With assets still predominately held by the first and second generations, the heads of most wealthy Asian families remain as key decision makers and they are often keen to stay actively involved in managing their own assets. This is despite the fact that many of Asia’s wealthy families are facing a transition period which involves shifting control of the family’s wealth to later generations. Hence, the idea of a family office – an institutionalised and formalised model that is dedicated to the financial, corporate and personal needs of wealthy families, is still a foreign concept to many of the region’s high net worth individuals.
Asia’s surging wealth is creating more millionaires and billionaires. Issues such as wealth preservation and succession planning have therefore become more of a concern, helping to propel the growth of family offices.
A close relationship built through being within the circle of trust allows “trusted” advisers to be closer to their clients and in a better position to come up with more “bespoke” services, which may include family governance, immigration and even education ranging from wealth management to wine appreciation. A family office of a single first-generation wealth family most likely act as a “private” office, which deals with personal and household matters and includes such concierge-like services.
A more holistic approach when structuring a family office’s services would therefore is to look into three perspectives – family, business and wealth management and in that order. Family harmony is key as if the family business is having problems, it would be difficult for the family to focus on investment returns.
For the ultra-wealthy, opening an investment company is just part of a business model. These families are essentially business owners who have taken companies public, or they are past business owners who just sold a portion or all of their business to a private party and cashed out on their business they built up in the past. As they have made their fortunes investing, they are comfortable investing for themselves. Many of the investments in Asia are therefore private equity, and the families also have good networks from which they can draw investment ideas and implement them.
Generally, Asian families do not tend to invest in any third party funds because they would usually have their own private equity managers. They would do deals directly and are very focused in the sectors they invest in and very often would want to cherry pick the deals because of their unique positions. The offices are increasingly teaming up with private equity funds and buyout firms (as well as competing against them) to do global acquisitions.
Given the specific needs of the ultra-wealthy in Asia and cultural differences between the Asian families and their counterparts in Europe and the US, there certainly is no one standard approach or formula that be applied to meet the needs of family offices in the region. As wealth continues to build in Asia, especially in the fast-emerging markets, demand for international or multi-jurisdictional wealth and succession-planning services has increased to assist the private family offices.
Source: Ariffin-Boromand, Azlinda., July 4, 2017, http://www.campdenfb.com/article/close-and-personal-perspectives-asian-family-offices