wealth management activity survey

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).

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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:

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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

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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:

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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

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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

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(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




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

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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)

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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.

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(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.

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(c) How much fees (in US$ million) would you expect to gain (lose)? Please state the

basis of your estimate.

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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?

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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 planning

Tax planning

Valuation of shares


17. Staff in different job functions

FunctionsNumber of

staff16

Total

remuneration17

(HK$’000)

Probate


Estate planning

Tax planning

Valuation of shares


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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?

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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,

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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

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wealth management activity survey

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