Why Hong Kong-based family offices are leading lights in philanthropic giving

Hong Kong and the successful families based there have long had a reputation for generous and charitable attitudes. For family offices with a philanthropic focus, the city state offers a wide variety of opportunities and incentives. Campden FB talks to Christine Ho, deputy global head of FamilyOfficeHK, a dedicated body of the HKSAR  Government  on the subject of effective giving.
 

Campden Wealth’s Asia-Pacific Family Office 2021 report found that 86% of ASPAC family offices are involved in philanthropic giving. This is much higher than their regional counterparts; in North America (where 76% of family offices are involved in philanthropy), while in Europe it is 67%. Why is philanthropy such an important factor for Asian family offices?
Asia, especially Hong Kong, has a rich tradition of philanthropy. Both the public and private sectors have been front and center in addressing social challenges throughout history.

It is suggested[1] that as the number of billionaires grows in Asia, the need for an effective way to pass on family wealth and values and to maintain harmony within the family has been increasing, leading to a sharp increase in the number of Asian family offices.

A survey [2] found that the number one reason for engaging in philanthropy for Asian family offices was “Ensuring the continuity of family values or creating a lasting legacy.” Philanthropy enables family values to acquire tangible form and be driven through the different generations. Apart from helping to instill and drive family values and strengthen family bonds, philanthropy also provides opportunities for family members to embrace meaningful responsibilities and transmit knowledge and build capabilities among family members.

The same report found that 55% of family offices in Asia-Pacific give with a clear strategy and focus. Will philanthropy remain a priority for family offices in Hong Kong and how can FamilyOfficeHK help newly established family offices in Hong Kong to define their own strategy?
We have witnessed more and more wealthy families increase their engagement with philanthropy and the next generation has shown more interest in these initiatives. Data [3] showed that the next generation is likely to focus more on philanthropy and impact investing than previous generations.

FamilyOfficeHK is a dedicated team representing the government and tasked to maintain close communication with family offices and industry's stakeholders. It assists family offices to better understand Hong Kong’s landscape and related regulations and initiatives, as well as provide advice and facilitate close communication with other government authorities for family offices, assisting family offices to define their own strategies, including in philanthropy.

To facilitate collaboration among family offices in the philanthropy front, FamilyOfficeHK actively collaborate with stakeholders and/or government-funded entities, on the provisions of research and publication, education / training and advisory services and voluntary funding towards social enterprises and startups, as well as connecting ultra-high-net-worth (UHNW) families with social impact companies / organisations in Asia and globally.

One of the crucial elements of philanthropy for a family office is legacy building and succession planning. How important are family values and providing opportunities for family members among family offices established in Hong Kong?
Family values and granting opportunities for family members are both important for family offices established in Hong Kong.

Eastern families [4] put more emphasis on preserving family harmony and unity than their Western counterparts. Through the management of philanthropic activities, family offices could achieve these goals by letting family members contribute their different expertise in charitable activities irrespective of their age and position. Family members can also be involved in the family philanthropy board and take up a management role in the family’s charitable foundations.

Perpetuating family values and sustaining legacy across generations represent [5] sharing and maintaining important traditions, milestones, personal histories and the family’s beliefs and principles. Legacy creates continuous improvements in business processes and strengthens the emotional connection between the family and the business [6].

A paper [7] also suggested that family philanthropy encourages interactions across generations, whereby elders can share their family values while providing the younger generation with a platform to develop their interests and prepare them to play an increasingly bigger role within the family.     

How can the HKSAR Government provide support to family offices looking to effectively establish philanthropic foundations?
Hong Kong has a long history of philanthropyand a mature and extensive network for philanthropy activities. Charitable assets account for about 3.3% of Hong Kong's gross domestic product (GDP), which is the highest in Asia. A comprehensive philanthropic ecosystem has encouraged family offices from all over the world to come to Hong Kong to work with relevant stakeholders.

Company registration processes in Hong Kong are faster and more efficient, this also applies to non-profit organisations and foundations. The HKSAR Government has also been providing strong support to optimise the ecosystem of philanthropy and impact investing. These initiatives have provided sufficient impetus for family offices in the city to pursue their philanthropic goals.     

Hong Kong is ramping up efforts to attract family offices with tax exemptions and signaling plans to loosen travel restrictions, the ease of setting up international foundations and philanthropies there is being promoted as a key selling point. Tax exemption is available for charitable institutions and trusts under section 88 of the Inland Revenue Ordinance. And, unlike Singapore, Hong Kong doesn’t set a specific proportion of funds that charities must use to support local causes.

FamilyOfficeHK’s primary purpose is to help family offices set up a presence in Hong Kong and this could involve assistance in helping them to establish philanthropic foundations in the city. The agency could provide professional advice and connect family offices with relevant government authorities, if required.
 

[1] Asian Family office – Recent Trends and its Non-financial Role, South China Morning Post
[2] UBS-INSEAD study on family philanthropy in Asia
[3] UBS Global Family Office Report 2020
[4] The Family Office: The glue to keep Chinese families together, FFI Practitioner
[5] Spotlight on Family Offices and Family Business, Issue 8, KPMG
[6] The enduring legacy of business families, KPMG and Stichting STEP Project Global Consortium
[7] Carrying the Torch - Passing on a lasting family legacy to future generations through family philanthropy, Deloitte and UBS