek, Partner, Business Tax Advisory, Deloitte Advisory (Hong Kong) Ltd (panellist)

Session Two

Jenny Choi FCG HKFCG(PE), Co-chair of the Wealth Management Interest Group under the Institute’s Technical Consultation Panel, and Partner, HK Entity Compliance & Governance Leader, EY

Wilson Cheng, Partner, Tax Leader, Hong Kong and Macau, EY

Willa Chan ACG HKACG, The Founding Principal, Willa Legal

Wise Lam, Partner, Tax Services – Private Client Services, PwC Hong Kong

Edmond Chiu FCG HKFCG(PE), Council member and Co-chair of the Wealth Management Interest Group under the Institute’s Technical Consultation Panel, and Head of Corporate & Fund Services, Vistra Corporate Services (HK) Ltd (panellist)

Hazel Fok ACG HKACG(PE), member of the Institute’s Professional Services Panel and a trust or company service provider practitioner (panellist)

Chee Weng Lee FCG HKFCG, Global Head of Tax, Tricor Services Ltd (panellist)