Synopsis: Drawing from the our experience in supporting CIES advisers, we share how these advisers have successfully competed against bigger players, and how they will continue to do so

1. By Patrick Ho
Industry Insights
30 OctobER 2012 - March 2013
Drawing from the our experience in supporting CIES advisers, we share how these advisers have
successfully competed against bigger players, and how they will continue to do so.
I
n October 2003, the Hong Kong SAR
government launched the Capital
Immigration Entrant Scheme (CIES)
to facilitate the entry for residence in
Hong Kong by capital investment en-
trants, without the need to establish or
join in a business. The scheme enabled
eligible persons to apply for permanent
residence in Hong Kong by invest-
ing HKD10 million in permissible in-
vestment assets, adhering to portfolio
maintenance requirements, and having
seven years of continuous ordinary res-
idence in Hong Kong.
Since 2003, the scheme has been a
massive success.
How Advisers Find
Success In CIES
Success of CIES
Since its launch, the scheme proved to
be a huge success, attracting rich for-
eign investors with the wherewithal to
commit HKD10 million for 7 years to
Hong Kong.
Statistics from the Immigration De-
partment (IMD) show that the scheme
has approved some 14,122 entrants
since its inception to March 2012. And
based on figures compiled from the
Hong Kong government yearbook from
2003 to 2011, CIES-approved entrants
registered an average growth of 212%
year-on-year for the past eight years.
2011 stands out as a pinnacle year for
the scheme as it recorded 4,187 ap-
proved entrants, the highest absolute
number in a single year ever.
In terms of investment monies,
the CIES has contributed impetus to-
wards the development of Hong Kong
as Asia’s top financial market. Since
launch, the scheme has attracted al-
most HKD103 billion in investment
monies, of which 30.7% is recorded in
2011 inflows. These monies increased
demand for permissible investment as-
sets, as listed in the scheme. These as-
sets include equities listed on the Hong
Kong Stock Exchange, debt securities,
certificate of deposits, subordinated

2. OctobER 2012 - March 2013 31
Important: See Disclaimer on Page 7
debt and eligible collective investment
scheme (CIS), all with the specific con-
dition that they be HKD-denominated
assets. This condition (among others)
enhanced liquidity for local investment
products, which is especially critical in
the current tough market environment.
The CIES Client Base
With the exception of a few nationali-
ties, most foreign nationals are eligible
for the CIES, including Macao SAR
residents, Taiwanese residents and Chi-
nese nationals with permanent resident
status in a foreign country. Among the
groups of affluent foreign investors
who have chosen to reside in Hong
Kong based on the scheme, Chinese na-
tionals make up almost 85%, many of
which see the importance of permanent
residency in Hong Kong as important
as the investment opportunities that the
scheme offers.
One might even argue the perma-
nent resident status is the most attrac-
tive opportunity. Many Chinese nation-
als seek greener pastures, not just for
themselves, but also for their spouse,
their family, and their future. Others
seek the Hong Kong passport for easy
access to the rest of the world. There
are some who merely wish to enjoy the
ease and convenience of holding their
assets in Hong Kong, while they con-
tinue to reside in China.
For these reasons, and more, Chi-
nese nationals will continue to push
the growth of the number of CIES
applicants to new highs. In 2011,
of the estimated 3.37 million High
Net Worth Individuals (HNWIs) in
Asia Pacific, China alone accounts
for 562,000 as reported in the World
Wealth Report 2012 by Capgemini
and RBC Wealth Management. With
this number reported to grow by 5.2%
year-on-year in 2011, China is now
second only to Japan in the number of
HNWIs in Asia Pacific. This growing
trend will create more opportunities
for CIES advisers, for years to come.
Advisers Succeed In CIES
with iFAST
For advisers, the opportunities are
immense, as the administrative and
transactional infrastructure is already
in place, easily accessible with full sup-
port from adviser platforms, such as
iFAST Financial (HK). Our experience
in supporting advisers began when
we saw the ample opportunities in the
CIES space.
iFAST embarked on enhancing
its system and processes to support
all third party advisers on the iFAST
investment platforms. With these en-
hancements, advisers could focus on
generating leads, client acquisition, and
client advisory aspects of their business
– the front line aspect of the job – while
iFAST with its expertise as a platform
provider, would continue offering all
the back-office support, including ap-
plication and reporting to the IMD.
In October 2009, the extension to
fully support the CIES business was of-
ficially enabled, and since our humble
beginnings, the CIES business has since
grown to be an interesting and signifi-
cant portion of the iFAST platform busi-
ness. By the end of August 2012, total
assets acquired via the CIES business
amounted to HKD1.24 billion, servicing
more than 174 CIES investors brought
in by advisers from 27 different finan-
cial institutions on the iFAST platform.
Sales on the iFAST platform contin-
ue to grow. In the first half of 2012, sales
excluding switching in CIES accounts
amounted to almost HKD500 million, a
growth rate of 194% when compared to
the same period in 2011. This is in con-
trast to the performance of the Hang
Chart 1: Cumulative CIES Growth
Source: Hong Kong Goverment Yearbook (Population and Immigration) and iGP compilations

