What do private bankers in Asia do when their client books are bulging, their asset under management have hit new heights and they’ve reached the peak of their profession? Increasingly, they are escaping the confines of their banks and are setting up multi-family offices (MFO) to provide independent advice to their wealthiest clients.
“Compared with just a couple of years ago I’m having more and more conversations right now with senior bankers, the top 10%, who are considering a multi-family office as a logical next career step,” says Rahul Sen, head of private wealth management at search firm The Omerta Group in Singapore. “They are a relatively new concept in Asia – managing only about 3% of regional private wealth – but they are growing.”
Their expansion is fuelled in part by concerns that private banks aren't meeting the increasing needs of clients in Asia, the world’s fastest growing region for private wealth. “I was chatting to a banker in Singapore this week who said his bank can no longer service his clients as he’d like,” says Sen. “He’s considering asking them to join a family office where he could offer them products from a range of banks – perhaps for their property deals, the Singaporean banks would be best, for example.”
The ability to offer independent, multi-platform advice is one of the main reasons for private bankers in Asia setting up or joining MFOs. “The increased spending on risk and compliance functions by private banks recently is another factor,” says Clarence Law, a business advisor who runs a family office in Singapore. “You don’t want to be talking to compliance all day like you sometimes are at banks; you want to be talking to clients.”
Rising regulatory costs are also heaping more revenue pressure on private bankers in Asia. The profit margin for wealth managers in Asia is 17 basis points, compared with 23 in Europe and 32 in North America, according to the McKinsey Global Private Banking Survey.
Multi-family offices aren't always a panacea for such pressures, however. Bankers typically first need to convince about four of their wealthiest family clients, each with at least US$30m in AUM, to make the move, says Sen. “And you will only survive as a sole-advisor, with your revenue linked to their AUM, if your relationships with these clients are very strong and entrenched – you’ve been through several financial lifecycles together and thoroughly trust each other.”
You’ll also need to get used to a different day job within a much smaller firm (family offices in Asia typically employ three to eight former private bankers). “The demands of your clients will be much broader than at a private bank – estate planning, insurance, business planning, trade finance, loans,” says Law. “You need enough clout to connect your clients to the right institutions – you essentially act as a middleman, a broker,” says Law.