As Asian families of substantial wealth grow in size and complexity, succession planning becomes increasingly important in achieving business and wealth continuity. Hence, a growing number of Asia’s wealthiest families are considering setting up family offices (FO), to serve as their focal point to navigate and coordinate family and wealth management matters in a centralized and consistent way. Beyond the general assumption that a family office would purely be set up to manage the family’s financial assets, other drivers such as facilitation of intergenerational family communication, next-generation development and philanthropy are top motivators. This coincides with the findings of the latest UBS Global Family Office (GFO) Report 2016 where succession of control from one generation to the next was mentioned as the most important objective in setting up a family office. Some family office setups in Asia may be driven and initiated by a generational transition when a young generation family member (often Western educated) takes an active role in the management of the family affairs outside of the family’s operating businesses.
For families which already have an informal “family office”, we see an increasing trend of professionalization of these structures as the second and third generations assume roles of leadership in family wealth management. As at 2016, implementing a succession plan was cited as the single most important governance priority of Asian family offices, followed by the creation of a sustainable family communication plan and the implementation of a risk management framework around the FO assets. These priorities should not come as a surprise as we expect 75 per cent of Asia-Pacific based family offces to undergo a generational transition within the next 15 years.
Size and cost structure
We expect this shift from traditional donation based philanthropy towards investment-based models focusing on achieving long-term social impact to further gain in significance, in connection with the generational transitions of family office principals and the professionalization of family offices in the region.