01 March 2023
Securing the future: Why Asian HNWIs are turning to offshore jurisdictions
Here, Carey Olsen counsel Rachel Yao reflects on the impact of recent global events such as the pandemic on Asian high net worth individuals and the move towards offshore jurisdictions as a solution for securing wealth by diversifying the geographic location of assets in response to changing priorities.
What kind of market volatility and geopolitical risks are Asian HNWI’s most concerned about today, and in what ways are they impacting their approach to growing wealth and succession planning?
Rachel Yao (RY): HNWI migration in Asia was a rising trend over the past decade and has not slowed down as a result of Covid-19 border closures and lockdowns. The inability to travel and the rapid growth of virtual meeting applications and software over the past three years caused many HNWIs to reconsider and reshape their lifestyle. Migration flows are expected to increase in 2023 and beyond as families and investors prepare for the post-Covid world.
As US-China and other regional tensions in Asia remain high, wealth and succession planning will become equally important to Asia HNWIs as creating wealth. Affluent individuals are extremely mobile and capital is moving faster than ever to safer destinations.
In what ways are you helping clients navigate through this period of tumult? Can you talk a bit about some of the innovative approaches you are using?
RY: Geopolitical and Covid-related difficulties that HNW families have faced over the past few years have resulted in an increased emphasis on succession planning.
Clients' needs during and post pandemic are and will be more sophisticated than ever. Allocation of capital and migration of family members will always have to be considered as an overall package. There is increasing demand from wealthy families in Asia to obtain a second passport or change their citizenship (for a different passport entirely) to enable them to move freely. Being admitted in China, England & Wales, BVI and Bermuda allows me to consider client needs from a multi-jurisdictional perspective and connect those clients with a range of intermediaries to achieve their objectives.
As many Asian HNW families are already familiar with Cayman, BVI, and Bermuda structures, they continue to be used during these tumultuous times and are flexible enough to allow for the changing needs of HNW families. Cayman foundations, as an alternative to trusts, are particularly popular amongst Asian HNWIs familiar with civil law principles and who are open to transferring ownership and administration of the assets they hold. We have noticed a particular increase in such interest from HNWIs, especially the next generation of wealthy individuals, who have amassed their wealth in the digital space in setting up Cayman and BVI blockchain and cryptocurrency structures.
For the other offshore jurisdictions that we also advise on, we noticed an uptick in enquiries in relation to Jersey and Guernsey private wealth solutions, especially among clients who are seeking a perpetual trust structure which is a key selling point for Jersey and Guernsey trusts. Being the only offshore law firm in Singapore with a dedicated "Channel Islands" desk, we have been able to provide our clients with on the ground support which has been greatly appreciated.
What are some of the most active Asian markets in this regard? How do some of their needs differ across jurisdictions?
RY: Family offices in Asia will continue to grow and this is an exciting development for both Singapore and Hong Kong. Asian families often find that BVI VISTA trusts, Cayman STAR trusts and Cayman or BVI PTC structures are desirable because they allow the family to retain effective control of the structure and may be used to complement local family office structures (such as the Singapore Variable Capital Company (VCC)).
Singapore is the rising star in the Asian private wealth market and its popularity is second to none. Singapore is a preferred market globally with its widely recognized neutrality and stability. During the pandemic, Singapore became a vital place for outposts of the global financial market. One of the most obvious areas where this can be seen is the flow of Chinese capital into Singapore family offices. Singapore currently has approximately 700 single family offices, compared to approximately 50 in 2018 and 400 in 2020.
Singapore does not only attract new influx of wealth from China, but also its neighboring countries like India, Indonesia, Malaysia, Vietnam, Japan, South Korea and from the West like the U.S. and Europe.
Can you talk a bit about the private wealth team at your firm? What kind of work is keeping them busy these days?
RY: Carey Olsen has one of the largest trusts and private wealth teams in the offshore world, and provides advice on the laws of Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey and Jersey to local and international clients and their advisers. Our offices in Singapore and Hong Kong enable us to advise clients in Asia on both contentious and non-contentious trusts and private wealth matters 24/7 with our presence globally in five separate time zones. Our service is further enhanced by the fact that we employ PRC-qualified Mandarin speaking lawyers from top tier firms. Our global reach, scale and experience means that we are perfectly positioned to assist and advise on the most demanding and complex cases concerning wealth planning and asset protection as well as the more straightforward day-to-day instructions.
Apart from traditional business such as trust and foundation set ups, we are also busy with requests from Asian clients, overwhelmingly Chinese, to revisit and conduct health assessments on the families' current wealth preservation tools and structures. In various cases, clients have asked us to dissolve out-dated structures and devise exit strategies for jurisdictions which are no longer deemed favourable.
What are your predictions for the wealth space in Asia for 2023? What kind of developments are you anticipating or hoping for this year?
RY: The Asian private wealth market in 2023 will be incredibly exciting with many emerging themes in the industry. As the three-year pandemic eventually comes to an end and China reopens its borders, we can expect a moderate rebound in domestic demands in major Asia economies. Generational changes will have a profound impact on the wealth management industry. The next generation of wealthy individuals embrace alternative asset classes as they tend to think that traditional investments will not produce the required returns anymore. The trend of realignment of wealth will continue growing with strong momentum. The pandemic-made HNWIs will consider carefully how putting all of their eggs in one basket could expose them to greater risks. With more freedom to move around globally in the new year, it is time for many HNWIs to be putting their thoughts to actions and executing plans. I look forward to seeing a robust and healthy private wealth market in Asia in 2023.
This is our full response to the Q&A from Asian Legal Business (ALB) for the article Securing the Future in the February 2023 issue of the ALB magazine.