Crisis means danger and opportunity in Chinese. This cliché has assumed new meanings in a world struggling with COVID-19. In his essay on finews.asia, Nick Xiao, CEO of Hywin International, explains how the current situation is impacting and enlightening Chinese wealth managers.
This time, it is (really) different. The COVID-19 crisis is a unique challenge. Unlike the 2008 financial crisis, which unfolded largely on Bloomberg screens, the loss of lives caused by COVID-19 is real, massive, and truly tragic. Unlike natural catastrophes that are sudden, the slow-motion deterioration and prolonged sense of helplessness are particularly harrowing.
Chinese HNW clients have had a few tough months, to put it mildly. Their perspectives have shifted, assumptions re-assessed, and priorities re-ordered, with implications for their wealth managers.
Clients Are Re-Surveying the World
Chinese clients used to see mega-trends as thematic overlays on their portfolios, or analytical angles to get positioned before everyone else does. With the COVID-19 crisis in the background, clients are re-surveying the world, with a real immediacy and intensity as if everything mattered, because it does.
Working with a leading global asset manager, Hywin is launching an ESG initiative – as a client academy to understand the essence of macro issues, and as a sponsorship, platform to pool clients’ insights and funding commitments to initiate, finance, and support mega-trend projects.
Hedging the Unthinkable
The COVID-19 crisis has unveiled many surprises. «Fortress» companies can fail; dividend consistency since the 1950s can break; indexes can rise regardless of systemic earnings destruction; symbiotic economic relationships could, despite all the reasons not to, unravel. Clients begin to appreciate that the world can, truly, be non-linear, but still want to be prepared.
In response, Hywin has provided strategic risk advisory services to UHNW clients, assisted by leading risk consultancies. Hywin also expanded its «portfolio review» process to include «ecological assessment». Hywin Wealth Fiduciary Services (Hong Kong) Limited was also launched to address the urgent demands of Chinese families for trust and jurisdictional diversification.
From «Shanghai Tatler» to «Foreign Affairs»
The past few months have upset quite a few plans of Chinese entrepreneurial clients. IPOs are put on hold. The acquisition of a «Mittelstand» engineering firm was aborted. The disposal of a London commercial building was delayed. Clients used to see international politics as an elevated topic, with some but not paramount relevance to their commercial pursuits.
But the rapidly evolving international relations and diplomatic flux over past months, by their unpredictability and impacts, have unnerved decision-makers at entrepreneurial families. Hywin’s client advisors used to leave lunch to find answers to a single stock financing request. Now they leave a client call to find out somebody’s political inclinations and a bill being debated at U.S. Congress.
As clients take up political-economic analysis, client advisors must become more worldly, in every sense of the word.
It’s All About the Children
Chinese entrepreneurs love their children, as all parents do. But «education» has been the keyword over the years. Never to lose an opportunity to deepen the relationship «across generations», private banks run summer camps, offer «young investor» workshops, operate simulated investing games, lead trips to Ivy League colleges, all of which proved popular. But COVID-19 has presented a difficult question to the parents: what if I depart before my time? Who will look after them, guide them, and…basically become the regent?
Hywin has set up an «advisory board» for clients’ companies and foundations – run of the mill. Very recently, Hywin also started to work with a few families to set up «regency board» for their children, i.e. a group of trusted, caring, un-conflicted seniors who take a personal interest in the growth and wellbeing of the kids, because of personal ties with the patriarchs, or long-term services to the family as lawyers, trustees, or doctors.
Holistic Guidance
In a trust context, this regency board can also be the «distribution committee», providing more holistic guidance to the dispensing of funding. It’s a slightly awkward gathering of outsiders, for any wealthy Chinese family of the Confucian prototype. But COVID-19 has challenged everyone to think the unthinkable and do what it takes.
Hywin International is the Hong Kong subsidiary of Hywin Wealth. Hywin Wealth is a leading independent wealth manager from China, with more than 2,300 staff serving 100,000 high-net-worth clients from 150 business locations in Mainland China (pictured above), Hong Kong, the U.K., and the U.S.
