Wealthy families tend to choose investment professionals they had previous dealings with, such as a private banker, as their office manager, said Chan. Others may select an ex- investment banker who advised them on transactions such as an initial public offering of their company, he said.
"Being the trusted adviser is key," Chan said. "Failure to retain talent in a buoyant market will usually be the cause of the office's failure. Right hires are managers who have a strong streak of loyalty to the family and who will not be easily swayed by other offers."
Wealth in Asia, excluding Japan, is expected to rise at about double the global rate of almost 6 percent through the next five years, the Boston Consulting Group said in a May 31 report. Singapore will become the world's top wealth management center by 2013, overtaking Switzerland and London, according to a PricewaterhouseCoopers LLP study published in June.
The region also is attracting overseas family offices. Tano Capital, the financial adviser of the founders of Franklin Templeton Investments, and London-based Alta Advisers Ltd., the family office of Swedish billionaire Hans Rausing, have opened units in Singapore.
"Anecdotally, we are seeing more European family offices making enquiries about setting up their Asian headquarters to participate in the Asian growth story," said Amy Lo, head of ultra-high net worth in Asia-Pacific at UBS AG's wealth management business.
About 62 percent of U.S.-based family offices surveyed this year said they were considering increasing allocations to Asian markets outside Japan, according to Family Office Exchange. The median family office reported 12 percent annual pretax portfolio return in 2010 and families are expecting a median return of 8 percent this year, according to the Chicago-based organization, which represents 350 families worldwide.
Singapore's central bank will require banks from Jan. 1 to advise inexperienced investors on the suitability of products they wish to buy.
"The Lehman crisis was a learning experience for most private banks and private bankers," said DBS's Tan. "You cannot sell products that don't fit the clients' risk profile and investment objectives." The Monetary Authority of Singapore's rules serve "as a protection from hopefully mis- selling from the bankers to the clients."
Noor Quek, previously the head of business development in Southeast Asia at Citigroup's private-banking unit who now runs Singapore-based family office adviser NQ International Pte, said family offices shouldn't be seen as a replacement to banks.
"The whole issue is about both working together," she said. "The bank must be able to understand the client and the client is to understand what the bank can offer. This is not something that happens overnight."