wealth management activity survey
TRANSCRIPT
Wealth Management Activity Survey
For the year ended 31 December 2003
Background
In his 2004-05 Budget Speech, the Financial Secretary proposed that a
review on estate duty should be conducted to examine whether adjustments to the
current duty regime would have the effect of attracting more foreign capital. Towards
this end, a Committee has been set up to study, among other things, the effects on the
economy and on government revenue of possible adjustments to estate duty.
2. A consultation document has been issued on 20 July 2004 to invite opinions
from interested parties on the review on estate duty. At the same time, the Committee
plans to assess the impact of changes to the estate duty regime on the economy in
general, and whether any such changes would have the potential for increased
investments and employment in the wealth management industry in particular.
Purpose of the survey
3. For the purpose of the impact analyses, a comprehensive survey of the industry is
needed. Inputs from the industry participants are important.
4. Wealth management is a complex, highly fragmented industry. The
development of financial conglomerates with activities in the private/retail banking,
investment and insurance sectors aside, many different players with varying products
and skills are offering services to affluent individuals. Wealth management also
indirectly supports many other jobs through links with providers of other financial
services, for example stockbrokers and independent analysts. The outsourcing of the
middle and back office functions is a growing trend. Many financial firms now offer
third-party products or simply act as fund supermarkets, carrying literally hundreds of
others’ funds. Such an increasing blurring of inter-industry boundaries adds further
complexity to the quantification of the economic activity generated by the industry.
5. Estate duty is imposed on estates of deceased persons with local assets
(excluding matrimonial home and insurance proceeds) of over HK$7.5 million.
Hence for purposes of this study, the survey is confined to businesses directly
involved in managing the personal wealth of high net worth individuals (HNWIs).
1
Who is to complete this survey questionnaire
6. This survey questionnaire is for completion by any business entities which,
during the year ended 31 December 2003, had been involved in any tax/estate
planning, investment, management (including trustee services) and/or custody of
total net investible assets of over US$1 million for any individual. We are aware
that HNWIs may maintain accounts with more than one business entity engaged in the
wealth management business and that their assets with any single entity may be less
than the prescribed threshold whilst their combined investible assets could be in
excess of this figure. However, to make this survey as practicable and straightforward
to complete as possible, a US$1 million threshold per HNWI per entity has been fixed
for the present exercise.
7. Investible assets refer to all fixed and current assets of the individual but
exclude his primary dwelling. They include a simple savings or fixed deposit account
with a financial institution, a securities account with a brokerage firm or an
investment-linked policy with an insurance company. If the HNWI has more than one
account with the entity, the total net investible assets would mean the aggregate net
investible assets of the accounts.
8. You are invited to complete this questionnaire even though wealth
management may not be your principal business activity. All dollar figures should be
quoted as specified in the questionnaire. The data collected will be kept confidential
and will only be used for the purpose of the impact analysis.
9. This questionnaire contains four parts, namely, Parts A, B, C and D.
Respondents are requested to complete Parts A, B and C. Accountancy and solicitors
firms are requested to complete Part D as well, which should cover services rendered
for all sectors, not limited to HNWIs. If a question within a part/section is not
applicable, please state “N/A” in your answer.
10. Please complete and return this questionnaire to the following address on or
before 30 September 2004:
2
Principal Assistant Secretary for the Treasury (Revenue)
Treasury Branch, Financial Services and the Treasury Bureau
4th Floor, Central Government Offices, Main Wing
Lower Albert Road
Hong Kong
3
Part A Corporate/Business Information
Name of
company
Business
address
Company
website address
Domicile of
company
Which countries does your company cover/service?
