Association of Private Bankers in Greater China Region

The Principles of Practice for Private Wealth Management

Introduction The Association has mission to develop and promote the Principles of Practice to foster responsible wealth management and to protect the private wealth owners and their beneficiaries. In this connection, the Association has good will to advocate the following paradigms:

● Prudent management of the private wealth management practice● Full transparency of fees and commissions● Full disclosure on material information that are of interests of wealth owners and their

beneficiaries● Dedicated effort to avoid conflicts of interest● Caution of investment not offering transparency or liquidity● Customized solution addressing unique and in-different needs of wealth owners and

their beneficiaries The Principles of Practice are a set of best practices intended to create ethical discipline, process and transparency in private wealth management in greater China region. The Association encourages the members and professionals who manage significant wealth to adopt and implement the practice following our valued principles. Supporting members and professionals can sign the Charter of Private Wealth Management Practitioners to signify their conviction and buy-in to the paradigms and the principles. The Principles of Practice are focused on the key areas of wealth management :● Governance● Service Approach● Investment Management● Oversight and Monitoring

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The Principles of Practice for Private Wealth Management Governance

Principle 1Practitioners should maintain financial stability. There should be a track record of consistent growth in assets and relationships over a period of 3-5 years. The practicing institutions should present the sustainable corporate ownership, the prudent governance structure and the proven firm profitability. Principle 2Practitioners should demonstrate commitment in fulfilling the multi-generational needs of wealthy family. The practicing institutions should develop their mission that reflects this commitment. Prime focus should be given in cultivating long-term and trustful relationships, attaining diversified goals of wealth owners and assisting in wealth and business transition. Principle 3Practitioners should employ competency and stable senior management and staff. The senior management and the responsible officers should demonstrate the conviction to high ethical standards and display the integrity in all the ways of managing the private wealth management practice. The execution staffs should carry recognized industry credentials and adequate experience in the private wealth management field.

Service Approach

Principle 4Practitioners should adopt a client-centered relationship management approach and practice in the way that reflect this live philosophy. Principle 5Practitioners should adopt an integrated service delivery process. This holistic approach to the wealth management process should consider the entirety of the clients’ situation and their best interest. The execution should reflect this live philosophy. Principle 6Practitioners should adopt a disciplined investment process. The practicing institutions should establish the well-documented investment strategy, develop and maintain the investment policy statements. The investment committee should be set up for supervising and monitoring the investment.

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Principle 7Practitioners should maintain a diversified menu or platform of investment products. The practicing institutions should get the access to a broad range of investment product, asset management services, financing solution and diversified asset classes.

Investment Management

Principle 8Each investment portfolio shall be diversified as completely as practical. There should be diversification of asset classes, investment managers, investment style, currencies, banking and brokerage exposure, and geopolitical risks. Principle 9Every portfolio shall have an investment Policy statement, and every manager shall have a clearly articulated mandate; and the investment Policy statement and mandate shall be monitored. Principle 10Any investment portfolio shall be designed taking into account the assets, objectives, needs, and character of the wealth owner and/or beneficiary; and should be monitored with those in mind; and a Foundation shall have a process to determine whether the investment program reflects the values of its mission and its philanthropic grant program. Principle 11There shall be clear, disciplined, and objective process for selecting, monitoring, removing, and replacing investment managers, custodians, banks, trade execution, accounting, and other professionals. Principle 12Any investment manager or specific fund to be used shall have a strategy and style which can be easily understood and explained to others by the Wealth owners and their beneficiaries or by one of the trustees, directors, or staff members of the Trust, Foundation, or Family Office. If no one other than the Investment Manager or the fund representative is able to explain the strategy and style, the manager or fund shall not be used. Principle 13Special scrutiny and limitations should be applied to any Investment Manager who does not offer complete transparency, or whose portfolio is not liquid. Such investments are not prohibited, but should be limited in proportion to total portfolio investments. Principle 14Custody of assets, accounting for assets, and investment management services shall each be performed independently and separately.

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Oversight and Monitoring

Principle 15The wealth owners and beneficiaries, the Trustees of a Trust, or the Directors of a Foundation shall articulate purposes, goals, expectations and risk tolerance with respect to the Wealth; and shall be ultimately responsible for maintaining the currency of that articulation. Principle 16With respect to a Family Office, a Trust, or a Foundation; the governance structure together with various governance roles and responsibilities shall be clearly set forth and shall include provision for the communication of those roles and responsibilities and assurance that they are understood and accepted. Principle 17Any Trust or Foundation and any Trustee or Director shall adhere to best fiduciary practices; and there shall be established process for monitoring the discharge of fiduciary duties by the Trust, Foundation, a Trustee, or a Director. Principle 18Succession shall be set out where possible and shall be considered. For the Wealth owners and their beneficiaries, provisions shall be in existence for disposition of assets and management of affairs from and after death or in the event of incapacity. For the Family Office, Trust, or Foundation; provision shall be made for succession of governance and management. Principle 19Practitioners should establish a process for reviewing the governance mechanism, the work policies and procedures. There shall be a method for managing and monitoring internal and external resources. Principle 20Practitioners should maintain comprehensive financial reporting to enable clients to understand their consolidated and latest financial position. Principle 21Practitioners should comply with all regulatory and financial requirements. The practicing institutions should be able to demonstrate the evidence of compliance with regulatory agencies and reliance on routine internal control procedures, such as financial, security and technology audits.

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Principle 22Practitioners should develop their robust technology platform. The practicing should hold reliable hardware and software systems that support the complex needs of multi-generational wealth owners and their beneficiaries. Principle 23Practitioners should enable full transparency of fees, commission and expenses. Full disclosure and clear explanation must be offered to the wealth owners and their beneficiaries prior to the execution and the disclosure should be arranged on an on-going basis. Principle 24Practitioners should maintain an equitable policy where the compensation and fees paid to staff, directors, and governors of Family Offices, Foundations, or Boards shall not be calculated on the basis of “investment return” of shorter duration than five years. Any salary, bonus, or fee must be fully disclosed as to its amount and its calculation. Any direct or indirect payment to or for staff or governors other than a payment designated salary, bonus, or fee (or similar designation) is discouraged. Principle 25Practitioners should maintain a staff dealing policy where the self-dealing by staff, trustees, or directors of any Family Office, Trust, or Foundation is strictly prohibited. Investment portfolios of these parties shall be subject to strict disclosure rules which ensure compliance with the prohibition against self-dealing. Any grant or payment to any agency or company in which such a party has any interest whatsoever should clearly reflect that interest in the deliberation relating to that grant or payment.

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