New updates to Hong Kong’s trust law could help boost the city’s industry as it strives to catch up with rival wealth hub Singapore, say industry players.

The changes – slated to be implemented on December 1 –  will likely entice rich Asian families and individuals to view Hong Kong as a more favourable city to govern their trust structures. This has led to an uptick in trust companies looking to set up operations in Hong Kong, sources tell AsianInvestor.

In addition to new laws, updated for the first time since 1934, trust companies say Hong Kong’s lighter overall regulation makes it an appealing place to set up business, notes Patrick Hamlin, of council at law firm Withers in Hong Kong.

Trust corporations seeking to set up shop in the city need only HKD$3 million ($386,785) in capital. And once they register, there are no ongoing licensing requirements, unlike in Singapore.

“Trust companies are interested in coming here not just because of changes to the law, but also because we have a very light-touch regulation here for trust companies,” says Hamlin. He has received inquiries from international trust corporations seeking to set up offices in Hong Kong, but declined to name any.

The city's proximity to China, as well as the fact that it is an established global financial hub with a large market capitalistion, also make Hong Kong an attractive alternative to Singapore for trust corporations, other sources note.

Yet some say Hong Kong could stand to learn from the Lion City’s accreditation system, as the former will likely face personnel shortages in its trust industry in the next five to 10 years.

Lau Ka Shi, chairwoman of the Hong Kong Trustees’ Association, points to the Singaporean government’s “proactive approach to establishing an institute to provide accredited training”, which is partially subsidised by the government.

As a number of local senior trust professionals are set to retire in the next decade, Lau says Hong Kong must address this problem by attracting young people now, and argues that if the local government offers education with more structure, recognition and accreditation, “maybe more people will see trust as an industry to enter”.

“We need to groom more people to [move] further up the value chain,” she adds.

Changes in Hong Kong’s trust law include new rules on reserved powers, which allow settlors (those who settle property under trust law for the benefit of beneficiaries) to retain power when making investment decisions.

Another notable amendment is that trusts may be set up in Hong Kong to last indefinitely, exceeding the city's previous 80-year limit and the 125-year limit in place in Singapore. This revision will appeal in particular to settlors looking to set up large dynastic trusts.

Competition will inevitably rise between the two cities, particularly as Asian wealth accumulates. According to private bank Julius Baer, the number of high-net-worth individuals in Asia ex-Japan has grown by 19% to 2.2 million in 2013 from 1.9 million in 2012.

Yet Simon Ng, managing director of both Royal Bank of Canada Trust (Asia) and RBC Investment Management, argues Hong Kong and Singapore's trust industries can co-exist.

“Hong Kong will now have a level playing field in its traditional market of Greater China, where proximity and language are distinct advantages for some clients, rather than losing out on opportunities that move to the more-distant Singapore, where trust laws received a similar update in 2005,” says Ng.

* An extended piece on Hong Kong's new trust law amendments will appear in the September issue of AsianInvestor magazine.