Questionnaire completed by:
Name
Position
Fax number
Telephone
number
Email address
1. Please select one item from the following that can best describe your Primary
Business Activity:
Retail and/or commercial banking
Investment and/or private banking
Insurance
Provision of trustee or custodian services
Investment advisory
Investment management
Funds distributor
Legal advisory
Tax advisory
Others. Please specify:
4
2. If you had gross operating income derived from managing (including provision of
trustee services) the investible assets1 of the HNWIs2 or providing other services
(including advisory) to such HNWIs, please state the total fees (in US$ million)
received for such services for the year ended 31 December 2003 which were derived
from contracts entered into by you directly with such HNWIs:
3. If the fees at Question 2 cover part or all of the following services, please state the
percentage in terms of the fees earned:
Percent
Sales and marketing of third-party products ---------
Asset management ---------
Investment planning/advisory ---------
Insurance ---------
Legal advisory ---------
Tax planning ---------
Estate planning ---------
Cash-flow management ---------
Custodian ---------
Trustee services ---------
4. Services assigned/outsourced to any related or third party by you for the HNWIs’
accounts out of the fees received for the year ended 31 December 2003
Services
To HK
entities
(“P”)
Professional
fees paid
(US$’000)
To Non-
HK entities
(“P”)
Professional
fees paid
(US$’000)
Asset management
Investment planning /advisory
Legal advisory
Tax planning
Estate planning
Custodian
5
Trustee services
Accounting/reporting
Regulatory compliance
System maintenance
6
Part B The Profiles of the HNWIs’ Accounts
[Please provide figures as at 31 December 2003]
5. (a) How many HNWIs’ accounts involving the investment of assets were booked3
under your management or opened with your company in Hong Kong?
(b) Please state the total value of such accounts (in US$ million).
6. (a) How many HNWIs’ accounts involving the investment of assets were not booked
under your management or were not opened with your company in Hong Kong,
for which you have served as a contact point facilitating the opening of such
accounts or receiving instructions from the holders of such accounts or providing
advisory services to them?
(b) Please state the total value of such accounts (in US$ million).
7. In relation to your answers to Questions 5 and 6, please provide –
(a) A breakdown of the HNWIs’ accounts by the domicile/residency of their holders.
Domicile/residency of holderNumber of
holders
Number of HNWIs’ accounts
booked/opened
In Hong Kong Overseas
Hong Kong
Mainland
Rest of Asia Pacific
North America (USA and Canada)
UK and Europe
Others
7
(b) A breakdown of the HNWIs’ accounts by their primary holding structures
Primary holding structureHNWIs’ accounts booked/opened
In Hong Kong (US$M) Overseas (US$M)
Personal name4
Nominees5
Hong Kong companies6
Offshore companies
Hong Kong trusts7
Offshore trusts8
(c) A breakdown of the HNWIs’ accounts by the level of investible assets
Total valueNumber of HNWIs’ accounts booked/opened
In Hong Kong Overseas
Between US$1.0M and US$2.0M
Between US$2.0M and US$5.0M
Between US$5.0M and US$10.0M
Between US$10.0M and US$30.0M
Above US$30.0M
(d) A breakdown of the investments in the HNWIs’ accounts by regions
Country/regionHNWIs’ accounts booked/opened
In Hong Kong (US$M) Overseas (US$M)
Hong Kong
Rest of Asia Pacific
North America (USA and Canada)
UK and Europe
Others
8
8. Types of assets under HNWIs’ accounts booked/opened in Hong Kong
Assets
HNWIs’ accounts within
US$1M-
US$2M
US$2M-
US$5M
US$5M-
US$10M
US$10M-
US$30M
Above
US$30M
(US$M)
Cash deposits or money market
instruments9
Equities10 Listed
Unlisted
Bonds11
Collective investment schemes12
Derivatives or structured products13
Properties14
Other investments15 (please specify)
9. Breakdown of investments by regions under HNWIs’ accounts booked/opened in
Hong Kong
Country /
regionHong Kong
Rest of Asia
Pacific
North
America
(USA and
Canada)
UK and
EuropeOthers
(US$M)
Cash deposits or money
market instruments
Equities Listed
Unlisted
Bonds
Collective investment
schemes
Derivatives or
structured products
Properties
Other investments
(please specify)
9
Assets
10. If estate duty were to be adjusted through upward adjustment of the exemption
threshold or provision of exemption by reference to asset type or domicile/residency –
(a) Which option would you prefer and why?
And if your option were adopted
(b) What would be the impact on your financial planning services?
(c) Estimate the inflow of funds or investments, if any, into Hong Kong out of your
clientele. Please explain how your proposed adjustment features in this and give
the basis of your estimate.
10
(d) How much fees (in US$ million) would you expect to gain (lose)? Please state the
basis of your estimate.
11. If estate duty were abolished –
(a) What would be the impact on your financial planning services, particularly the
trust and other structures currently used by your clientele in holding their
investible assets?
(b)
Estimate the inflow of funds or investments, if any, into Hong Kong out of your
clientele. Please explain how estate duty features in this and give the basis of your
estimate.
11
(c) How much fees (in US$ million) would you expect to gain (lose)? Please state the
basis of your estimate.
