While wealthy Asian families are increasingly looking to set up family offices, managers need to be aware of their cultural sensitivities and risk appetite, a forum heard.
From a hands-on attitude to investing and a stronger appetite for risk, knowledge of many families’ characteristics was highlighted as key to ensuring a successful business relationship.
And while there has been a move in Asia towards using professional partners, as opposed to trusted family advisors, relationships with different relatives was still key.
The issues were raised at AsianInvestor’s inaugural Family Office Forum Asia in Singapore yesterday.
“From my perspective, Asian families are comparatively more hands-on. In Europe, once you become a trusted advisor, families tend to be less actively involved in the asset allocation. In Asia, the patriarch tends to remain hands-on,” said Ivo Bartoletti, CEO of Oclaner Asset Management, who was a speaker at the forum.
“Families in this part of the world like to be proactively involved. Maintaining full control at all times is a must.” Because of this, Oclaner has structured its role as that of a CIO.
“We like to think of a family office structure like the structure of any company: with its board of directors, family representatives and lawyers,” Bartoletti added. “All working hand-in-hand to ensure proper governance of the structure. The board gives the strategic parameters, we advise and the family office executes.”
Bartoletti also observed that Asian clients tended to have a stronger risk appetite versus European clients, where wealth preservation is the main priority.
In India, where the family office is more of a recent concept having started about 15 years ago, Soumya Rajan, chief executive of Waterfield Advisors, said Indian families tended to be extremely private and closed, and even seeking advice from a firm was difficult.
While there is a move away from using trusted family advisors to the hiring of professional advisory firms, the latter still had to build relationships with different members of the family where each one is looking at the business differently. For example, the younger generation has a preference for investing in new-economy businesses such as e-commerce, while the older generation remains invested in traditional sectors.
“There is this dichotomy and we see how we can facilitate and help in terms of how to demarcate the traditional business and enter into new ones,” said Rajan. “So our model also caters to the corporate advisory needs of a family."
Meanwhile, Nadav Lehavy, managing director for Asia at UK-based Sandaire Investment Office, said that Asian and European clients had different investment approaches.
"One of the differences between British and Asian clients is once you get the former's trust you get a significantly high percentage of family wealth to manage. In Asia you get a percentage with the understanding that assets under management will increase if you do a good job," he noted.
There is also a tendency for Asian clients to have asset concentration risk, especially in fixed holdings such as real estate. Lehavy said Sandaire’s focus on global diversification through its strategic asset allocation helped to offset this risk.