Opportunity for US Multi-Family Offices to tackle Asia

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1 Opportunity for US Multi-Family Offices to tackle Asia An opportunity is being presented in the market for sophisticated US model multi-family office platforms within the Asian wealth Diasporas. Globally, private wealth rose by 7.8% (to approximately USD 135 trillion) in 2012 from the previous year, with Asia ex-japan having the largest increase of 17% (to approximately USD 28 trillion) in private wealth from 2011 to This is projected to nearly double to approximately USD 48.1 trillion by History. US Model. The family office is an institutionalized financial model which originated in the 1960 s in the US and Europe. Initially conceptualized to manage the wealth of a single UHNW family and formulate its succession planning, the range of services offered has expanded over the years to cover all wealth management capabilities including PWM, Trust, Estate Planning, Insurance and Investment Banking requirements. Recently bankers seem to be amalgamating and aligning the interests of numerous UHNW families onto a single platform, forming the multi-family office approach. Each office develops depending on the specific needs of the family which can also include property management or concierge services. There are no consistent characteristics among the family offices which would differentiate a successful office; success is dependent on the goal of the family or group within and its financial DNA.

2 Evolution. Traditionally in Asia, UHNW families would manage their wealth across several retail banks, and have an in-house accountant who would monitor and consolidate the families investments and assets, but would not recommend investment and asset allocation advice. The generation from 1985 has been concentrating on wealth creation only. Given the huge change in the region and its vast human market, the need for goods/ services/ real estate/ agribusiness/ domestic demand/ commodities remains extremely strong locally even following a softening in Western market demand. Couple the above with a very low rate of employment cost and the spike in UHNW is not surprising. With the maturity of the industry and as a result of the 2008 crisis, clients/families have shifted to preferring a dedicated trusted banker to manage their assets and investments and who can offer sophisticated advice across their portfolio. Accordingly, over the past six years bankers have been setting up smaller family or private offices and multifamily offices in Asia in order to provide this consolidated, holistic service for their key clients as the clients juggle continuance of wealth creation/ business management and generational handover challenges. With the crisis in Europe, sophisticated Family offices based in Switzerland have also set up offices in Asia in an attempt to attract Asian client wealth and to book their European client assets in Asia thus deepening their Asian understanding and asset holdings.

3 There are a modest number of independent providers in Singapore with a stronger presence in Hong Kong, but they are individually run, small (2-4 bankers) outfits catering to a few families or single clients. These offices lack institutional support, and are very Eurocentric in their thought processes and objectives. They cater more to discretionary solutions, as well as wealth conservation and preservation. A few offer some Corporate Finance expertise which is a big plus to the Asian investor. Education. Large private banks have set up multi-family office platforms in order to compete, however they are largely limited to their in-house products and are unable to provide the range of independent solutions that the UHNW families require. Family offices in Asia are just beginning to understand the importance and relevance of services such as family governance, legacy planning, second generation wealth education, philanthropic advice and so forth. We note a spike in demand for senior Trust/Estate/Wealth Planners amongst Asian UHNW as generational changeover looms from the initial wealth creators to the progeny thereof. As families in the region receive education on these services, the differentiating factor between family offices and private banks will be much more transparent. Asian UHNW therefore have a growing appreciation of the independent office versus the retail banking platform. Fu Bu Guo San Dai A Chinese saying - wealth does not pass three generations

4 Footprint. The US has a very advanced UHNW financial service platform manifesting itself in banks, asset managers and in particular multi-family offices of scale. Lessons have been well learned and have value to the new wealth in Asia. However, the Asian UHNW population is growing at a faster rate (from a smaller base) and since the multi-family office industry is at a nascent stage in Asia, it will be, we believe, a huge advantage for US houses to extend their capabilities to service families on the ground in Asia, and attract Asia based wealthy clients seeking candid advice and diversification. Wealth in Asia is moving from the 1st generation to the 2nd generation as noted above. As a result, there is a need to provide more sophisticated advice to the new generation, and educate them on the value add of the multi-family office model. One or two banks are even commencing workshops for the next generation running over a week or so. Demand for advice is therefore growing. Opportunity therefore exists to penetrate and gain substantial UHNW business in Asia as the generational challenge bites and banks fail to service the demands inherent. Senior bankers can be attracted and incentivized to move away from their respective banks and be part of the multi-family office industry relatively easily given the onerous constraints within the banking brands. Asian Senior Bankers run USD billion dollar books and have over years of experience so they fully understand the client and the industry. They will be able to offer to their clients comprehensive, unbiased advice across banks, across platforms, and be able to take care of client s entire financial needs across PWM, Trust, Estate Planning, Insurance and Investment Banking requirements. Singapore is seen as the wealth management hub of Asia with the largest number of mass affluent individuals in the region. With a very stable economy, low unemployment rate, low taxes and financial safety, it is considered the Switzerland of Asia; a safe and stable place to preserve ones wealth. The Hong Kong Monetary Authority (HKMA) and the Monetary Authority of Singapore (MAS) have modified licensing allowing entities to set up, get licensed and commence business very quickly.

5 In essence, with Asia s growing wealth and stability among Hong Kong and Singapore, the single and multifamily office industry is in turn growing as well. Approximately 25% of AUM at Private Banks in Switzerland is managed via External Asset Managers and in Asia it is currently less than 3%. The Top 12 Private Banks in Asia manage in excess of USD 1300 Bn in Client Assets. We believe there is a huge opportunity to grow Market Shares of Multi - Family offices with every 1% share representing USD 12 Bn in incremental AUM. Opportunity. The lack of a mature wealth industry in the region does not allow for Asian families to be serviced to the full extent as one would be in more sophisticated markets such as the US. US based family offices that have the experience and capabilities when it comes to servicing UHNW families hold the skill set to properly service these Asian clients. Extending ones capability to the Asia region, educating the client base on the family office model, and hiring the right personnel to service the clients, will allow for Asian families to full utilize the services that are available to them through a single trusted advisor. Our FE offices are well placed to advise PWM businesses considering an Asian opening. This can take the form of holistic turn-key planning/ licensing/ manning projects or integral parts thereof. Sheffield Haworth PWM Practice is Global and covers clients in all continents. We career manage candidates and take pride in developing appropriate and profitable businesses within the PWM industry. We contribute to Awards panels and offer thought leadership items in the media.

6 Sheffield Haworth is a leading global executive search, interim management and human capital research & advisory company. We employ over 100 staff across 10 offices and 4 continents. Our client list includes global financial services companies, fund managers and property companies. Sheffield Haworth is a member of the Association of Executive Search Consultants (AESC), the worldwide professional association for retained executive search firms. We are ranked number 1 for financial services retained search firms by UK Executive Grapevine industry survey for APAC points of contact pertinent to this article are: Tim Gibson-Tullberg Global Head PWM Singapore tgt@ Rahul Sen Director PWM Asia HK and Singapore sen@ Sujan Melwani Senior Consultant PWM USA/NYC (previously in HK) melwani@