Lee Woon Shiu, head of wealth planning at Bank of Singapore, and Chee Fang Theng, Singapore-based director of international tax and trust law at law firm Pan Asia Wikborg Rein, teamed up to answer China Offshore Quarterly's questions on private banking through offshore jurisdictions.
Q: What is private banking? How does it differ from other types of banking?
A: Private Banking is a holistic suite of wealth management, investment, estate planning and other associated financial services provided by banks to high net-worth individuals. As a result of the highly dedicated and customized services rendered on a more personal basis, "private" banking differs from "retail" consumer or "affluent" banking in the degree of attention dedicated to each client. The range of services as well as products offered are also more sophisticated, given that private banking clients are typically more investment savvy. Private banking is far more intimate than "investment banking" or "retail banking" because clients often share details of their personal life with their private bankers, such as their philanthropic objectives. Such insights allow private bankers to advise and offer the right wealth planning solutions to achieve those goals.
Q: Why would Chinese investing offshore be interested in private banking?
A: Private bankers have access to possibly the widest range of asset management, investment, estate planning, global mortgage, life insurance and associated financial tools to deliver solutions to achieve almost all personal investment and succession planning needs of high net-worth Chinese investors. These investors are often unable to avail themselves of these services on a comparable scale and depth onshore within China, so they should take advantage of the availability of such services outside China to achieve optimal wealth management and estate planning benefits.
Q: How do you approach financial planning for individuals and families entering private banking for the first time?
A: There are diverse and sometimes conflicting needs of different high-value individuals within a family -- often where decisions can be more sensitive and complicated. The starting point of planning is to assess the needs and objectives of a wealthy individual, usually the patriarch, matriarch, founder or their families. Sometimes there may not be a very clear differentiation between business and personal financial needs. For example, a wealthy individual or family could still own significant stakes in businesses and have a continuing role in corporate strategy and day-to-day business operations. This can give rise to many legal issues to be considered in order to achieve the objectives of protecting the privacy of the individual, preserving assets, planning for succession and minimizing conflict within the family and with the business.
Q: What advantages can offshore jurisdictions offer in terms of private banking (for example, tax planning)?
A: Offshore jurisdictions offer a discrete and tax efficient platform for clients to engage in private banking, particularly in asset management, long-term estate planning, succession and family governance strategizing. Offshore jurisdictions often also have favorable legal, regulatory and tax regimes designed specifically to encourage asset management and trust administration activities, and these will undoubtedly translate to a more dynamic platform for clients to conduct their private banking activities. Different jurisdictions may offer unique planning opportunities as well as give rise to different sets of legal challenges. Multi-jurisdictional planning is required for international transactions and structures, particularly to deal with international needs of the individual and the families, who may have members and assets spread all over the world.
Q: What are some of the more popular investment products that are available through private banking?
A: Investment products popular among Asian private banking investment include fixed-income corporate and sovereign bond investments; listed stocks across global exchanges; exchange traded, mutual and hedge funds; structured notes, options and other financial derivative instruments; and discretionary portfolio management mandates. Products can also be structured or combined in trusts, foundations, family holding entities and cross holding structures, allowing for greater flexibility to meet the objectives of private banking clients. A team of experts which includes both bankers and lawyers would be required to put together a suitable structure best able to achieve these aims over the long term.
Q: What are some popular jurisdictions for offshore private banking?
A: Switzerland is the traditional bastion of private banking. Popular tax-free jurisdictions include Jersey, Cayman and Bermuda. Hong Kong and Singapore, which are well-established and have developed infrastructure and private banking experts.
Q: What are the most important aspects of regulation regarding private banking?
A: Regulations relating to the control of the competency and the fostering of high market conduct standards of private banking professionals are expected to assume increasing importance, as will ancillary policies dealing with areas such as ethics and professionalism, client relationship management and risk management. Investors should also be aware of the increasing transparency of exchange of tax information globally and the leveling of the playing field for all private banking hubs from a tax perspective. An understanding and appreciation of these global trends may have long-term impact on the choice of private banking products as well as long-term lifestyle choices for clients, such as immigration and permanent residency applications.
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