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China's wealthy increasingly see value of full family office offering

By Jessica Tasman-Jones

China's growing high-net-worth population is taking an increasing interest in the non-investment services family offices provide, according to experts from Asia Pacific, such as estate and tax planning, as well as education.

According to the RBC World Wealth Report 2015, China's population of high net worth individuals (HNW individuals) grew 18% in the last year, and now sits at 758,000. The total wealth of this group grew 20.5% to $3.8 trillion.

Kenny Lam, president of wealth management firm Noah Holdings, which caters to Chinese families and enterprises, said the firm established a family office division earlier this year, having previously been much more focused on discretionary investment services.

Last month it announced a cooperation agreement with US multi family office McKinley Capital Management and professor Raphael Amit, family governance and wealth management professor at the Wharton School. The agreement aims to improve the firm's global reach, with Lam pointing out that the family office division serves many multijurisdictional families.

Clients, Lam explained, are typically self-made business founders with big families “riding off the economic boom of China”, who are interested in learning best practice from established family office markets, such as the US.

“These entrepreneurs are reaching an age, around their early 50s, where they feel like they need to think about family wealth planning, which includes estate planning, tax planning, and education,” Lam said.

The Global Family Office Report 2014 found that the consolidation function of accounting, tax and estate planning was the second most important family priority for offices, after intergenerational wealth management. Family unity was considered the third most important objective.

Family offices in the US and Europe began introducing these type of value-added services in the 1990s, and many larger family offices have introduced family dynamics, education, and family history teams.

Noah Holdings caters to a significant chunk of China's HNW population, with 80,000 clients using its wealth management services. Around 100 have signed up to their family office services.

Nisha Singh, a senior associate in the Asia private client team at law firm Berwin Leighton Paisner, agreed that there are an increasing number of families from China interested in the family office concept. The Singapore-based lawyer said families typically look to multi family offices if they're primarily interested in investment management services, due to their lower cost structures.

Singh added: “The creation of multi-function single family offices by Chinese families is less common, although they can provide an invaluable framework for super-wealthy families with international connections and sophisticated needs as they will have a wider function, including coordinating strategic tax and wealth-planning advice and philanthropic activities.”

Lam said China's super rich have traditionally sought discretionary wealth management rather than fully-fledged family office services, and this demand is continuing with recent stock market fluctuations.

“If you talk about wealth management, China is probably representing already half of Asia, ex-Japan, but for family offices I think China still has a much smaller part of the pie, because their needs are still very much being met out of Hong Kong,” Lam said.

“The so-called family office industry is mostly discretionary management. But that's the case now, and we see China growing very quickly.”

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