What sets the crazy rich Chinese apart from other family offices in Singapore

ENTREPRENEURIAL, open to ideas, and raring to go – these are among the adjectives that come promptly to the minds of bankers and consultants when asked to describe the super-rich Chinese setting up family offices in Singapore.

Unlike their more-established counterparts from Europe and South-east Asia, the patriarchs and matriarchs from China are typically first or second-generation businesspeople.

A large part of their wealth is tied up with their family businesses, with many driven by economic and political reasons to diversify into Asean.

Singapore has been a popular spot for them to park their wealth. About 44 per cent, or 63 out of 143 new family offices here, were from Greater China, as at April this year, according to data analytics platform Handshakes.

Fire in the belly

Most first-generation entrepreneurs still have the “fire in the belly”, and tend to reinvest capital into other businesses, Edwin Tan, chief operating officer at asset manager Prime Asia, told The Business Times.

Many of these businesspeople have seen their wealth grow in the last 40 to 50 years, Tan said. Most of Prime Asia’s Chinese clients are in their 50s.

The mandates for their family offices tend to overlap with existing family businesses, and these entrepreneurs are “hands-on” with how they manage their wealth and businesses, he added. In contrast, the more established businesses prefer to hire professional asset managers.

Desmond Teo, who leads EY’s Asia-Pacific family enterprise team, said wealthy Chinese clients scout for opportunities in the “new economy” related to sectors in which their families have built their wealth. For instance, those involved in the consumer goods business may venture into alternative food products.

Helena Robertsson, EY’s global family enterprise and family office leader, added: “Chinese family offices are entrepreneurial in spirit. Many have made their wealth in unicorn companies and are young in their business origin. Family offices in northern Europe, on the other hand, often have over a century of history and are attached to certain legacy businesses.”

Governance and infrastructure

Because Chinese family offices are relatively young, industry players said there is a demand for advisory on governance structures and how to manage intergenerational wealth transfers.

For many of these clients, the focus is still on wealth building and asset preservation, and they may therefore not have thought very deeply about governance structures and wealth transfers, said Chew Mun Yew, UOB’s head of private wealth.

Advisers have an opportunity to plug the gap.

“China billionaires are currently in the process of wealth transference from first to second generation, and most of the matriarchs and patriarchs are industrialists or enterprise owners. They appreciate access to operational details, the ability to move swiftly, and put in place risk and control parameters when necessary,” said Faye Ong, Citi Private Bank’s head of family office advisory for Asia.

Ong also noted a demand for succession and legacy planning for the families.

Working with ‘own people’

Some industry players also noted that Chinese clients also prefer to appoint people they have worked with before – such as those who managed the accounts and finance for their family businesses back in China – to roles in their family offices.

“It is common that they would pull people out of existing businesses, whether in China or elsewhere, and install these so-called insiders here when they set up their family office units in Singapore. And that is only natural, because they have worked together before. But we often share with them that it is important to also have new professional input,” UOB’s Chew said.

Tan agreed, noting that European families tend to be “more receptive to employing outside the family”.

“It typically takes about 2 years before family office advisers at Prime Asia gain the trust of (Chinese) clients to advise on their family affairs,” he added.

DBS Private Bank’s regional head of wealth planning, family office and insurance solutions Lee Woon Shiu said family offices in the East may act more quickly on investment decisions as they have “direct lines of communication” with the decision-makers, while family offices in the West tend to involve additional layers of management.

But this distinction could diminish as more wealth transfers from generation to generation, he said.

Once trust has been established, however, EY’s Robertsson said Chinese clients tend to be comfortable seeking advice on a myriad of affairs, including their parents’ medical arrangements and children’s education.

“Asian family offices tend to have these add-on and concierge services. So the family office manages assets, which could either be used for investments within the business, educating the next generation, or taking care of the elders’ medical needs and lifestyles,” she said.

But Robertsson said longevity is a common objective for family offices across cultural backgrounds. “Family offices are built to last. It’s not about what the flavour of the month is or just hitting the high notes. What’s universal is their focus on steady returns and long-term growth.”

Lee added that the growing interest in Asia among family offices around the world, together with Singapore’s strong rule of law, as well as political and economic stability, makes the Republic an attractive proposition for these wealth inflows.