Suggested Answer — Question 1: Wealth Planning

(a) Business-succession solutions

Any two well-supported solutions may be credited. Suitable possibilities include:

• Restructure voting, management and economic rights: Ms Wong could consider a properly advised share restructuring under which Adrian obtains appropriate management or voting control while Ms Wong retains an economic interest, such as dividend-bearing rights, during retirement. Bella could receive non-voting economic interests or other assets of comparable value. This separates control from economic benefit, supports Adrian’s management role and may provide Ms Wong with retirement income.
• Family trust holding company shares: a trust may hold selected shares for family beneficiaries under defined terms. Governance provisions could support continuity of family ownership, permit Adrian to manage the operating business and provide economic benefits for Bella. The settlor’s desired control, trustee powers, beneficiary interests, jurisdiction, cost and tax consequences must be examined.
• Shareholders’ or family agreement: if ownership will be shared, an agreement can document voting, dividend policy, transfers, entry into management, dispute resolution, death/incapacity and exit. This reduces the risk that disagreement between Adrian and Bella disrupts Prosper Foods.
• Phased transfer with a documented succession plan: Ms Wong could transfer responsibility in stages, set milestones for Adrian, identify emergency leadership and agree how the board will supervise the transition. This tests readiness and reduces key-person dependence.

(b) Personal wealth-succession or estate issues

Material issues include:

• Her estate arrangements are more than ten years old and may no longer reflect the family, asset values or intended treatment of the children.
• The HKD45 million portfolio is held solely in her name, creating possible continuity and liquidity problems on death or incapacity.
• Most wealth is concentrated in private-company shares, which may be illiquid and difficult to divide fairly.
• There is no clear plan for reconciling Adrian’s business role with Bella’s economic provision.

Potentially relevant solutions include:

• Review the will and wider estate plan: obtain legal advice and coordinate the will with company-share arrangements, account ownership, beneficiary designations and any trust. This helps ensure the current wishes are documented consistently.
• Trust planning: a suitably designed trust may provide continuity, professional administration and defined benefits for family members. It may also address control of business shares, but it is not automatically suitable and requires full legal and tax analysis.
• Insurance for liquidity or equalisation: appropriate coverage may create cash on death, support dependants or provide value for Bella if Adrian receives a larger interest in the business. Coverage, ownership, premiums and beneficiaries must fit the plan.
• Incapacity and account-continuity arrangements: valid powers or mandates, and an appropriately advised review of sole versus joint ownership, may reduce disruption if Ms Wong cannot act. These arrangements can affect ownership and succession outcomes and must be implemented carefully.
• Family office or coordinated reporting: if justified by complexity and cost, an internal, outsourced or multi-family-office arrangement may coordinate investments, governance and external advisers. It does not replace the underlying legal documents.

A high-scoring response links three solutions to the two issues identified rather than listing structures without explaining their purpose.

(c) Other wealth-planning needs

• Debt planning: the proposed HKD30 million borrowing and possible personal guarantee could expose family wealth to business risk. Terms, repayment capacity, collateral and limits on personal liability should be reviewed.
• Risk management and asset protection: Ms Wong is concerned about protecting family wealth from a business setback. The ownership structure, guarantees, insurance and separation of business and personal assets require analysis.
• Retirement and lifetime cash-flow planning: she retires in about two years and wants reliable income. Required spending, expected dividends, liquidity and longevity should be modelled rather than assumed.
• Investment and liquidity planning: her HKD45 million portfolio is concentrated and not regularly reviewed. The portfolio should be assessed against retirement objectives, liquidity requirements, time horizon and risk tolerance/capacity.

Suggested Answer — Question 2: Behavioural Finance

(a) Biases and consequences

• Outcome bias: Ms Wong judges a decision as good merely because it produced a short-term profit, without evaluating the research or whether it followed the agreed plan. This can reinforce a poor decision process, encourage unsuitable holdings and cause her to abandon disciplined planning.
• Self-attribution bias: she credits gains to personal skill but blames losses on external market events. This can produce excessive confidence, increased trading, underestimation of risk and resistance to contrary advice.

(b) Moderating the biases

• For outcome bias, agree objective decision criteria before investing, use a decision journal and assess both process and outcome at reviews. Compare each decision with the agreed investment plan rather than judging it solely by recent profit.
• For self-attribution, compare results with an appropriate benchmark and the risk taken, review gains and losses symmetrically, and require documented research and position limits before additional trades.

