Multi-family offices are unlikely to gain as much traction as their single-family counterparts in Asia, says Grégoire Imfeld, senior relationship manager for family offices at Swiss private bank Pictet & Cie.
The Geneva-based executive cited a number of reasons for this – one being rich Asian families’ worries about revealing too much – during a recent trip to Hong Kong.
“I wonder if multi-family offices [MFOs] can really be successful here,” Imfeld tells AsianInvestor. “I don’t see MFOs being as successful in Asia as single-family offices. Confidentiality is a big issue.”
One issue is custody of assets. “Many people in Asia don’t understand why they need to centralise information about their wealth in one spot; they tend to segment the data,” notes Imfeld. “Giving it all to one person is something they are not comfortable with.”
That contrasts to Europe, he says, where the rich like having global custodians that make it easier to consolidate their financial wealth. This may also include information about their businesses, yachts, houses, incomes etcetera.
Another factor is that there is significantly greater staff turnover in the wealth management sector in Asia than in Europe, Imfeld points out. This higher volatility in personnel makes it harder for families to build long-term relationships with certain firms and makes them less likely to entrust them with overall information.
There are, of course, any number of well established MFOs that may disagree with Imfeld – for example, Stamford Privée and ThirdRock Capital in Singapore, and Hong Kong-based organisations Alps Advisory and Grace Financial.
Whichever model they choose to use, one of Asian families’ biggest concerns is transferring wealth to the next generation, and governance around that, says Imfeld.
“[In Asia,] people tend to be very public about other families’ failures, which makes people think ‘that could happen to us’. In Europe, people are more discreet about [such things], so this has triggered strong interest among Asians as to how to avoid (public) failure in transferring wealth to the next generation.”
However, European and US private banks seeking to adopt a ‘colonial’ approach to the market in Asia by seeking to impose their models here might struggle to do so, argues Imfeld. Asia is likely to find its own FO model, he notes – market participants in the region can soak up ideas from elsewhere and create a setup that will suit them in a fast-growing environment.
But while private banks and MFOs face challenges, single-family offices have concerns of their own, says Imfeld. One of these – particularly for the smaller or early-stage entities – is whether they should look to hire a chief investment officer or outsource portfolio management to an external CIO.
A skilled professional CIO may typically run some $2 billion, and therefore may not want to switch to managing a smaller portfolio of, say, $200 million, notes Imfeld. As a result, he says the ‘outsourced CIO’ model is increasingly gaining traction – above all in the US, while it is starting in Europe and is at an embryonic stage in Asia.
Commonly, families would split, say, a $100 million portfolio and hand mandates to several private banks, but this is not an institutional approach, says Imfeld. Each of the three different banks or asset managers may cancel each other out in terms of investments, which results in a “zero-sum game” for the family, he adds.
Yet by centralising the financial assets, the CIO can manage it more effectively and with economies of scale. “The whole approach today in Asia is siloed and costly,” he argues. “You need a holistic view to understand and manage efficiently both the portfolio and the risk.”