Family offices will control $10 trillion in assets in the next 10 years Technology-enabled asset man

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Trainee reporter Shan Meiqi and reporter Zhu Dandan in Beijing

Since its quiet rise,family office (FO) has been one of the important ways of wealth management for a hundred years. Even though it has been nearly 50 years since the real rise of the industry,family office has already lost its high-end and mysterious coat. Relevant data show that more than 60% of families will gradually set up family offices between 2019 and 2022.

With the continuous accumulation of wealth, in addition to family wealth, the importance of inheriting family civilization has been gradually discovered. The first batch of family businesses created by the reform and opening up also appeared the problem of intergenerational inheritance for the first time. Family office is also gradually regarded as an important means to achieve a smooth transition between the 'generation' and heirs of Chinese family enterprises, and to facilitate the steady inheritance of material and spiritual wealth of family enterprises.

Industry insiders predict that the assets controlled by family offices will reach 10 trillion yuan in the next ten years. 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.

In addition, the addition of fintech makes it break the information asymmetry, strengthen the ability of data analysis, improve the service efficiency, and help virtual family office better and faster development, which is becoming an indispensable driving force for innovation.

Family Office focuses on 'Generational succession'

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.

In recent years, Family Office, an imported product, has developed rapidly in China. Throughout the country, family offices are mainly located in Beijing, Shanghai and Shenzhen, and more than half of them were established during 2015-2016.

The birth of the family office also means that people are increasingly aware that as wealth accumulates, passing on the family culture is equally or even more important than the family business, your correspondent notes.

Recently, our reporter learned from the first Yanqi Lake Forum that 'Singapore Shipping King', Chairman of Bandung Pan-Asia Group and Chairman of International Family Business Association Asia Branch Weid Tsao said that after breaking the curse of 'wealth cannot last three generations', the focus of family inheritance is no longer wealth, but spiritual and cultural inheritance.

'The inheritance of a family business is not passing on the company or the family, but passing on the essence of the family spirit and culture, including the evolution of the world view, values, organization and talent.' 'Tsao stressed.

'Reform and opening up created the first batch of family businesses, gradually realizing the accumulation of family wealth, and the problem of intergenerational inheritance appeared for the first time.' Hold the same view and Aladdin President BaiRuiMin family office, she said in a speech, 'the family office is the realization of China's family businesses' and the generation and the successor, the smooth transition between the power stable inheritance of family enterprise material wealth and spirit wealth goes back to ancient times, to promote the development and progress of the society.'

Looking at the inheritance and development of family enterprises around the world, how can family civilization be better inherited? Gao Hao, director of the Global Family Business Research Center at Tsinghua University's Wudaokou School of Finance, offers his explanation.

'After a long period of accumulation, Europe and the United States have created highly developed material civilization and spiritual civilization, which is worth learning and absorbing part of the combination with our traditional Confucian culture, truly achieve the combination of Chinese and Western, can look forward to a better future of Chinese family, business and even the whole society.' Gao Hao said.

Looking at the present, whether the new era also has new requirements for the inheritance of family civilization. In this regard, Wong Kam-shing, managing director of Hong Kong Kowloon Watch Bank, one of the top 10 famous watch banks in Hong Kong, believes that the sense of belonging and ownership is very critical and necessary for the heirs of a family business, only in this way can a strong family culture be established. With cohesion and centripetal force, young entrepreneurs can constantly lead the family business to success.

'Virtual digital' is technology-enabled

Relevant data show that the background of family offices in China is mainly trust companies, accounting for 39%, commercial banks and lawyers accounting for 25%, and entrepreneurs accounting for 21%. The vast majority of assets under management are under Rmb10bn. Among them, the model of cooperation with tripartite institutions is the one most in line with the primary stage of Chinese families at present, that is, the virtual family office model (VFO).

VFO is a new form of diffraction developed in recent years. It does not serve specific families, but a working platform that combines common services and provides corresponding services. In fact, the concept of VFO began to rise in Europe and the United States in the 1990s, and it has gradually developed into the best solution to save management costs, selecting suitable service providers for ultra-high net worth groups who are ready to set up or accept family office services.

With the rapid development of big data, cloud computing, artificial intelligence and other technologies, and the galloping 5G era, the huge power of scientific and technological innovation is also providing a dynamic driving force for all fields to move forward. With the increasing penetration of fintech into traditional finance, VFO has also become the beneficiary of 'technology empowerment'. With the power of science and technology, VFO ushered in a new tuyere.

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 embrace more application possibilities. VFO will also become an important development trend in China's local family office market in the future. The VFO allows families and family offices to have a team of top advisors from all over the world at a low cost to provide a full range of objective advisory advice, the most dutiful global asset allocation, and even to handle various family matters.

The supply side of the family office market has several characteristics, according to Bermin. First, the family business customer base is just forming and the market is very early. Changing the original market supply system is very difficult because the needs of family business customers and business providers in the traditional system are very different.

Second, it is difficult to find professionals and lack of market research; The third is the need to reorganize the business model from a family perspective; Fourth, family demand has begun to give rise to some single family offices and multi-family offices, which have begun to appear in the market; Fifth, privacy, personalization, customization, specialization, resource integration requirements to reach the highest.

'Every word contains a meaning. A family business communicates all the family relationships, family goals, family vision and so on with the family office, and then generates services, so privacy is a very high requirement in the family office. Good mechanics and positioning will lead to the creation of business multi-family offices that suit the needs of families.' 'Berimin explained.

In addition, she predicts that the next three to five years will see an 'early stage' of growth for the family office industry, with a long way to go.

It is worth mentioning that VFO fu can still can use financial science and technology, financial technology can break the information asymmetry, strengthen the ability of data analysis, improve service efficiency, and can fundamentally change research, risk control and compliance, in the form of a comprehensive upgrade family office skills, can also strengthen the accumulation of precipitation data, Long-term returns through artificial intelligence and machine learning.

The industry believes that in the future, VFO needs the integration of fintech, Internet technology, asset management and other dimensions. At the same time, it needs an open and inclusive mind and innovative spirit to embrace the infinite possibilities brought by digital technology and actively absorb the suggestions of top technologies and professional teams.

Editor in Chief: Meng Junlian Editor in chief: Ran Xuedong

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