Family offices based in the Hong Kong Special Administrative Region are in urgent need of a regulatory framework that ensures standards and professionalism, and allows the city to outperform its competitors in attracting funds, according to prominent local families and financial service providers.

A solid regulatory framework would help to build trust and provide an incentive for wealthy families from Chinese mainland and overseas to set up their wealth management offices in Hong Kong, according to Mahesh Harilela, family council convenor of the Harilela Group.

Creating a regulatory framework to which family offices are aligned would “build on Hong Kong's core competencies” in investment management, he said.

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The Harilela family is the most prominent Indian family in Hong Kong with a century-long track record of business success in trade and the hotel industry.

Currently, family offices in Hong Kong manage around $1.3 trillion in offshore assets, about the same as in Singapore. There are more than 2,700 family offices in Hong Kong compared to fewer than 2,000 in Singapore.

Gregg Li, an honorary member of the Center for Family Business at the Chinese University of Hong Kong (CUHK), echoed Harilela’s sentiments that the sector urgently needs regulatory clarity, institutional support, talent development, professionalism and a strong brand identity to compete with other global family office hubs.

Li, who is also an ambassador and researcher of the Laboratory for Space Research at the University of Hong Kong, said family offices in the city are keen to find investment opportunities in new technology and innovation industries, provided that commercialization and market incentives are strong in the Greater Bay Area, especially the HKSAR.

The SAR government has earmarked HK$ 1 billion for the commercialization of AI and high-tech projects in the fiscal year 2024-2025.

“Hong Kong has been a trusted broker because its professionalism makes the city a good bridge between the two sets of standards (of the Chinese mainland and the West) in traditional business trade sectors,” said Li.  However, as the big data and new space economy grow in importance, the city is poised to become a hub of data transactions, and a frontier for finance and the marketization of high-tech projects.

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To build a good working environment for family offices, the regulatory structure must be robust and reliable, said Harilela.

Although Family Office HK (FOHK) was officially established in June 2021 under InvestHK to promote the city as a hub for family offices, a recent study by the Chinese University of Hong Kong Family Business Center revealed that the family office sector “is at a crossroads”. Its ecosystem is yearning for maturity to support growth in asset management and diversified investment portfolios in high-tech industries.

According to research co-authored by Marshall Jen, director of the CUHK Center for Family Business and Li, there is a need for a more structured training regime and ecosystem development to enhance professionalism in the industry, which is key to Hong Kong's competitiveness as a family office hub. A robust ecosystem supported by a public-private partnership could improve service quality and stakeholder collaboration, the research found.