Hong Kong’s trust industry is well-positioned for further growth amid its easy access to Chinese mainland clients, Asia’s growing private wealth sector, and a robust regulatory environment.

However, industry practitioners must deal with increasing compliance costs and difficulties in attracting talent, according to a new survey by the Hong Kong Trustees’ Association ( HKTA ) and KPMG.

The HKTA and KPMG conducted interviews with government officials and regulators, and almost 30 trust industry executives, alongside a digital survey of HKTA member institutions, to gauge the health of the sector, which performs a vital role in safeguarding assets held in pension schemes, as well as in corporate, charitable, private and public trusts.

Hong Kong’s trust market grew by 10% HK$5,188 billion ( US$667 billion ) of assets held under trusts at the end of 2023, compared with HK$4,719 billion in 2021.

Connectivity initiatives

In the survey, 24% of respondents identified connectivity initiatives in mainland China, such as Wealth Management Connect with the Greater Bay Area, as the most significant growth engines for the industry over the next few years.

A further 18% cited the Capital Investment Entrant Scheme ( CIES ) under which the Hong Kong SAR government has been attracting capital and family offices, and 18% identified similar initiatives focused on family offices and philanthropy.

Recent regulatory developments are increasing confidence and enhancing protection for investors, the survey finds. These include the introduction of Type 13 regulated activity ( RA13 ) for depositaries of Collective Investment Schemes ( CISs ) authorized by the Securities and Futures Commission and the Hong Kong Monetary Authority’s Supervisory Policy Manual Module ( TB-1 ). About 64% of respondents believe the regulatory regime is conducive to business, up from 51% in 2021.

However, while new regulations are improving the business environment, they are also proving challenging to implement.  Almost two-thirds of respondents ( 64% ) reported that their compliance costs had increased by 5% to 15% over the past 12 months, partly because of increasing regulatory complexity.  

Attracting talent is also seen as a significant industry headwind, with legal and compliance roles and trust administration the two most critical functions.

Playing a critical role

Hong Kong’s trust and fiduciary industry plays a critical role in the city’s success as a major international financial centre, employing a diverse range of professionals across banks, independent trust companies, insurers, private banks and legal, tax and accounting service providers. The sector is critical in protecting the financial well-being of the vast majority of Hongkongers, including 87% of the working population who have assets held under the Mandatory Provident Fund ( MPF ) and Occupational Retirement Schemes Ordinance ( Orso ).

“While compliance, reporting and regulatory requirements are becoming increasingly stringent, these new standards are also bringing with them increased credibility,” comments HKTA chairman Lau Ka-shi. “Hong Kong is rolling out the red carpet for global wealth.  The trust industry needs to step up now, work together, and be proactive in serving these clients or risk missing out on the opportunity to solidify Hong Kong’s position as a leading global trust centre.” ext

Lau adds: “Trustees continue to play a crucial role in Hong Kong’s financial system, and their importance is particularly evident in the MPF system, which is pivotal in safeguarding the retirement assets of Hong Kong people.” The MPF is marking its 25th anniversary this year.