Suggested Answer — Question 3: Customer Relationship Management

(a)(i) Matrix classification

Strong mutual attraction means Ms Wong is highly attractive to the bank and she also sees high value in the bank and current relationship. She belongs in a priority relationship segment that should be actively nurtured. The position is not permanent: the recent manager transition creates a risk that the customer’s attraction may weaken if continuity and trust are not maintained.

(a)(ii) Maintain and develop the relationship

• Agree a purposeful contact and review plan covering retirement, the borrowing, portfolio concentration and succession rather than relying on product contact.
• With consent, introduce relevant specialists in family-business succession, wealth planning, investment and credit so that Ms Wong receives coordinated expertise.
• Demonstrate continuity after the former manager’s departure through a documented relationship plan, reliable follow-up and a wider service team.
• Provide relevant education, briefings or events aligned with family-business and next-generation needs, avoiding generic invitations.

(b) Intergenerational retention

• With Ms Wong’s permission, begin relationships with her husband, Adrian and Bella. Understand each person’s role, objectives, communication preference and financial knowledge rather than treating them only as future asset recipients.
• Facilitate appropriate family discussions about management, ownership, economic fairness and the planning horizon, supported by relevant specialists and external advisers.
• Offer suitable next-generation education and digital engagement, and ensure the bank can continue service through retirement, incapacity and wealth transfer.

Suggested Answer — Question 1: Customer Relationship Management

(a) Initial engagement and fact-gathering objectives

• Establish the relationship and scope: explain the manager’s role, confidentiality, services, limitations, fees and the need for legal/tax/regulatory advice. Confirm which family members, entities and jurisdictions are within scope and how decisions will be made.
• Create a verified wealth map: obtain assets, liabilities, ownership, location, cash flows, insurance, existing structures, advisers and the expected partial-sale details. This is necessary because Mr Zhao currently gives only broad estimates and has no consolidated record.
• Recognise and prioritise needs: identify family support, protection, incapacity, retirement, succession, post-sale diversification and service expectations. Qualify each objective by purpose and priority and quantify amount, currency and timing.
• Evaluate tolerances and constraints: establish risk tolerance, risk capacity, investment knowledge, liquidity, time horizons, tax position and legal/regulatory constraints before discussing products.

Any three fully explained objectives should receive credit.

(b) Immediate and future priorities

Immediate priorities may include:

• Repair the service failure, correct the incomplete summary and respond to the urgent call.
• Complete fact gathering and establish ownership, source, location and transferability of assets before product recommendations.
• Assess the risky positions, liquidity and behavioural risk without making an uninformed sale recommendation.
• Clarify the partial-sale timing and its possible liquidity, concentration and planning consequences.

Future priorities may include:

• Develop a post-sale diversification and long-term asset-allocation plan.
• Plan retirement and lifetime cash flow.
• Create succession, incapacity and protection arrangements for the spouse, children and parents.
• Assess whether a trust, insurance solution, foundation, private label fund or family-office service fits defined needs.

(c) Service recovery

1. Acknowledge, listen and apologise promptly: contact Mr Zhao through his preferred channel, allow him to describe the impact and accept responsibility without blaming another team.
2. Correct the failure: provide an accurate revised summary, return the urgent call, identify one accountable contact and agree the immediate next action.
3. Prevent recurrence and follow up: investigate why the call and summary failed, improve hand-offs and quality checks, confirm communication standards and later check whether confidence has been restored.

A credible response addresses both the operational error and the loss of trust. It may convert an early failure into evidence that the institution is responsive and accountable.

Suggested Answer — Question 2: Wealth Planning

(a) Applying three process stages

• Establish the relationship: define scope, responsibilities, confidentiality and adviser boundaries across the family, business and jurisdictions.
• Gather information: obtain a consolidated balance sheet, cash flows, ownership, liabilities, insurance, sale expectations, family obligations, objectives, liquidity, horizons, risk profile, tax position and control preferences.
• Analyse: test liquidity and lifetime cash flow, identify concentration in the group and risky positions, distinguish current assets from uncertain sale proceeds, and assess protection, retirement and succession gaps.
• Plan: prioritise objectives and design coordinated investment/liquidity, risk-management, retirement, succession and cross-border recommendations with reasonable alternatives.
• Implement: obtain informed agreement, coordinate qualified advisers, allocate responsibilities and put only suitable, permitted solutions in place.
• Monitor and review: review after the business sale, family or residence changes, market movements and legal/regulatory developments.

