2. Content
•The Status of Private Wealth & Family Office Markets
•Profile of Chinese Magnates
•Challenges Facing the Wealth Owners
•What Magnets really want?
•Prospect of Family Offices in Greater China
•What AFO & APB do to Foster Collaboration
•Bring Everyone On the Road to Success
4. The Status of Private Wealth & Family Office Markets
•Global Snapshot of Private Wealth Markets
•China : AUM and no. of wealth are going up, reveals promising outlook
•Wealth management in Asia gains in stature, maturity
•Seasonal Trend in Family Office Market : Shifting focus to direct investment
•Constant Change in Family Office : Investment Behavior Evolves In New Generation
•Asia FOs gain momentum and Chinese family offices start to emerge
8. Top 25 HNWI Population Ranking
•China: Rank the 4th
•HNWI Population : Grow from 643,000 in 2012 to 758,000 in 2014. Annual Growth Rate : 17.8%
•HNWI Wealth:US$ 3.8 trillion. Wealth also grew strongly by 20.5%
9. Wealth Management in Asia Gains Stature
•access to a broader array of products and services
•stronger regulatory frameworks and market structures
•local wealth management firms began investing in talent & capabilities
•two primary service models operating in Asia: a bank led model verse an international private wealth model
10. Seasonal Trend in Family Office Market : Shifting focus to direct investment
•Lift up allocation % to direct investment , see opportunities in other business and real estate
•FOs investing in PE are predominantly SFO & MFO with in-house investment management capabilities that seek a capital growth over a medium to long-term horizon.
•Allocate more in Asia, Western Europe, US, UK. Most of the FO investors are considering co- investments alongside FOs and PE firms.
Source : BCG
Source : Investec
11. Constant Change in Family Office : Investment Behavior Evolves In New Generation
13. Profile of Chinese Magnets
Latest Trend
•Not just embracing family office concept, we see offices creation, both SFO and MFO
•2ndand 3rdgenerations step-in though some Chinese new generations reject to continues the parent’s business
•Co-investment is common
14. Profile of Chinese Magnets
Investment Profile
•Allocate More In Direct Investment
•More real estate and private equity
•Less in capital market
•Seek For Diversification
•Still biased on Asia Pacific
•Fond of several developed markets : North America, Australia, UK & Germany
15. Interesting Fact about Wealthy Chinese & Asian
17,500 UHNWI in Asia having net investible assets of US $30 million. China has4,900 of these well-heeled people
Top Tier FOs in Asia : Average size of US$480 million in assets under management & managing >US$20 billion private wealth
77% of family offices in Asia reporting some form of philanthropic
1/3family offices with endowments of at least US$15 million, focusing on mainly education and healthcare
The Chinese wealthy entrepreneurs & owners of listed companies aged between50 to 70
Many of the wealthy families in China have 1++ passports
17. Challenges the Magnets Facing
Shrink in Wealth
Some indicative Stories
Fall of Business
Threat to Family Wealth
$ ¥ £
18. Fall of Business
•The life cycle of Chinese firms is less than 20 years
•Not many have the luck to pass on the business to 2ndGeneration
•When business passed on or the founder passed away, most of the public firms experienced significant fall in share price
19. Threats to Family Wealth
•Tax (US inheritance tax at 50%, China : expect to come, probably high rate)
•Dissipation to multiple family members
•The failure of family business, its continuity and evolution
•Predators (e.g. bad advisors)
•Catastrophe (e.g. war, economic crisis, political incidents)
20. Some indicative stories
•From the wealthiest to the bankrupted person, Solar King in China – Story of Mr. Shi Zhengrong
•Fighting of Kam’sFamily, Fall of the Famous Roasted Goose Restaurant
•A Golfer, refusing to be the successor of a family corporation, Son of Zhu Xinli, HuiyuanGroup
23. Key Agenda
Set up Firewall between Corporate & Family Assets
Continuity and Evolution of Family Business
Succession
Growth of Wealth
Individualized / Family Goals
24. And What do the Magnets Need
•Going Out : International / Regional Footprint
•Corporate Financing Solution
•Business Renovation
•Going Public / Privatization
•Philanthropy
•Prep the Future Generation
•Family Enjoyment
•Passion Investment
Growing / Transforming their Business
Succession Management
Self Actualization
Life Style Pursuance
Wealth Management
•Wealth Transfer & Protection
•2ndGeneration Take-over
•Fire Wall between corporate & family wealth
•Real Asset
•Financial Asset
•Lux Concept
•2ndHome
Diversified
Needs
28. Potential of Family Offices in China
Investable assets of UHNWI : RMB 88 Trillion in 2013
Hitting threshold of listing Forbes Billionaires : close to 500 known magnets
Advent of capital market & wave of wealth succession, high demand of FO services
1000 –2000 FOs emerge in China in next decade
29. Asia FOs gain momentum & Chinese FOs start to emerge
•Foreign Asset Managers set up offices in China
•Local wealthy clients consider setting up family offices to manage their huge capital and wealth transfer to next generations
•We see local family offices will be found in China while still many families want to establish their FOs in offshore wealth management hub in Hong Kong or Singapore
30. Operational Challenges of Family Offices
•Controlling CostsWhile Improving Efficiency
•Facing Staff Shortages to Build a Team with the Required Level of Expertise
•Growing Cross-Border Transaction Leading to Complexityin Managing Operations
•Demand for Transparency, International Investments and Growing number of Asset Classes Increase the Complexity of IT Systems
31. Controlling Cost While Improving Efficiency
•Staff Costs + Administrative Costs + IT Costs
•SFO : Not Cost Efficient
•MFO : Scale Required
•Action : Analyze Cost Structure, Streamline its Operation
•Lean FO model good for SFO and MFO
32. Finding Right People
•The typical composition of FO : CEO, CFO, CIO, analysts, lawyers, accountants, controllers administrative staffs.
