Taiwanese wealth has surged on the back of the ongoing AI boom. This has created not only opportunities but also emerging concerns, such as concentration and succession planning, according to Lombard Odier.
Since 2023, the TAIEX (Taiwan Stock Exchange Capitalization Weighted Stock Index) has more than doubled, driven largely by the semiconductor sector due to the ongoing global artificial intelligence (AI) boom. Companies like chip giant TSMC, which account for the largest weighting on the index, saw its share price skyrocket by more than four-fold during the same period.
As a result, Taiwanese wealth has been rapidly expanding and the trend is expected to continue. According to a report by Boston Consulting Group and CTBC Bank, Taiwan is currently home to around 124,000 individuals – or 0.5% of the population – with at least TWD100 million (USD3 million) in assets each and this figure is projected to reach 155,000 by 2029.
Private banks have been a major beneficiary of the Taiwan story not only from business owners but also their employees.
“When we speak to clients, it’s not uncommon to hear clients say, if we were to rewind three, four years back versus today, business revenues or even bottom-line profitability, the difference is in multi-fold. It could be four-fold, five-fold, six-fold. And so I think that cascades into the entire wealth conversation,” said Alfred Low, Lombard Odier’s Hong Kong CEO and head of North Asia markets, during a media luncheon.
“So you have a mix of new wealth found to the extent that even white-collar workers with senior managers with stock options […] in an electronics company could clearly now be our clients and we will welcome them. That pool that has really emerged over the last two years.”
Onshore developments
Beyond the offshore opportunity, the onshore market is also seeing tailwinds from newly minted riches.
In an effort to keep assets at home, Taiwanese authorities have launched the Wealth Management 2.0 initiative, which includes the introduction of the Kaohsiung asset management zone, to lure banks and asset managers to set up and entice local high net worth individuals (HNWI). CTBC was the latest lender to establish a wealth management hub in the zone to focus on private banking and family office services.
“The normal regulations in Taiwan will have certain restrictions of what could be done, so I think that wealth hub gives you a little bit of, for lack of a better word, maybe a sandbox. I think it’s a very useful, long-term plan to develop Taiwan as a hub for wealth,” Low explained.
“I think there are a few things that probably need to be tackled over time. Speaking to the folks in the Taiwan industry and the practitioners as well as the heads of the business, talent pool is very tight. A lot of them are concentrated in Taipei, so then when you go south down two and a half hours [to Kaohsiung] by high-speed rail, that talent pool then becomes a little bit thinner. Do people want to relocate? These are very practical on-the-ground questions.”
While Lombard Odier does not have an onshore presence in Taiwan, it has a strategic alliance with Taipei Fubon Bank to provide its expertise in investment and family services.
Concentration and geopolitical risks
On the other hand, the rise in wealth is also creating new issues such as concentration risk as Taiwanese HNWIs are heavily invested in the domestic market. Low observes that clients are worried about the possibility of a correction as the local market has been essentially “a straight line up”.
In addition, there are also ongoing concerns about cross-Strait relations between Taiwan and China, and the possibility of escalating geopolitical tensions as Beijing has vowed to unify the two.
“We have entered a storm globally on many, many angles. The old world order that was written by the US for the last 80 years is no more,” Low added.
Succession planning: More action needed
And on the multigenerational front, Lombard Odier also sees risks with families from Taiwan, and Asia broadly, still unprepared for succession planning and transfers. According to a recent Lombard Odier study, 43.5% of respondents in Taiwan were most concerned about intergenerational challenges with 23.9% seeing resistance to change from senior family members to balance tradition and modernity as well as 39.1% citing a lack of interest or involvement among family members.
“I think for most of the Asian families, especially the traditional ones, it is still a problem to talk about succession planning. And talking about wealth transfer, it feels like it’s even more sensitive,” said Louisa Loo, Lombard Odier’s Asia head of wealth planning, citing issues such as the taboo of speaking about death, conflicts around splitting assets with heirs, and lack of alignment with the next generation. “But we all know that sooner or later it will happen and when the time comes, they are not prepared.”
To help clients become better equipped, Lombard Odier is running various events such as seminars to share real-life next generation stories and bespoke sessions for individual families.