3. 32 OctobER 2012 - March 2013
Seng Index, and the broader investment
environment, which remains volatile
while moving perpetually sideways
during this period. CIES business on the
iFAST platform continues to see good
exponential growth, and these growth
rates are helping iFAST ride through
the financial impasse on firmer footing.
With growth comes competition, and
advisers need to keep a lookout for other
players looking to enter the CIES market.
Competition and Market
Share
iFAST is not the only firm making in-
roads into the CIES business. Advisers on
the iFAST platform will be aware of the
other players progressively positioning
themselves to offer their services to target
potential CIES clients. Banks are a major
force to be reckoned with. Their strong
brand name and their extensive network
of branches, make access to their services
easy. These advantages, coupled with a
streamlined through-train payment setup
where CIES clients can sometimes pay for
the CIES investments directly from main-
land banks, make the banks the market
leader in the CIES business.
In October 2010, the Hong Kong
government announced that insurers
authorised to carry on Class C business
will be permitted to act as a financial
intermediaries for the purpose of the
CIES. With this, the major insurance
companies started channeling their dis-
tribution forces to push CIES business.
There was also a mad rush by some
insurers to set up their own CIES per-
missible products, mainly single premi-
um investment-linked assurance plans.
This will allow them to charge clients
two sets of fees – agent commission re-
muneration and product fees.
Faced with such competition, inde-
pendent financial advisers would ben-
efit from support to help level the CIES
playing field. This is especially criti-
cal for the smaller advisory companies
with limited resources. The resources
and support provided by iFAST has
helped advisers compete with bigger
players by offering top-notch service
to the CIES clients. The numbers bear
this out – based on iFAST compilations,
in 2011, advisers on the iFAST platform
captured an estimated 24% of the CIES
market share in sales of eligible collec-
tive investment schemes, one of the per-
missible investment assets offered on
the iFAST platform.
This is an impressive feat, consider-
ing the challenges associated with com-
peting against bigger players.
Chart 2: CIES Growth
Source: Hong Kong Goverment Yearbook (Population and Immigration) and iGP compilations
Chart 3: iFAST CIES Cumulative Growth
Source: iGP compilations

4. OctobER 2012 - March 2013 33
Important: See Disclaimer on Page 7
How Successful Advisers
Leverage on iFAST
Advisers have found success on the
iFAST platform for several reasons.
Firstly, successful advisers focus on
their front line activities, such as face-
to-face interactions to reach potential
clients, or to service existing clients.
iFAST supports these advisers by tak-
ing care of all back-office administra-
tion. Our in-house team of CIES experts
have an in-depth understanding of the
CIES workflow and can support any
enquiries from advisers or their clients.
This includes submission and ongo-
ing reporting to the IMD, which mini-
mises mistakes and delays. iFAST also
provides meeting rooms for CIES client
meetings at its spacious and conveni-
ently located offices.
Furthermore, iFAST can complete an
entire workflow from account opening
to trade placement to the final submis-
sion to the IMD, within two business
days. Successful advisers leverage on
our expertise to free up time for the ac-
tivities that matter more to the client.
Secondly, successful advisers lev-
erage on the information resources
available on the iFAST platform.
iFAST platforms are custom designed
to cater to the need of advisers, CIES
clients as well as the stringent report-
ing demands of the IMD. Online ac-
cess to information on the investment
products, account details and client
statement of holdings provides great-
er convenience to both advisers and
their clients, especially if CIES clients
are overseas, or travel extensively.
Online access is similarly paramount
for advisers who are moving from one
meeting to another. Another informa-
tion resource that benefits advisers is
our extensive product training. Rather
than wade through reams of reports,
iFAST regularly conducts CIES invest-
ment workshops to educate advisers
on the salient selling points of these
products. Nothing beats meeting the
fund managers behind the investment
products and so iFAST will always in-
vite them to grace the seminars. The
popularity of this approach can be
seen when sometimes a top fund man-
ager will attract so many advisers that
even standing room is not available.
Thirdly, successful advisers lever-
age on the range of CIES permissible
investment products offered by iFAST,
which currently offers both debt se-
curities and eligible collective invest-
ment scheme (CIS) products. There are
a total of 16 mutual funds and 7 Hong
Kong listed exchange traded funds
(ETFs) as well as the full range of per-
missible over-the-counter bonds for
advisers to recommend based on the
respective risk profile of their clients.
This allows them to perform proper
investment planning. For clients, the
big range allows them to enjoy switch-
ing among these products without
compromising their CIES status.
Finally, successful advisers enjoy at-
tractive remuneration benefits offered
on the iFAST platform. The iFAST wrap
model allows advisers to charge an up-
front advisory fee, relatively in line with
the industry. However, the iFAST wrap
model also allows advisers to charge an
ongoing advisory fee for ongoing advi-
sory services rendered. This fee ranges
from 0% to 2.25%, enabling advisers to
earn recurring income on a yearly basis.
While the CIES permissible products on
iFAST do not have any lock-in periods,
the CIES entrants are required to keep
the investments for 7 years. So as long
as the investment stays within iFAST,
advisers will receive recurring income.
As an illustration, an adviser charging a
1% ongoing advisory fee for 10 CIES cli-
ents who each invested HKD10 million,
is looking at HKD1 million recurring in-
come per year for 7 long years!
Find Success In CIES
But ultimately, successful advisers have
to leverage on their ultimate asset: their
will to succeed. A conflation of positive
factors is driving the growth of CIES
accounts – from the growth of wealth
and the HNWI population in China, to
the complete commitment of the iFAST
platform’s expertise and resources – all
that remains now is for advisers to look
within themselves to see if they have
what it takes to seize the business op-
portunities.
For advisers with a conscientious
plan to create a network of contacts in
the mainland and seek out the potential
CIES clients, a very viable and success-
ful business awaits them.
For those who are keen to find out
more about iFAST CIES offerings, please
contact the iFAST business development
team at bd.hk@ifastfinancial.com. iGP
Table 1: CIES-eligible products available on iFAST
16 Mutual Funds
7 Exchange Traded Funds
OTC (Over-the-counter) bonds
Source: iGP compilations