A significant increase in the number of Asian billionaires over the next decade could result in a new class of family office that is optimised for growing wealth, according to a regional adviser.
Patricia Woo, senior consultant for international legal practice Squire Patton Boggs, made her comments in response to the Knight Frank Wealth Report 2016, which was released this week.
The tenth annual report found that a 71% surge in Asian billionaires over the next decade would put the continent’s billionaire population on par with the US, while Woo said that the number of family offices is likely to increase in tandem.
“The fundamental reason for the surge in family offices will be demand. When Chinese people want something, they want it at once. We have three sources that are currently contributing to the family office community: Chinese locals, those from Hong Kong, and those from overseas. I expect that to continue,” she said.
Produced by high-end real estate firm Knight Frank, the report found that the surge in the number of Asian billionaires over the next decade would bring the total population to 832, placing the continent almost on par with the US’s 840.
Other results from the report suggest that the amount of money leaving the country reportedly surpassed $1 trillion in 2015, as increasingly wealthy Chinese citizens look to invest in global assets and get their money out of China.
Woo says many Chinese families are still in the stage of making more money, and therefore are not hugely concerned with family offices, adding that the family office market is likely to develop offerings around this desire.
“There are other problems that will affect the growing family office market. Just to name a few: unavailability of talents, culture differences, stage of development of the legal infrastructure, and political instability,” she said.
Yet the biggest problem for family offices in 2015 stems from the challenges the younger generation face when engaging the elder generation, according to Woo.
“Family offices are something new and something from the West. It takes time and effort to convince the elder generation. But the good news is many rich mainland Chinese parents are receptive to models that have already proved themselves and they are willing to let the children try the concept out,” she said.
She concluded by summing up the immediate future for the family office market in China: “Although the number of family offices is increasing rapidly, the market in both China and Hong Kong is still in an early stage, except for a number of mature ones in Hong Kong with more than 50 staff.
“The future looks pretty optimistic for independent players, rather than ‘family office’ services in a bank or trust company. Although China apparently has an advantage in the growth in number, in terms of comprehensive service offering, Hong Kong will stay ahead for quite some time,” she added.
The Knight Frank Wealth Report 2016 revealed that the number of ultra-high Net Worth Individuals, those whose net assets are over $30 million excluding their main residence, dipped 3% last year.