The trust industry of family trusts

Only two financial institutions have launched actual family trust plans in China. The first family trust plan is the Ping An Wealth·Hongcheng Family Series single fully funded trust launched by Ping An Trust. The starting amount of the trust is RMB 50 million and the contract period is 50 years.

Wang Jing, executive deputy general manager of the Private Banking Department of China Merchants Bank Head Office, said that the first family trust plan was launched in May 2013. As of July, China Merchants Bank has signed family trust customers with 10 families, all of whom are high-net-worth customers with financial assets of RMB 100 million and total assets of more than RMB 500 million. The current contracted customers are mainly concentrated in northern cities, and all of them are private business owners. The management scope of family trusts mainly focuses on financial assets, including some equity, but does not include real estate, which accounts for a large proportion of the property allocation of domestic high-net-worth individuals.

In addition, due to the different regulatory environments at home and abroad, independent trust plans are established for overseas assets. The current scope of family trust management mainly focuses on domestic assets. "The most important role of family trusts in developed regions such as Europe and the United States is to help the wealthy avoid taxes reasonably. Once China's inheritance tax is introduced, it will definitely drive the development of family trusts in China." Fei said.

China’s high-net-worth individuals have entered the “wealth inheritance” stage. The "2013 China Private Wealth Report" jointly released by China Merchants Bank and Bain & Company shows that "wealth protection" has become the primary goal of wealth management for high-net-worth individuals in China, and the demand for "wealth inheritance" has become more apparent. Michael Thorneman, president of Bain & Company Greater China, pointed out that about one-third of high-net-worth individuals are currently making wealth inheritance arrangements and seeking to use family trusts, tax planning, insurance planning and other tools to complete wealth planning.

At present, the development of domestic family trusts still faces many bottlenecks. A report from Noah Wealth, a third-party financial management institution, pointed out that trust is the foundation of trust, but at present, many high-net-worth individuals in China make their own money from scratch, and they prefer to manage their wealth by themselves. On the other hand, since trust companies still have huge profit potential in traditional businesses such as collective trusts, they are not very enthusiastic about developing property trust business.

Lin Jianguo, Executive Director of Bank of China International Holdings Limited, believes that family trusts in Hong Kong are very mature, and wealthy people are accustomed to choosing family trusts to protect the inheritance of wealth. In Hong Kong, family trusts can hold assets including real estate, stock portfolios, family businesses, columns and copyrights, etc. Because Hong Kong directly faces the global market, there are no geographical restrictions on trust management, and the investment portfolio is more diversified. Family trusts have become a magic wand for Hong Kong’s high-net-worth individuals to break the curse of “not being able to get rich for more than three generations”.