An independent wealth advisory based in London and Hong Kong is seeing a sharp increase in demand for strategic management of family assets and both philanthropy and succession planning from Asia.
Strabens Hall told CampdenFB that family offices are “coming of age” in the continent, with about 50 established in only 10 years. More family offices opening were confidently predicted, due to Asia now being home to a third of ultra-high net worth people, and young less risk averse westernised wealthy next-gens returning home with expectations of inheriting the family business from traditional affluent older generations.
Most principal Asian cities saw double-digit percentage growth in their ultra-wealthy population and Asia-Pacific continued to be the global leader in ultra-high net worth population growth despite flatlining growth worldwide and China's economic slowdown, according to the latest World Ultra Wealth Report by Wealth-X in late September.
Adam Benskin, director at Strabens Hall, said in the United States and Europe family offices tended to be run by separate professionals, yet in Asia the family unit still tended to exert executive control.
“The owners of the family's wealth are still incredibly instrumental in the management of their assets, and are often the executive decision makers,” Benskin said.
“As a major financial centre, Hong Kong has spear-headed the change in the way family offices are being run, with teams being enlisted to assist the high-net worths and create strategic investment portfolios and conduct risk management, alleviating them of the responsibility.
“Recently, we have noted a significant increase in enquiries regarding how best to develop a philanthropic dimension to a family's wealth. Our clients are keen to donate to worthy causes, with education, healthcare and environmental issues being the most popular to the mass affluent.”
The certified and chartered financial planner, and Fellow of the Personal Finance Society said the majority of family assets have been in real assets and private unquoted or locally quoted equity.
“For many the asset base is often business assets or equity, what we would call venture capital or private equity, property, cash with less of a focus on listed equity and debt, although this is changing,” Benskin continued.
“We have seen how many of our Asian high net worth clients bank with multi private banks. This is often paired with a lot of duplication on their investment strategies. By establishing a family office or by using a multi family office, their office will represent them to the private banks, removing duplication and the product push from the private bank RM.
“Currency risk has always been a major anxiety for most family offices with a global outlook and increasing so now are holding vehicles for various assets (think UK property) and local or global taxation.”
Campden Research, in association with Credit Suisse, published A Roadmap for Generational Wealth in Asia – Family Constitutions: Early Lessons Learnt in early July.
Almost 1,280 listed companies above $500 million in market capitalisation in Asia, excluding Japan and Australia, were family influenced and the proportion was even higher in unlisted or privately held companies, the report said.
However, relatively few ultra-high net worth families in Asia Pacific have adopted written documents, to guide future decision making by the families, due to the newness of family businesses and wealth.
Family governance progress is hampered in the region of India, China, Hong Kong, Singapore, Thailand and South Korea by patriarchal control, a lack of knowledge about family governance and language gaps between generations.
The shortcomings of some family constitutions that have been made were also noted. Attitudes to women and in-laws needed to be revisited, the paper added.
Benskin said Strabens Hall advisers have noticed that some of their young affluent clients wished to distance themselves from the business side of the family, so staff have had to adapt their business continuity plans to suit those younger generations. Balancing the desires of the traditional older generations and the entrepreneurial younger family members takes great skill, sensitivity and tact,” he concluded.
“The trend of sending children abroad to international schools and universities is becoming ever more popular. This in turn has also runs alongside residency and citizenship planning where families think about global mobility and move away from single-citizenship for a number of reason ranging from global mobility to security and safety.
“Family offices will play a key role is structuring and managing such affairs at a local level.”