What can Asia’s rich learn from the mess of the Stanley Ho saga and some of the region’s other notorious family splits?
The high-profile succession cases that you refer to are merely the tip of the iceberg. In the next 15 years or so, we will see a very significant transfer of wealth in Asia to the next generation and the vast majority of families are not fully prepared for this.
Almost without exception the cases to which you refer generally do not appear to have used the sophisticated succession planning tools that are provided by private banks and that are available to their clients. The succession planning tool of choice used by most private banks and, which acts in complement to a will, is the common-law trust. When assets are held in such a structure, there is a very specific methodology for the recording of wishes, mandates, governance and decision-making processes that ensures that the plan itself is carefully thought-through well in advance of the event.
The result is that family expectations are managed and met, the execution process has the necessary formality to significantly reduce the possibilities of misunderstanding, and the process itself avoids the costs and delays of probate, which could act to the detriment of most families. We believe that the trust industry in Asia is on the cusp of a boom as families recognise the importance of this instrument in the planning of their succession arrangements. Most private banks provide professional trustee services, and their wealth planning departments work closely with the relationship managers to provide these holistic solutions to their clients. We strongly recommend that our clients address these issues and are fully committed to assisting them in this process.
How do private banks tackle confidentiality and privacy issues?
These matters are of utmost importance to us and the private banking industry. Given the recent headline developments, our clients, in Singapore for example, are aware of the importance of these issues and draw comfort from the fact that we all are subject to the banking secrecy laws in Singapore.
More generally, what are some of the most pressing investment challenges for clients right now?
In Asia, inflationary pressures remain, with food and energy prices the two key factors. For now, inflation is still mostly limited to food prices, as non-food inflation remains generally low. It is likely that Asian central banks will implement more tightening measures such as raising interest rates and price intervention in order to curb inflation and prevent a spill-over to non-food inflation and wages.
In the euro area, speculation about the next steps in the reform of the governance system of the European Monetary Union is likely to increase further this year. To avoid a negative spiralling effect of expectations and the cut-off of more EMU countries from market funding, it is essential that policymakers move to clarify their plans.
Some other potential risks that investors should look out for in 2011 include the timing and speed of monetary policy exits, fiscal policy decisions as well as the outlook for budget deficits and debt of the G7 economies.
Having said that, and while we need to closely monitor the risks, we should also not forget that investment challenges offer opportunities for investors as well.
Are clients worried about the double whammy of inflation and low real interest rates?
It is important to note that while we have to be mindful of the risks in the market, opportunities also exist for investors who have positioned their portfolios well to benefit from the market environment. For instance, given the current market environment of high inflation and low real interest rates, cash is probably not the asset class to be overweight in at this point. Thus, investors should re-look at their portfolio’s real returns after adjusting for inflation and review their investment holdings, so as to position their portfolios well for the current market conditions.
Has property investment fallen out of favour given the determination of central bankers in the region to prick property bubbles?
Ultra-high-net-worth investors are generally unaffected by measures to curb property price bubbles, given that they usually have a long-term view on real estate and are not looking to enter and exit the market in the short term. In fact, these measures could potentially work to their advantage if real estate prices stabilise as a result.