As the number of family offices in Southeast Asia continues to grow, Agnes Chen, CSC’s managing director for Fund Services in APAC, discusses the changing face of wealth management in the region.
The South China Morning Post’s recent China Conference: Southeast Asia focused on powering regional growth through technology, talent, and collaboration.
It included an insight-filled panel discussion about the rise of family offices in the region, and the role of Singapore and Hong Kong in attracting and servicing wealth management structures.
Highly experienced industry experts discussed issues around shifting priorities in wealth management, generational wealth succession, and the wider financial services ecosystem in the region. Here are four key takeaways from the discussion.
1. The future for family offices in Asia is bright
Asia seems to generate billionaires faster than anywhere else in the world, and perhaps faster than in any period in history. Hong Kong has the highest concentration of significantly wealthy individuals in the world.
At the same time, wealth management is growing more sophisticated. Wealthy families are prioritizing the preservation and succession of their assets with a focus that was less evident a decade ago.
This provides a huge market opportunity for family office service providers. In the next 10 years, $30 trillion is expected to be passed from one generation to the next in Asia.
Family offices will help enable what is the biggest wealth succession in history, but they will need experienced support. As wealth preservation, risk management, and regulatory compliance become more complex, outsourced wealth administration services will be necessary to assist family offices as they diversify and grow.
2. The role of the family office is changing
The role of family offices in Asia is evolving. Many wealthy families prioritize sustainable wealth, regulatory compliance, and robust inheritance strategies over higher returns from investments. They seek support with managing wealth for the long term and turning current business success into multigenerational prosperity.
It’s been suggested that heads of wealthy Asian families tend to be less confident the next generation is properly equipped to take responsibility for managing family assets. Family office providers have a major role to play here—by designing and managing robust inheritance strategies that protect wealth as it passes from one generation to the next.
3. Attitudes to risk are also evolving
As Asian investors become more sophisticated, their attitude to risk is also becoming more nuanced. Those who have enjoyed multigeneration wealth for decades or longer still tend to favor the traditional 60/40 split between fixed income assets and public equities.
However, a new generation of Asian ultra-high-net-worth individuals sees risk differently. These investors see security in diversity beyond traditional assets. Family offices in Asia must create and manage more complex investment portfolios as high- and ultra-high-net-worth individuals demand more exposure to alternative investments.
In the next few years, digital assets such as cryptocurrencies are likely to feature strongly despite the current climate, and family office providers will have to be ready to offer expertise to manage them.
As well as diversification, wealthy families are focused on the risks of non-compliance. They want to know their reputations are secure.
As such, they see family offices less as a tool to grow wealth, and more to help them navigate regulatory environments and comply with tax and reporting demands. They are also becoming interested in factors such as sustainability and environmental, social, and governance (ESG) investing.
Compliance, administration, and due diligence are complex and often time-consuming tasks. This is why many multi-family office providers reach out to third-party administrators to help them keep private client entities in good legal and regulatory standing.
4. It’s not just about Asian investors
There was discussion of the strengths of Singapore and Hong Kong as centers of family offices for U.S. and European investors.
Singapore benefits from a positive regulatory and tax environment, and the recent rollout of investor-friendly initiatives, such as the Singapore Variable Capital Company (VCC).
Hong Kong, meanwhile, is the de facto gateway to China and offers all the benefits of a deep and liquid capital market.
This is a story of collaboration as much as competition. One rarely finds a family office headquartered in one city that doesn’t have dealings in the other.
There is also a wider context. Asia is becoming more attractive to a new generation of U.S. and European investors with an international outlook. As these wealthy and globally connected individuals look to manage and preserve their wealth they will not be limited by geography. That’s an opportunity for family office providers in both jurisdictions.
Why CSC
CSC provides tailored administration and strategic outsourcing solutions to support the complex operations of alternative asset managers across jurisdictions and asset types while adhering to global regulations and compliance. A market leader, we work with funds of all sizes, from start-ups to the largest and most experienced fund managers in the world. Founded in 1899, CSC prides itself on being privately held and professionally managed for more than 120 years. We are the trusted partner of choice for more than 90% of the Fortune 500® and more than 70% of the PEI 300. CSC has office locations and capabilities in more than 140 jurisdictions across Europe, the Americas, Asia Pacific, and the Middle East. We are a global company capable of doing business wherever our clients are—and we accomplish that by employing experts in every business we serve. We are the business behind business®. Learn more at cscgfm.com.