"Family wealth" asset management weaknesses to be replenished Multiple types of institutions compete

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With a large number of domestic private enterprises entering the intergenerational transition period, enterprise inheritance has become a key issue for many 'generation creation' thinking.

'Compared with some of the top families in Europe and America, the development of family wealth management in China is just beginning.' Recently, Tsinghua University Wudaokou School of Finance global family business research center director Gao Hao told 21st Century Business Herald reporters.

'Managing and passing on wealth is a very, very difficult thing,' says Mr Gao. In 2018, the average wealth of the world's $1 billion rich fell sharply, because the economy is cyclical. In a turbulent era, international relations, geopolitics and economic development are all facing new and major challenges. Last year, the number of people in the $1 billion net worth group in China fell by nearly 16 percent, and the total value of their wealth fell by nearly 8 percent, and if we stretch the time horizon, the 'rich in three generations' is also supported by the data.'

As a result, the demand for wealth management among UHNWIs is rising year by year.

Short stay

How can Bill Gates remain the richest man for so long? 'The simple answer is to create wealth centrally and manage it diffused.' Gao Hao told the 21st Century Business Herald.

Indeed, the country's top billionaires have been setting up family offices to manage their wealth. In 2015, Joseph Tsai, one of Alibaba Group's core founders, set up a family office in Hong Kong, which attracted a lot of attention.

According to the 21st Century Business Herald, private banks, trust companies and third-party institutions are currently serving the family wealth management business.

Data show that family offices originated in Europe and the United States. In 1882, American industrialist and 'oil baron' John Rockefeller established the world's first family office, known as the Single Family Office, to serve only the Rockefellers. Since then, it has been divided into single family offices and multi-family offices according to the number of families served.

It is estimated by industry insiders that the assets controlled by family offices will reach 10 trillion yuan in the next ten years, and the asset management and advisory services market supported by technology will usher in more application possibilities. Virtual family offices will also become an important development trend in China's local family office market in the future.

At home, however, the development of family offices is still in its infancy.

'At present, the domestic family business customer group has just formed, the market is also in the early stage, there are still the shortcomings of professional talent is difficult to find, the lack of market research.' 'But family demands are starting to lead to single-family offices and multi-family offices, where privacy, personalization, customization, specialization and integration of resources are at their highest,' says Bermin, president of Aladdin Family Office. 'We see the next three to five years as a big growth story for the family office industry.'

Institutions are piling into the high net worth market

'For nearly 100 years, family offices have flourished around the world, but it is still a new word in China. It has only been 40 years since we started reform and opening up and we have just had our first family businesses. Globally, family offices have become partners for rich families to pass on wealth and demonstrate social responsibility. The main services of the family office include family charter, family council, family asset management, etc. The family office is to help family members manage ownership and wealth responsibilities, and to help them make the relationship between owner, business or family wealth more positive.' 'Said Bermin.

According to the data of China Merchants Bank-Bain & Company high net worth group research and analysis, compared with 2017, more than 53% of Chinese high net worth people have started to prepare for wealth inheritance, have been preparing, and intend to prepare in 2019, which is significantly higher than 2017.

Looking at the development of family offices in China in recent years, family offices are mostly clustered in the three places of Beijing, Shanghai and Shenzhen, and were mostly established in 2015 and 2016.

'The wave of large-scale inheritance of private enterprises has just begun in China. Most of the 32 million private enterprises may complete intergenerational inheritance in the next 10 to 20 years. According to the data of the United States, 60% of family enterprises fail to inherit, which means that nearly 20 million private enterprises will fall down in the process of inheritance. If we don't deal with this problem well, it will become a gray rhino for China's sustained and healthy economic development.' Gao Hao points out.

'At present, the domestic family office market is mixed, and the overall service level is far from the international leading peers. However, with the continuous resource investment and capacity upgrading of domestic financial institutions for this business, the popularization of customer education and the increase of marketing efforts, there is great hope for the development of a booming family office market in China. 'Berrimin said.

(Editing by Li Xinjiang)

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