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for challenges facing UHNW M

aking money is different to preserving wealth. And it’s the ‘new and mature’ phase of protecting tradition, wealth and building a legacy that UHNW Chinese need assistance with, according to Richlink Capital CEO Jason Zheng.

“China,” says Mr Zheng, “boasts a great amount of family wealth that

needs to be managed with professional practices and visionary strategies.” Mr Zheng, an industry leader in private equity investment and financial

advisory services in China, says the challenges to UHNW Chinese are many- fold. Most UHNW Chinese, says Mr Zheng, keep their interests close to home. Certainly domestically. And although this has serviced the money-making dynamic very well over the last couple of decades, it’s now time to diversify. “With bank interest barely keeping pace with the CPI, the domestic

Chinese banking system alone is not a viable way to build and maintain wealth,” says Mr Zheng. Compounding the challenges facing UHNW Chinese are the intricacies

of the Chinese tax system – including the spectre of a heavy inheritance tax. Mr Zheng is a visiting professor of several top universities in China,

including Peking University, Tsinghua University and Fudan University. In 2013, he was made an Honouree Fellow of Macquarie University Faculty of Business and Economics. He says that creating a global asset and investment base is the challenge for many UHNW Chinese. Again, the challenge is complicated because many of the wealth-building techniques and mechanisms – rooted mainly in manufacturing – are extremely China-centric. So the very dynamic that has led to robust wealth creation may not be conducive to the next, mature phase of wealth protection and preservation. Although Mr Zheng’s outlook for China’s economy is strong, he says there

is no doubt China is crossing from one phase of development to another. And that, he says, creates uncertainty. And where there is uncertainty, there is risk. “Risk is not good for wealth protection. Risk might even create a good

climate to start from. But risk is not a good climate to protect and nurture.” He says the Family Office model is perfect for minimizing risk and maximising reward. Another reason the Family Office is such a good fit for UHNW Chinese is

the way it can work with the extended family culture of China. For instance, says Mr Zheng, Chinese families routinely consist of three

generations all living together under the same roof. It’s a ‘normal’ and harmonious arrangement. And it’s this cooperative and protective net that a Family Office can replicate and respond to. He says wealth-creation and protection is often kept within the family circle. “UHNW Chinese may also have more complex family structure,” says

Mr Zheng. “These structures might seem very unconventional to Westerners. A Family Office can help greatly in smoothing legal complications when there are multiple heirs.” Mr Zheng says Australia is well-placed to offer advice and services as

well as investment opportunities for Chinese UHNW. With many free market reforms to the Chinese system a recent development – and no entrenched superannuation system – China has much to gain from Australia’s experience. He says the Family Office wealth structure means there is a need to holistically care for the younger generation: not just throw money at them. “There is a responsibility for senior members of a family to lead. That means to provide knowledge as well as security.”

Scott AJ MacDonald, the executive director of the IFOA and chairman of Richlink Capital (Australia), says a Family Office can be structured to respond to any challenge.

“It’s a bespoke solution,” says Mr MacDonald. “And it’s conceived and structured to respond and

FO opportunity snapshot

Scott A J MacDonald serve the needs and interests of each family.”

He says a particularly potent aspect of a Family Office is succession planning and provision for family members and family legacy.

“A Family Office can be tailored to provide family members with more than a sense of ownership – it can provide them with ownership, investment education and leadership in a real capacity. So they can build the legacy themselves.”

Mr MacDonald says that the fact China does not have an entrenched superannuation system in China is double-edged driver for Sino-Australian investment and cooperation.

“A Family Office can also function as a ‘superannuation fund’ for family members. It’s an invaluable service. It’s a win-win scenario. There are no external shareholders in a Family Office. Or, rather, the shareholders are the family, not the owners of stock in an investment firm.

“For Australian interests, there are extraordinary opportunities in China to provide protection and guidance in lieu of superannuation. In concert with a Family Office and the interest of its members, these services can be exciting and unique to the Chinese marketplace.

“A Family Office can also serve as a protection providing families with confidentiality, flexibility and a guide to global investment from the West.”




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