Overseas Diversification Minimizes Risk, But Requires Increased Knowledge of Compliance, Taxation, and Regulatory Issues

Chinese high-net-worth (HNW) and ultra-high-net-worth (UHNW) individuals are increasingly looking for greater diversification, protection and portfolio growth as they become more financially sophisticated, according to new research from Jersey Finance.

The report, “The Internationalisation of Chinese Wealth – 2016” is based on proprietary research conducted by Jersey Finance, the body which promotes the jurisdiction as a robust, transparent, financial centre, and Hubbis, a provider of events and content for Asia's Wealth Management community, from interviews with industry representatives. The white paper examines the driving forces behind Chinese investors’ increasing appetite for foreign investment, and the risks and challenges they must prepare for in doing so.

The research involved the views of over 50 practitioners working in the wealth management industry in either Hong Kong and Singapore. These included wealth professionals at private banks, trust and fiduciary services providers, tax consultants, law firms and other professional services firms.

The white paper identified estate and inheritance taxes, along with the global drive towards tax transparency, as being among the biggest and most pressing risks for Chinese HNW and UHNW individuals.  According to the report, Chinese individuals also see overseas investments as a way to achieve higher returns through access to a broader selection of products and services than would be available domestically.

The key findings of this white paper include:

• The primary needs of China’s HNW and UHNW individuals are to diversify and protect their assets in an increasingly complex world, and to establish proper succession planning for family businesses and to protect their personal wealth
• While China’s HNW and UHNW individuals prefer to take a predominantly active role in their own investments, the broader selection of products and services available has led to commensurate demand for wealth management services.
• The management of overseas wealth presents new challenges for investors. The implications of regulations, including the Organisation for Economic Co-operation and Development’s Common Reporting Standard is still not fully understood by Chinese investors
• Maintaining compliant structures in an increasingly transparent and compliance-driven world is ever more challenging and more important

Richard Corrigan, Interim Director of Financial Services for the Government of Jersey said: “As China’s HNW and UHNW take an increasingly active role in their own investments, there are signs that more of them are entrusting a larger share to wealth professionals, both domestically and through international finance centres (IFCs), especially in the current volatile environment. We believe there is a stronger need for first-class IFCs and financial practitioners to provide a full suite of wealth management services – including estate and wealth planning, corporate finance and real estate to serve the needs of Chinese wealthy individuals.”

The complete findings, which include insights into structuring solutions, tax-related risks, gateways to Chinese wealth and more, can be found in the "The Internationalisation of Chinese Wealth – 2016”.