While wealthy Asian families are getting vast investment opportunities today, technological changes plus shifting risks mean that more families need a fully operational family office as a key component for successful intergeneration planning.

The desire to preserve family legacy as patriarchs and matriarchs in Asia advance in years, alongside opportunities and risks this decade, are the main reasons driving wealthy families to set up family offices in financial centers such as Singapore and Hong Kong, according to a recent report by DBS Private Bank and Ernst & Young Solutions.

«The need to increase professionalism in managing the family’s affairs and creating a family office, with employees dedicated to the various tasks, is a natural step for Asia’s high wealth family groups. As families mature, the focus usually shifts beyond the conventional pursuit of capital growth to include philanthropy, other social causes or special interests,» said Ian Burgess, EY Asia-Pacific family enterprise leader, during the launch of the report «The Asian Family Office: Key to Intergeneration Planning».

A Complex, Multi-Faceted Process

«Laying down the foundation of continuing education of the current and future generations on the family’s legacy, values, and financial management, is also an increasingly important aspect of a family office in helping to strengthen the family for the future and minimize intergenerational conflicts,» Burgess added.

This often is a complex, multi-faceted process and navigating it effectively requires quality professional advisory, strong market knowledge and a keen understanding of the family’s unique objectives, he notes.

Preserving The Legacy While Pursuing New Paths

As the founding patriarch or matriarch hands over the reins to the next generation, more of the future generation are seeking to institutionalize the family office, hiring professionals with experience in the financial sector and putting in place sophisticated disciplined investment mandates, notes Desmond Teo, EY Asia-Pacific financial services growth markets leader, in a media release.

«Further, the next generation may have a preference to forge their own future by pursuing new areas, rather than carrying on the established family business. Wealthy families are seeing family offices as a means to preserve the family legacy – be it the core business or the family name – as well as keep the family together and aligned,» said Teo.

Still in its Infancy

The concept of setting up professional family offices is still in its infancy in Asia, but the need is growing fast as wealth starts to change hands, said Lee Woon Shiu, regional head of wealth planning, family office and insurance solutions at DBS Private Bank.

For many Asian families, a fully operational family office will be a key component for successful intergeneration planning. Families embarking on this journey are advised in the joint report, to:

  • Take stock of where their activities are to be carried out practicably and align their wealth planning structure.
  • Accept that transparency across jurisdictions is the new norm, and work to understand what it entails and the compliance that comes along.
  • Have holistic management of the sharing or exchanging of financial information across various sources.
  • Consider the sustainability of the structure, not just in the next decade, but across generations.