Wealth managers in Hong Kong face heavy workloads and the higher client revenues as anxious mainlanders turn to the territory as a safe haven for their investments in the wake of market volatility and currency devaluation.
Those benefiting the most from Chinese clients’ increased interest in Hong Kong are at opposite ends of the wealth management spectrum, however. On one hand, relationship managers (RMs) servicing ‘mass affluent’ or ‘medium net worth’ Chinese nationals (typically those with between US$100k and US$1m in liquid assets) and on the other, RMs at global banks who can provide capital markets services to Chinese entrepreneurs.
Hong Kong has long been a global investment gateway for rich mainlanders, but that position now appears stronger than ever. “Bankers are definitely dealing with increased inquiries from Chinese clients on how to transfer money out of China,” says Sunny Kwak, a private banking consultant at Morgan McKinley in Hong Kong.
Pathik Gupta, head of Asia Pacific wealth management at consultancy McLagan, adds: “There is clearly now more appetite for mainland Chinese investors to diversify their holdings outside the mainland – the use of HK as a base to achieve diversification, stability and safety has become critical.”
Officially there is a US$50k annual restriction on individuals moving money out of China, which means mass-affluent RMs are now getting more work from moderately wealthy mainlanders looking to ensure they transfer and invest up to the limit, says Gupta.
It's not just the workloads of current staff that have been affected – banks also look set hire more of these RMs in the near future. “There will be an increased need for wealth managers in HK to capture domestic wealth flowing out of mainland China into HK through retail channels,” adds Gupta.
Which banks in Hong Kong are likely to be recruting more mass-affluent RMs? “Chinese banks such as Bank of China and ICBC will grow their wealth management businesses in Hong Kong because of their seamless links with their mainland headquarters,” says a private banking headhunter. “The local Hong Kong banks Hang Seng and Bank of East Asia will also benefit as they already have strong platforms for medium-net-worth Chinese clients.”
But it’s not just these mid-level clients looking to shift cash out of China. Wealthier business owners can get around the US$50k limit by investing in foreign companies, for example. And banks such as UBS, Credit Suisse, HSBC and Citi – which have the capacity to cross-sell investment banking products to Chinese entrepreneurs – are best placed to reap the rewards.
“The recent market events have triggered the need for Chinese high [assets over US$1m] and ultra-high [over $30m] investors to continue their asset diversification strategy,” says Gupta from McLagan. “We will see increased use of institutional channels for wealth flow between mainland China and HK. Therefore private banks that are able to leverage on their capital market businesses are going to thrive and need to hire.”
Gupta adds: “Pure-play private banks will need to explore more collaborative approaches, such as partnerships with Chinese banks, to be able to offer wealth management platforms and capabilities in lieu of their client access. An example is Julius Baer’s strategic tie up with Bank of China.”