Opening doors to family offices
THE rise of family offices in Asia — the region with the highest number of billionaires worldwide — has been phenomenal in recent years. Established to cater to wealthy families for the management of their wealth and assets, this is backed by the fact that the Asia-Pacific region is expected to outperform the global economy’s growth for 2024, according to provider of information and solutions Empaxis.

Across the causeway, the number of family offices has more than doubled from the 400 or so, as at the end of 2020. Malaysia though, has no official figure on this.

It has been reported, however, that the Finance Ministry and Securities Commission are working to establish family offices in the country.

Meanwhile, data on Empaxis’ website indicate that some 9% of the world’s 20,000 or so family offices are located in Asia and of this 9%, more than half are located in Singapore. Hong Kong is expected to get more than 200 family offices by 2025.

Other data posted by Empaxis show that ‍58% of family offices in Asia Pacific reported assets under management or AUM growth last year, of which 32% saw a 10% increase.‍

By 2027, there will be roughly 210,000 ultra-high-net-worth-individuals (at least US$30mil or RM141mil worth) in Asia, up by 39.8% from 2022, it adds.

All of these raise one question: Is there enough talent to manage all of this wealth, present and incoming, and is the Malaysian market ready to handle it? For now, no.

Even in Singapore, one of the most popular places for the rich to park their wealth, industry experts have already sounded the alarm bells, stating that the industry is likely to soon see a shortage of experienced talent.

The demands of billionaires are different from those of other wealth classes, says a Singapore-based individual with five years’ experience in the industry. Trained as a private banker in Hong Kong, he adds that the offices are “highly selective” when it comes to hiring.

“Education and experience are important, but more so is your network of contacts, and if you come from a wealthy background, that lends a premium that most people lack,” he adds.

Family offices have a myriad of duties like legacy planning and management as well as investment portfolio management, all aimed at growing and safeguarding family wealth to ensure it remains within the family for many generations.

That is why it is crucial to get the right professionals and they are paid top dollar. In Hong Kong, a “talent war” has led to more than a 30% pay increase for new hires over the last year.

Talent gap

In a report entitled:”2023 Global Family Office Compensation Benchmark”, consultancy group KPMG International notes that family offices are evolving — and fast.

“From their history as small and intimate entities protecting family wealth that are now growing into institutionalised forces with exceptional professionals, they are becoming a potent force in the investment landscape.”

While the industry is still at a nascent stage in Malaysia, the country will eventually catch up with its regional peers.

Wealthy Malaysians currently park their wealth mostly in Singapore, which leads us back to the question of whether the industry will have the required talent when it finally takes off here. How can that be achieved?

Family offices require a unique skill set, unlike other workplaces. As KPMG notes in its report Foreword, this is an environment where there is more to it than just work — it’s personal and often causes compensation decisions to be based on guesswork and emotion rather than research and precedent.

KPMG’s report also says that within the family office business in Asia, 31% of the CEOs are family members, mostly males aged between 35 and 44 — the youngest globally. They are also the most highly educated with almost 70% holding at least a Master’s degree.

CEOs of family offices in Asia earn between SG$158,001 and SG$500,000 (RM1.76mil) per year, minus bonuses.

As our regional peers begin to attract talent in this evolving industry, Malaysia should begin focusing on this area so as not to miss out.

This article first appeared in Star Biz7 weekly edition.
Star Biz7,Family offices,talent,CEOs,billionaires,ultra-high-net-worth-individuals
THE rise of family offices in Asia — the region with the highest number of billionaires worldwide — has been phenomenal in recent years. Across the causeway, the number of family offices has more than doubled from the 400 or so, as at the end of 2020. Malaysia though, has no official figure on this.