Original title: 21 exclusive: a number of foreign banks have tightened their independent capital management IAM business and the traditional private business model has been re-valued.

21st Century Economic reporter Huang Zixiao reporting from Shenzhen

RecentlyJackpotprizeHSBC's "go home" news came from the market, saying that HSBC would stop working with all family offices in Hong Kong.

In response, an HSBC spokesman told the 21st Century Business Herald, "the above news is not true. HSBC Global Private Bank is terminating its independent asset management business (Independent Asset Management, referred to as IAM) in Hong Kong and Singapore, China."

HSBC said it decided to end the IAM business based on business strategy, but would continue to provide wealth management services to family office clients.

An international financial practitioner told the 21st Century Business Reporter that the IAM model is more difficult to regulate its funding sources than the traditional private model. At the same time, the cost of the IAM model is not low, and it is not cost-effective in terms of profit margins.

The 21st Century Business Herald exclusively learned that based on both cost and risk considerations, a number of overseas banks have recently reduced the pressure on the business (IAM).

The tripartite model is similar to the imperfect tripartite model of "buyer investment".

With regard to the development of HSBC's IAM business, an HSBC Asia-Pacific spokesman replied to the 21st Century Economic reporter that the relevant business in Singapore will start in 2020 and Hong Kong in 2022, but the above arrangement is not expected to affect the relevant business team.

HSBC Global Private Bank is reported to have overtaken Credit Suisse in the Asia-Pacific AUM on the eve of Credit Suisse's acquisition by UBS in 2023 and is now second only to the merged UBS with a total AUM of $209 billion.

Independent asset management (IAM), which is actually derived from private banking, also known as external asset management (EAM), has become a common mode of operation in Europe. In addition to getting services through their own private banks, high net worth people can also hire IAM independent asset managers as third-party consultants.

What is the difference between IAM mode and traditional private practice? In contrast to traditional private banks, IAM is independent of the banking system and avoids profit-driven sales and rebates, thus standing in the same position with customers in terms of mechanism, which is quite close to the concept of "buyer investment".

However, IAM is not a perfect model.

A Singaporean industry insider told the 21st Century Economic Reporter that the IAM model is not cost-effective compared to the traditional model.

"the cost of the IAM business is not low, the scale of the business is small, and the profit margin is not particularly cost-effective. Once there is a compliance problem, the bank will face greater risks." He further said that the adjustment of IAM business was misrepresented as "going home", but in fact it is not, the home office has a clear threshold for entry, while IAM generally has a smaller amount of capital and a lower threshold.

"based on business strategy considerations, HSBC Global Private Bank has decided to end its business for independent asset management clients in Hong Kong and Singapore," an HSBC spokesman said.

It is reported that the independent asset manager is the authorized agent of some family office clients of HSBC. A spokesman for HSBC said that most of the bank's family office clients were served directly by private banks rather than IAM channels, and that the bank planned to focus on serving family offices in this model in the future.

In fact, the penetration of the IAM model in Asia is not as good as that in Europe. According to Haitong International's 2022 report, EAM's penetration in Singapore and Hong Kong's high net worth customer market is 6. 5% respectively.Jackpotprize.5% and 4Jackpotprize.7%, which is still a big gap with Europe, with 16% in the UK and 15% in Switzerland.

HSBC said it would do its best to assist affected customers to make appropriate arrangements and continue to provide suitable and comprehensive wealth management solutions for clients in single and joint family offices.

Regulatory pressure and risk considerations, a number of banks pressure down IAM business

With increasing competition for wealth management in Asia, both Hong Kong and Singapore have extended an olive branch to the wealthy by encouraging family offices.

According to the data released by the government departments of the two places, by the end of 2023, there are about 2700 single family offices operating in Hong Kong, China.JackpotprizeThere are about 1400 single family offices in Singapore, all of which have received tax incentives. It is reported that customers and families who set up family offices through the Singapore government tax incentive scheme can obtain Singapore tax resident status.

However, the situation in Singapore is becoming more delicate. In October last year, the Singapore police cracked the largest money laundering case in recent years, involving a total amount of S $2.8 billion. At the same time, the Singaporean authorities pointed out that some suspects may be linked to a single family office, and that there may be more arrests and asset freezes in the future.

For IAM, when it replaces some private services, it will be more difficult for banks to carry out anti-money laundering management.

The above-mentioned industry insiders told reporters that compared with the traditional model, the source of IAM funds is more difficult to regulate. "if you only open accounts directly through banks, it will be more accurate to trace the source of funds, but it will be difficult to manage external assets." He further said that in view of regulatory pressure and risk considerations, a number of banks in Singapore and other places have reduced the pressure on IAM business.

From a policy point of view, in the face of a surge in applications and risk pressure, the Singapore Monetary Authority has been raising the threshold for household management in recent years.

In 2022, the Singaporean authorities added a request to increase the asset management requirement when applying for a home office under the tax subsidy scheme from S $5 million to S $10 million, with a commitment to increase it to 20 million yuan within two years. In July, Singapore raised the threshold again, when applying for the establishment of a home office, the asset size was increased from at least 10 million yuan to at least 20 million yuan.

Hong Kong, China is still making great efforts to introduce home-run business. According to invest Hong Kong, from June 2021 to the end of March this year, invest Hong Kong has assisted 64 family offices to set up or expand their business in Hong Kong, while another 136 have decided or are preparing to set up or expand their business in Hong Kong.