Mega wealthy Asians are increasingly demanding that their private bankers quit their jobs and manage their money from family offices in Singapore and Hong Kong.
“There is a growing need for family offices in Asia as ultra-high-net-worth clients are now demanding more sophistication in money management and more discretion,” says Pathik Gupta, head of Asia Pacific wealth management at consultancy McLagan. “A lot of clients feel that family offices are more aligned to their investment strategies and risk appetites – as opposed to a banker who might be deemed biased to in-house products or services.”
The Asian wealth sector has also reached a crucial turning-point – wealth created by entrepreneurs in emerging economies over the past 20 years is now increasingly passing to the next generation. “With this in mind, many clients feel that family office are better suited for long-term succession planning,” says Rahul Sen, a former Merrill Lynch private banker, now head of wealth management at search firm The Omerta Group in Singapore.
The tightening of onboarding and compliance processes at private banks in Asia is also making more clients consider less restrictive ways to manage their money, says a family office manager in Singapore who asked not to be named. “The rise of compliance has helped the rise of family offices,” he says.
The good news for private bankers looking to join family offices is that the sector is set to expand further – Asia’s millionaire population is due to overtake North America’s by year-end, according to Capgemini and RBC Wealth Management. “Plus family offices in Europe and the US are far more established and service older money, so there’s more room for growth in Asia,” says Sen.
While the sector in Asia is now dominated by multi-family offices, experts say future growth will be fuelled by single-family offices set up by billionaires to serve just the needs of their families and/or close business associates. Earlier this year, for example, Joseph Tsai, Alibaba’s executive vice chairman, and other early Alibaba executives established a new family office to manage the wealth created by their company’s IPO.
Right now only about 100 of the world’s 3,000 single-family offices are in Asia. “This is only due to the current level of maturity of families in Europe vs in Asia. I believe that in the next decade or so, we will see many more single-family offices operating in Asia than in Europe or in US,” says Gupta from McLagan.
While not every banker will have clients wealthy enough to take the family-office route, Gupta says it’s generally an appealing career path. “The type of bankers who would want to join the new family offices in Asia would do so because there’s less revenue pressure compared to a bank, a higher degree of independence and more opportunities to contribute broader perspectives to clients – you’re not so boxed into your role.”
“You can actually conduct proper wealth management rather than just go after targets and push products,” adds Sen from Omerta Group. “You’re moving up the value chain by managing one or a few large families and going the whole nine yards by servicing their full requirements – from to asset management to trust and estate planning.”
The family office manager in Singapore warns private bankers not to make a rash move into the sector. “The decision to join or start a family office should never be taken lightly. There’s still immense pressure that comes from acting in the best interest of clients,” he says. “The depth of relationships is even greater than at a bank – the highest level of trust is placed in you. It’s the epitome of relationship management within wealth management, so not all bankers who’ve made the move are successful.”