•Few family members work in FO but hard to trust people outside
•Competition from investment banks, private banks, hedge funds and investment boutique.
•Hard to find staff with the required level of expertise
•China –we need more
•Need of going aboard
•Becoming sophisticated
•In adequate all-rounded Front Office Managers
33. High Complexity in Operation
•Families are becoming more internationally located
•Family offices are increasingly managing investments in foreign countries
•Manage operations outside their home country
•Deal with complex taxation and legal systems involved in international investments and cross-border transactions.
•Hire local talent to provide country-region-specific investment advice
•Require advanced IT systems for managing the complexity in operation
34. Good Progress So Far
•The existing family offices founded in the past 2 decades run in good shape
•They have made significant progress in
•creating sustainable wealth management structures
•fostering important relationships
•The offices manage significant wealth, their average size of asset under management is USD 480 million
37. Strengthen the ties among the prestige circle
Industry Contribution
Industry Research and Survey
CFOS & Extension Courses MFO Founder Prep Course
Networking Event & Knowledge Foster Functions
Member Service
Club Deal Facilitation (Regular Private Party)
Platform Solution that support co-working
Customized Consulting Services using guru in the circle
38. Supporting Family Offices
Challenge Faced by FOs
Initiatives by APB & AFO
Controlling Costs While Improving Efficiency
-Consulting Service ForOut-scouring
-Business Model & Process Review by Bureau Members or Connected Industry Guru
Build a Team with the Required Level of Expertise
-CFOS Program
-MFO Founder Program & Start Up Consultation
-Customized Training & Industry Exchange Program
-Diversified Events For Knowledge Boost
-Maintain a large talent pool in specialty bureau & technical committees
Growing Cross-Border Transaction & Operation Complexity
-Cross Disciplinary Services by PlatformProviders and Bureau & Technical Committee Members
-Cover : M&A, Financing, Legal, Tax, Compliance, Due Diligence, Valuation, Various Sector Specialists
Complexity of IT Systems
-Technology ConsultingService by APB Platform Providers and Bureau & Technical Committee Members
-Cover : Data Aggregation, Accounting, Valuation, Global Trading, Company Management, ERM
40. Strategies that Bring Everyone to the Road of Success
Back Client’s Business
One Stop Shop?
No indifferent Customers
Reach out the plugged in connectors with Chinese Expertise
41. Back Client’s Business
•Mantra : Back business, not investment
•Who is the customer ? The key man in family business, the entrepreneurs
•Conversation all link to family business
•To gain trust, work on bottom line or the main thing the entrepreneur desire first
42. One Stop Shop?
To successfully develop decent solution that is contingent to the unique and all-encompassing requirements of client, One-size-fits-all approach doesn’t work
43. No Indifferent Customers
•Within a family, there is founder and future bosses
•Their needs and requirements evolve
•Heterogeneous format of family offices
•Develop solution that is contingent to the unique requirements of clients
44. Reach out the plugged in connectors
•Target the trusted investment bankers, attorneys, accountants and other plugged-in advisors who can help get you connected.
•APB –gather practitioners, offer solution and support
•AFO –gather SFO, MFO, VFO, society, facilitate co-investment
•Leverage AFO &APB for local insights & relationship
46. •A business build on long term client relationships
•Demand understanding and responding to clients’ need
•Quality : unbiased advice, transparent, reliable and prudent
•Duty : Help client contain risk bearing in chasing return, Support client’s business and goal pursuance
•Chinese value flexibility and relationship much more than the western world
•Adapt to this culture, partner with local players or hire local staff to bring you advantages
47. •To reach out the discreet SFOs, you need to leverage trusted bankers, attorneys, accountants and other plugged-in advisors
•AFO & APB connects elites and ultra-affluence, we manage a platform that accessed by industry practitioners and wealth owners for confronting new relations & opportunities emerge around the world
•Members of APB link you to wealth owners.
•Members of AFO are SFOs and MFOs
48. Eva Law
•Profile : hk.linkedin.com/in/evalaw/
•Email: evalaw@private-bankers.net
•Email : evalaw@familyoffices-asia.org
•WeChat : APB-AFO
Association of Private Bankers in Greater China Region
Association of Family Offices in Asia
•HK Phone #: + 852 3499 3851
•PRC Phone #: + 86 147 1433 4066
•Correspondence : GPO Box 11666, Hong Kong Post Office
•Email : support@private-bankers.net(APB)
•Email : admin@familyoffices-asia.org(AFO)
•URL : www.private-bankers.net(APB)
•URL : www.familyoffices-asia.org(AFO)