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Trend Analysis - 04 December 2018

Vietnam: Why Wealth Managers Must Keep a Close Eye on Global Regulations

Business Development Director Irene Lee recently presented at the Hubbis Vietnam Wealth Management Forum. Irene shared some insights with Hubbis regarding the importance of global regulation and compliance.

“You might ask what all the new global regulations, such as the Common Reporting Standard (CRS) and the Automatic Exchange of Information (AEOI), have to do with Vietnam,. “Well, the answer is that although Vietnam might not yet be listed as a signatory to CRS and AEOI and other regulations, we think it is just a matter of time before the country accedes to those demands. We therefore need, as professionals, to give our clients the full information to make informed decisions in anticipation of the ever changing environment. We must pay ever closer attention to the new world of regulation and compliance.”

Irene Lee also explained that the creation of regulatory and tax compliant tools for wealth management and estate planning can best be achieved with professional advice and services from reputable jurisdictions. The continuous and projected evolution of both Singapore and Hong Kong as private client wealth management centres in Asia is also closely linked to regulatory demands, both globally and locally, and those markets can serve as adjuncts for the evolutionary Vietnamese wealth management market.

Asia’s growth path is virtually set in stone. She noted that the IMF earlier this year highlighted its projection that Asia will contribute two-thirds of global growth in 2018 as a whole. However, Lee also acknowledged that there are always uncertainties ahead.

The huge economic growth in the region is propelling Asia’s wealth management industry. Looking at the world’s total offshore wealth, the numbers look very encouraging, especially for Singapore and Hong Kong. “The world’s total offshore wealth stands at USD10.3 trillion,” Lee noted, “with Switzerland at the top with USD2.2 trillion, but with Singapore already at USD0.9 trillion and Hong Kong at USD1.1 trillion. Due to Asia’s remarkable growth, both are set to grow at more than twice the pace of Switzerland in the next several years.”

Why Asia’s HNWIs must (eventually) march in line

Lee noted that Singapore and Hong Kong are both keeping closely in step with global regulatory developments and both are signatories of the Organization for Economic Cooperation and Development Multilateral Competent Authority Agreement (MCAA), a multilateral framework agreement that provides a standardised mechanism to facilitate the automatic exchange of information for tax matters and avoids the need for bilateral agreements to be concluded.

Lee highlighted that CRS, AEOI and MCAA reinforce the trend towards tax compliance. “Most clients do not want to evade tax, they do not mind to some extent being scrutinised, but, they are concerned about their safety and security,” she said. “Private clients should note that the confidentiality of taxpayer information is a fundamental cornerstone in all exchanges, using internationally required confidentiality and data-protection safeguards.”

The net widens

“What does this all mean?” asked Lee rhetorically. “All these countries have signed up and agreed to exchange information.” Although Vietnam is not yet involved as a signatory to these regulations, there will be mounting pressure from the leading global economies and multi-lateral bodies for the country to eventually fall into line.

Singapore edges ahead

As this likelihood edges closer, it is worth considering how to work with the high-quality offshore wealth management centres in the region. Singapore has certainly focused on boosting its appeal in many different areas and Singapore’s demonstrates excellence on so many levels, Lee observed. It has been achieved through outstanding infrastructure, smart government policies, a competitive and skilled labour force, and the culture of innovation. Singapore, Lee noted, is pro-business with a stable government and over 70 tax and trade benefits.

“These factors and many more have helped create the deep and diverse expertise in the financial and wealth management services here today,” Lee observed. “It is also seen as a tax compliant, safe haven by Asia’s HNWIs.”

 

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