As Gen Y takes over the reins of power, they are helping their families to play a more active role in managing their own wealth, while placing greater emphasis on purpose and sustainability
Family offices are an increasingly popular option among wealthy families in Asia. That’s partly because the region continues to get richer, creating an ever-rising number of wealthy families. The growth of the family office model also indicates that those families are taking an increasingly active role in managing their own investments—and often in a lot more besides.
“In the last two decades, Asia has been accumulating wealth at a pace faster than any other region,” says Harry Pang, a committee member of the Family Office Association Hong Kong. “With great wealth come great responsibilities. Wealthy families must consider a host of topics, such as how to invest responsibly, intergenerational planning, tax efficiency, confidentiality, philanthropy, legacy setting and many other complex issues. They are looking to customised solutions for their unique needs to manage their affairs and investments.”
An increased interest in actively managing family affairs often coincides with a passing of the reins of the power to the millennial generation, with an accompanying greater emphasis on purpose; for many, sustainability is replacing wealth generation and preservation as their primary imperative.
“Relatively speaking, the younger generation is, as a group, highly educated, well travelled and exposed to all the most advanced ideas and themes from around the world,” says James Wey, head of Singapore and Southeast Asia, Wealth Management for JP Morgan Private Bank. “Sustainability and ‘doing well by doing good’ are things that we hear more and more from our partners.”
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Adds Pang: “Millennials are increasingly assertive in presenting their views to make a positive social impact. They are more progressive, more environmentally conscious and more purpose-driven. They are more likely to factor in the sustainability aspect in their decision-making, as they recognise the importance of a clean and safe future.
“Millennials are also a lot more progressive in defining value creation—they tend to adopt a more holistic view on evaluating financial achievements as well as positive social impacts, as they believe the value they generate from their wealth should do good to the broader community as well.”
The appetite for innovation among this group also extends to methods of investing, he says.
“There has been a growing diversification in asset classes, including a rising interest in investments in startups, SPACs [special purpose acquisition companies] and digital assets. The first generation of families in Hong Kong who built their wealth upon real estate or ‘old economy’ businesses have traditionally focused on listed securities, fixed income and real estate. However, in view of the low-interest rate environment and market volatility, they also search for more promising investment return through private deals, and younger-generation investors are paying more attention to impact investment or ESG-related themes.”
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Another aspect of family offices’ appeal is their relatively straightforward structure, streamlining the ways in which family wealth is managed. Often, for example, they replace complex networks of offshore holding companies that provide confidentiality but can be difficult to manage, particularly in areas such as tax compliance. (Plus, these days, owning a network of offshore companies is increasingly just kind of a bad look.)
“With new regulations from tax havens, families need to think about a new approach,” says Eva Law, founder and chairman of the Association of Family Offices in Asia. “You still need an appropriate structure for any offshore investment, but with the CRS [the Common Reporting Standard, a global harmonisation of tax reporting introduced in 2017 to encourage greater transparency], is it still necessary to have that kind of offshore presence?”