The current “hybrid model” of a family office in Asia, and especially in the wealth hub Singapore, is likely to transition to a North American/European model of the integrated family office over time.

The current “hybrid model” of a family office in Asia, and especially in the wealth hub Singapore, is likely to transition to a North American/European model of the integrated family office over time, according to a new white paper, Singapore Family Offices, by Richard Wilson Capital Partners.

Singapore is a hotbed of private wealth: 15.5 per cent of households are millionaire households, placing it number one globally by this measure, followed by Switzerland (9.9 per cent) and, in seventh place, the US (4.5 per cent), according to data from Boston Consulting Group.

While this does not attest to overall numbers of wealthy people – as the population of the city state, at around 5.2 million compared to the US’s 313 million, is comparatively tiny – it does indicate a concentration of wealth that is indicative of the country’s business and wealth tax regime.

A snapshot of its economy shows it registered growth last year of 14.5 per cent and in the crisis only experienced one year of negative growth, of -0.8 per cent in 2009 (source: US government).

Singapore is also a regional hub for Asia, a region with 17,500 ultra high net worth individuals – equivalent to 17.5 per cent of the world’s ultra-wealthy population – the white paper claims.

The “hybrid model” in Asia

However, so far Singapore’s wealth management industry is not home to an abundance of traditional family offices, either single- or multi-family.

“One study by VP Bank found that wealthy Asian families turn to ‘a plurality of players that are independently (e.g. global banks) or collaboratively (e.g. asset managers, lawyers and independent advisors) providing family office services for wealthy Asian clients … these structures work as a dynamic network of different players’ discussed as a ‘hybrid network family office model,’” reads the white paper.

“Yet, as single- and multi-family offices gain traction among the Asian investment community, we expect Singapore to fully embrace the more traditional family office model,” it continues.

This idea is corroborated by an earlier academic paper from the SP Jain School of Global Management, which reads:  “In Asia… instead of one office looking after the wealth of the family, there are many experts from various fields providing the services to these families. The experts include private banks, lawyers, external asset managers, trusted employees, independent advisors and trust & fiduciary companies. These experts have usually had a long-term relationship with the family or are established players in the wealth management industry. They collaborate and work together through a 'gatekeeper' for the family who looks after its best interest.”

“Exploding” family office numbers

One key difference between the wealth in Asia and the West is that the former is more likely to be first generation, entrepreneurial wealth. Some believe the transfer of this to the next generation will catalyse fast growth of family office numbers.

One executive, Vicky Wong, head of key clients at LGT Group in Hong Kong, told WealthBriefingAsia in an interview last year that the space is set for explosive growth within the next decade, with FO numbers set to grow by at least 100 per cent in Asia. Meanwhile, Citi predicted last year that the number of family offices will triple in the Asia-Pacific region over the next decade.

As growth remains slack in developed markets, this could create opportunities for providers of family office services in North America to export knowledge and talent, as well as to form partnerships to provide outsourced services to Asian family offices. For example, Rothstein Kass, a New Jersey-headquartered professional services firm, is targeting growth for its Family Office Group by forming partnerships with single-family offices worldwide that are looking for a partner in the US to manage their families’ affairs there.

The earlier paper from SP Jain School of Global Management, which is based in Dubai, Singapore and India, had the following advice for service providers: “[They] need to understand the cultural and individual needs of the people in Asia which will give them the foothold they need to become permanent and structured family offices in Asia giving them access to a mammoth amount of wealth and a new and different clientele.”