HK regulators urged to expedite China HNWI onboarding
Hong Kong’s regulators must simplify an onerous account-opening process that unfairly disadvantages Chinese high-net-worth investors (HNWIs) if they are to maximise the city’s potential for wealth management, according to Hong Kong's Private Wealth Management Association (PWMA).
Wendy Tsang, vice chair of the PWMA, said the industry body has asked the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) how to ease the level of registration that Chinese HNWIs need to go through to open an account in Hong Kong, a process known as on-boarding.
“One of the things we have been talking about is the cross-border account-opening issue. It’s not always easy [to bring on new mainland Chinese clients] because there are a lot of onboarding regulatory requirements,” noted Tsang.
By doing so, Hong Kong could underline its appeal as a wealth management centre, she said. Next to Japan, China has the most HNWIs (those with $1 million-plus in investable assets) in Asia Pacific. According to the latest Capgemini World Wealth Report, China’s HNW population grew by 16% to slightly over a million people in 2015.
“We would like to work with regulators in reviewing onboarding procedures in Hong Kong and, at the same time, explore how we can allow qualified clients come on board more efficiently,” Tsang added.
While private banking heads in Hong Kong understand the need for implementing know-your-customer (KYC) and anti-money-laundering (AML) requirements, Tsang believes the onboarding process often puts Chinese applicants at a disadvantage.
For instance, while the onboarding of new clients takes between three to six months, mainland HNWIs are more likely to fall into the “six-month segment”. Tsang offered no specific reason for why Chinese clients had to endure the lengthy approval process. But it appears private banks and regulators are particularly cautious when it comes to assessing how Chinese HNWI applicants gained their wealth.
However, Tsang argued the level of regulation had become overly zealous, making for a difficult onboarding process for Chinese wealthy individuals. “We want the regulators to review the client onboarding procedure in Hong Kong and allow those qualified Chinese clients to be able to open accounts in Hong Kong more efficiently,” she said.
“It is important for regulators – when they are bearing in mind the protection of the client, when they are bearing in mind the requirements for AML – to also think about the client experience, because nobody wants to feel they are being suspected of [money laundering]. I think that they [the regulators] have to strike a balance,” she added.
Targeted approach
Tsang said the PWMA has offered several ideas for how the regulators can simplify the onboarding process, including a more targeted approach in segmenting clients.
One example was for private banks to segment clients according to risks. Tsang declined to provide more details about this approach, noting that discussions were still under way with no guaranteed final outcome.
She hopes Hong Kong’s regulators will shed more light on this during the PWMA’s inaugural Wealth Management Summit in September.
The ability to onboard Chinese HNWIs could play a pivotal role in the competition between Hong Kong and Singapore to be Asia's leading wealth management hub. Tsang offered her own view about which has the key advantage.
“Hong Kong and Singapore are both prominent financial centres. Because of their geographical locations, Singapore tends to cover Southeast Asia, while Hong Kong covers Northeast Asia," she said. "But when you think about the opportunity for future growth and development, I think Hong Kong has an advantage owing to its geographical and social proximity to [mainland] China."
PWMA was established in Hong Kong in September 2013 to help maintain Hong Kong’s competitiveness as a major financial centre. The chair of PWMA is Amy Lo, head of Greater China at UBS Wealth Management. Tsang, who is vice chair, is also head of private banking at Bank of China (Hong Kong).