Any three stages should be clearly applied to Mr Zhao rather than merely named.

(b) Needs and potentially relevant solutions

• Consolidation and oversight: verified consolidated reporting or an appropriately scaled family-office service may coordinate multiple institutions, ownership arrangements and advisers. A family office is not automatically justified; cost, control and complexity matter.
• Succession and incapacity: coordinated wills, valid authority arrangements, account review and possibly a trust may improve continuity and provide for the spouse, children and parents. Legal and tax advice is essential.
• Family protection and liquidity: insurance may provide liquidity or protect dependants following death or disability, subject to suitable coverage, ownership, beneficiaries and affordability.
• Post-sale investment and liquidity: a staged asset-allocation and liquidity plan may diversify concentration while retaining the agreed business interest and funding foreseeable family needs.
• Retirement: a lifetime cash-flow plan should quantify spending, income, longevity, support obligations and the uncertain timing/value of sale proceeds.
• Purpose or philanthropy: if a genuine objective emerges, a foundation or another suitable arrangement may organise governance and distributions. It should not be proposed merely because Mr Zhao mentioned the term.
• Investment structure: a private label fund may be considered for eligible assets where scale, tailored management, costs, liquidity and regulation support it. It is not a substitute for estate or family governance planning.

Suggested Answer — Question 3: Behavioural Finance

(a) Prospect-theory explanation

• Reference point: Mr Zhao uses the previous portfolio peak as the benchmark and frames the current value as a loss, even though that peak may have no relevance to today’s best decision.
• Loss aversion: recognising the decline causes disproportionate discomfort, encouraging him to delay reducing unsuitable positions.
• Risk attitude: after framing himself in the loss domain, he becomes willing to accept greater risk to return quickly to the reference point. This is risk-seeking behaviour in perceived losses.

(b) Moderating the behaviour

• Reframe the choice as the best use of current wealth to meet future objectives, not as a requirement to “recover” to the old peak. Present balanced scenarios in money and percentages.
• Agree an investment plan, diversification parameters, position limits and decision rules before implementation; use staged changes if appropriate and suitable.
• At reviews, compare decisions with the agreed process and objectives, use a decision journal and avoid reacting solely to short-term outcomes.

Suggested Answer — Question 4: Overview of the PWM Industry

• Complex, consolidated oversight: Mr Zhao has business, property and investments across institutions and locations. Coordinated reporting, a lead relationship manager and possibly an outsourced or multi-family-office service may create a reliable total view and organise specialists.
• Family succession and continuity: he supports several generations and wants continuity on death/incapacity. Integrated wealth planning can coordinate ownership, protection and professional advice rather than sell a single product.
• Cross-border capability: onshore and offshore assets require location-aware service and regulatory discipline. A coordinated model should use permitted channels and qualified local expertise.
• Confidential, reliable digital service: controlled access, accurate reporting, privacy and responsive human support directly reflect his stated preferences.

Any two needs earn full credit when the answer explains both the relevant structure/service and how it supports a sustainable relationship.

Suggested Answer — Question 5: Hong Kong, Mainland and Asia-Pacific PWM Markets

(a) Cross-border issues

• Legal and regulatory permissions: determine where solicitation, advice, execution and other activity occur; whether the Hong Kong manager or a relevant entity is authorised; and which approved channels may be used. The manager must not conduct unauthorised activity in the Chinese Mainland.
• Ownership, source and transferability: verify who owns each asset, source of wealth/funds, whether funds are onshore or lawfully offshore, and whether foreign-exchange or capital-movement rules permit a proposed action. Do not assume assets can simply be moved offshore.
• Product eligibility and suitability: confirm investor and product eligibility, objective, risk, liquidity, horizon and applicable offering requirements.
• Tax, succession, data and reporting: cross-border differences require qualified advice and appropriate controls for information transfer and confidentiality.

(b) Enhancing the relationship

A verified global wealth plan and location-aware asset allocation can connect Mr Zhao’s onshore and offshore assets to family liabilities, currencies, liquidity needs and time horizons. Coordinated reporting and regular review improve transparency, while candid explanation of legal boundaries builds trust. This turns the relationship from product selection into continuing advice relevant to the partial sale, diversification and family succession.