Wealth transfers to spur family offices’ growth in SG, HK

The two markets each manage $1.3t in offshore assets.

Hong Kong and Singapore will benefit from increased wealth flows from global investors shifting their eyes to Asia in search of a safe haven for portfolio diversification.

The two markets are expected to grow the roughly $1.3t in offshore assets they each manage from single family offices, said management consulting firm McKinsey & Co. in its article “Asia’s family office boom: opportunity knocks.” 

Hong Kong and Singapore are currently home to 15% of the world’s single-family offices, at about 4,000. This is quadruple the figure they held in 2020, according to the report’s authors, McKinsey senior partners Bernhard Kotanko and Joydeep Sengupta.

Assets managed in the two markets may also grow as high net worth (HNW) and ultra-high net worth individuals (UHNW) in APAC transfers around $5.8t in assets to the next generation by 2030, McKinsey & Co. said.

HNWs are those with personal financial assets between $1m to $50m, whilst UHNWs are those with over $50m in personal financial assets.

However, the number of family offices in APAC may shrink. McKinsey expects consolidation amongst smaller single-family offices given rising operating costs, which are now at least $100m.

“Some single-family officers are expected to come together to build MFO structures to lower their operating costs,” the management consulting firm said in the report.

McKinsey identified five challenges faced by family offices: weak governance, rising operational costs, limited access to bespoke alternative solutions for portfolio diversification, limited understanding of insurance products, and out-of-date technology.

Banks and insurers can fill this gap by providing advisory services to family offices to help them with recruitment, providing data analytics, sourcing deals and conducting due diligence.

Insurers may consider building an insurance ecosystem offering tax advisory, immigration support, and legal support, amongst others.