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Wealth Management Activity Survey

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  • 1. 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
  • 2. 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
  • 3. 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
  • 4. 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
  • 5. 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 Professional To Non- Professional entities fees paid HK entities fees paid (“P”) (US$’000) (“P”) (US$’000) Asset management Investment planning /advisory Legal advisory Tax planning Estate planning Custodian Trustee services 5
  • 6. Accounting/reporting Regulatory compliance System maintenance 6
  • 7. 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 holder Number of Number of HNWIs’ accounts holders booked/opened In Hong Kong Overseas Hong Kong Mainland Rest of Asia Pacific North America (USA and Canada) UK and Europe Others 7
  • 8. (b) A breakdown of the HNWIs’ accounts by their primary holding structures Primary holding structure HNWIs’ 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 value Number 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$30.0M (d) A breakdown of the investments in the HNWIs’ accounts by regions Country/region HNWIs’ accounts booked/opened In Hong Kong (US$M) Overseas (US$M) Hong Kong Rest of Asia Pacific North America (USA and Canada) UK and Europe Others 8
  • 9. 8. Types of assets under HNWIs’ accounts booked/opened in Hong Kong Assets HNWIs’ accounts within US$1M- US$2M- US$5M- US$10M- Above US$2M US$5M US$10M US$30M 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 / Hong Kong Rest of Asia North UK and Others Pacific America Europe region (USA and Assets Canada) (US$M) Cash deposits or money market instruments Equities Listed Unlisted Bonds Collective investment schemes Derivatives or structured products Properties Other investments (please specify) 10. If estate duty were to be adjusted through upward adjustment of the exemption threshold or provision of exemption by reference to asset type or domicile/residency – (a) Which option would you prefer and why? 9
  • 10. And if your option were adopted (b) What would be the impact on your financial planning services? (c) Estimate the inflow of funds or investments, if any, into Hong Kong out of your clientele. Please explain how your proposed adjustment features in this and give the basis of your estimate. 10
  • 11. (d) How much fees (in US$ 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
  • 12. (c) How much fees (in US$ million) would you expect to gain (lose)? Please state the basis of your estimate. 12
  • 13. 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 Functions Number of Total remuneration17 staff16 (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
  • 14. 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 Functions Number of Total staff16 remuneration17 (HK$’000) Probate Estate duty clearance Estate planning Tax planning Valuation of shares Valuation of property 18. Would there be any changes in your number of staff and what would be the likely effect - 14
  • 15. (a) If your option at Question 10(a) were adopted? (b) If estate duty were abolished? 15
  • 16. 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, 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 16
  • 17. 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 Referring to any staff in charge of the company’s management strategic planning and the continuous development of the wealth management activities 17