Family offices, also known as private companies, are typically small operations which manage investments and trusts for families with more than US$100 million in investible assets.
The study surveyed more than 35 family offices in Asia with assets of at least US$50 million but often rising to more than US$1 billion.
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The study report found that the Asia-Pacific region has 100 family offices, which accounts for paltry 4% of the 2,500 family offices located around the globe.
Furthermore, around 75% of the family offices participated in survey had only been in business since the 1990s.
The report also says that Singapore, Hong Kong and Australia are the most attractive locations to set up a family office.
The report further revealed that family offices currently operating in Asia have on average six staff members, relatively conservative investment portfolios and posted an average investment return of 9.1%.
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By GlobalDataAccording to the study, concerns on confidentiality are holding back Asian families from outsourcing their wealth management services.
Other notable trends which emerged from the study include an increasing emphasis on financial literacy of the upcoming generation and a tendency towards risk management in these uncertain economic times.
David Bain, head of research at Campden Wealth, said: "It is astounding that the family office model hasn’t taken hold in Asia-Pacific to a much greater extent given the dramatic growth in wealth there in the last 20 years. But as wealth continues to grow in the region and face more multi-generational pressures there is likely to be a huge demand for the services of family offices, leading to a boom in their numbers."
Wealth managers and family offices will continue to make a beeline for Asia as the region will continue to be at the forefront of wealth creation, minting millionaires at a faster pace than any other region in the world, despite the recent market volatility.
With wealth exploding and the economy transiting from scarcity to prosperity, we see a huge demand for estate planning, wealth protection, taxation advisory and more in Asia.
However, most of Asia’s rich are still looking to grow their wealth, unlike in the West where the mood is to protect and preserve wealth. In fact, savvy risk-taking clients see the current market turmoil as an opportunity.
Also, Asia’s old rich have traditionally been reluctant to take professional help, while the young millionaires are only just warming up to private bankers.
So the challenges before the family offices in Asia will vary extensively compared to challenges in European and North American markets. We believe that the success of family offices will depend more on quality and innovation they will manage to bring into their product portfolios and how well they lure these reluctant neo rich.
Even in terms of structure, Asian markets will differ from the western market. WealthInsight is of the opinion that standalone family offices will have a distinct advantage over bank-run family offices, as they don’t have conflicting interest to peddle in-house financial products faced by private bank advisors, offering clients, objective advice customized and tailored to their needs in the boutique firms.
However, what could potentially temper rush of family offices into Asian market is the current regulatory uncertainty in the wealth management market, which we believe should stabilize as the regulators alight on a new framework. However, given the sedate pace at which the Asian countries are moving this may take some time.