12
Part C Staff Handling HNWIs’ Accounts
[Please provide figures for the year ended 31 December 2003]
12. Breakdown of staff handling HNWIs’ accounts booked/opened in Hong Kong
FunctionsNumber of
staff16
Total remuneration17
(US$’000)
Sales and marketing/Client relationship manager
Research and analysis
Legal advisory
Tax advisory
Asset management and investment advisory
Custodian
Accounts administration18
Corporate planning and business management19
13. How many staff were involved in handling HNWIs’ accounts booked/opened
outside Hong Kong and what was their total remuneration?
Number
Remuneration (US$’000)
14. What would be the likely effect on the number of staff involved in handling HNWIs’
accounts –
(a) If your option at Question 10(a) were adopted?
(b) If estate duty were abolished?
13
Part D To be Completed by Accountancy Firms and Solicitors Firms
[Please provide figures for the year ended 31 December 2003]
15. Breakdown of fees received (from all sectors not limited to HNWIs)
Functions Amount (HK$’000)
Probate
Estate duty clearance
Estate planning
Tax planning
Valuation of shares
Valuation of property
16. Professional fees paid for outsourcing of services
Functions Amount (HK$’000)
Probate
Estate duty clearance
Estate planning
Tax planning
Valuation of shares
Valuation of property
17. Staff in different job functions
FunctionsNumber of
staff16
Total
remuneration17
(HK$’000)
Probate
Estate duty clearance
Estate planning
Tax planning
Valuation of shares
Valuation of property
14
18. Would there be any changes in your number of staff and what would be the likely
effect -
(a) If your option at Question 10(a) were adopted?
(b) If estate duty were abolished?
15
Meanings of terms and expressions:
1. Investible assets All liquid assets including savings, checking, money
market accounts, certificates of deposit, stock, bonds,
mutual funds, unit trusts, investment trusts, insurance
policies, and all real estate excluding the primary
dwelling of the HNWI
2. HNWI An individual placing total net investible assets over
US$1 million in value of his own with any entity or
an individual seeking tax or other advisory services
from any entity in relation to the disposition of his net
investible assets of not less than US$1 million in
value
3. Booked (a) References to accounts booked in Hong Kong
refer to accounts managed in Hong Kong or governed
by the laws of Hong Kong.
(b) References to accounts booked overseas refer to
accounts managed outside Hong Kong or not
governed by the laws of Hong Kong.
4. Personal name In the name of the account holder, i.e. the HNWI
5. Nominees In third party’s name and held in trust for the HNWI
6. Hong Kong companies Companies incorporated in Hong Kong or companies
with share registers kept in Hong Kong.
7. Hong Kong trusts Trusts with trustee domiciled or resident in Hong
Kong
8. Offshore trusts Trusts with trustee domiciled or resident outside Hong
Kong
9. Money market instruments Short-term debt securities
10. Equities Shares of a company, including common stock,
depository receipts, etc.
11. Bonds Debt instruments issued for a period usually of more
than one year, for example, debt securities issued by
the Government, public entities, or corporations. It
would include debentures, convertible bonds, zero
coupon bonds, preferred stock, eurobond, etc.
12. Collective investment schemes Unit trusts, mutual funds, REITs, etc.
13. Derivatives or structured product Financial instruments such as futures, warrants,
16
options, swaps, structured notes whose characteristics
and value depend on the characteristics and value of
its underlying asset. Such instruments are to be
valued at cost at the time of acquisition
14. Properties Landed properties
15. Other investments Investment instruments other than equities, bonds,
cash deposits, money market instruments, collective
investment schemes, derivatives and properties, such
as gold or other low liquid assets
16. Number of staff Referring to the total number of staff in Hong Kong
involved in any wealth management activities.
Respondents are requested to use their best efforts to
identify the primary function and the principal office
for its staff. For any staff member who performs
multiple roles or has more than one product specialty
or serves more than one geographical regions, the
headcount can be a fraction e.g. any staff member
who spends half of his time in managing funds or
portfolios and the rest in marketing of funds for the
company, then the headcount will be 0.5 for
management of funds and 0.5 for sales and marketing
17. Total remuneration Including salary, double pay, bonus, allowances,
housing benefits and share option, etc.
18. Accounts administration Referring to operation, control and other supporting
staff (e.g. settlement, compliance, accounting, risk
management, etc) who are involved in the
management of HNWIs’ accounts and portfolios
19. Corporate planning and business
management
Referring to any staff in charge of the company’s
strategic planning and the continuous development of
the wealth management activities
17