A cluster of forces and new market developments bode well for the trusts sector in Hong Kong, but there is a need to get on top of compliance requirements.

Access to Chinese mainland clients, Asia’s growing private wealth sector and improving industry credibility underpin a positive outlook for Hong Kong’s trust industry, according to a survey from the Hong Kong Trustees’ Association and KPMG.

However, practitioners must overcome increasing compliance costs and access to talent to improve business health, the report said.

The HKTA and KPMG, which interviewed government officials and regulators, and almost 30 trust industry executives, carried out a digital survey of HKTA member institutions.

Hong Kong’s trust market grew by 10 per cent from 2021 to 2023, with HK$5,188 billion ($667 billion) of assets held under trusts at the end of 2023, compared with HK$4.719 trillion billion) when the previous HKTA-KPMG report was issued in 2021. 

When considering the most significant growth engines over the next few years, almost a quarter (24 per cent) of respondents identified Chinese Mainland and Greater Bay Area (GBA) connectivity initiatives, such as Wealth Management Connect. 

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

The report found that recent regulatory developments are increasing confidence and enhancing protection for investors. These include the introduction of RA13 for depositaries of SFC-authorised Collective Investment Schemes (CISs) and the Hong Kong Monetary Authority’s Supervisory Policy Manual Module (TB-1). Some (64 per cent) of survey respondents said the regulatory regime is conducive to business, compared with 51 per cent in 2021.

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

“While compliance, reporting and regulatory requirements are becoming increasingly stringent, these new standards are also bringing with them increased credibility. Hong Kong is rolling out the red carpet for global wealth,” HKTA chairman Ka Shi Lau, said. “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.”