Some investment banks are now seeking to tap the growth of family offices in the region by setting up units that cater to the independent firms. Credit Suisse Group AG is housing five Asian and European families in Singapore that are seeking to "incubate" their own wealth management firms, said Bernard Fung, head of family office services at the private banking unit. The Zurich-based bank also works with other families in the region seeking to set up their own family offices, he said.
Role to Play
Family offices and private banks are "not mutually exclusive," said Fung, who previously oversaw the London-based family office of David Sainsbury, the billionaire philanthropist and former chairman of the eponymous supermarket chain. Families that are serious about managing their assets should use "proper systems to measure risk and governance processes," he said.
"If you've got that, then financial institutions can have a role to play within that," Fung said. "Trust goes both ways." Part of the wealth of the family offices that Credit Suisse is housing is still managed by the bank, he said.
Zurich-based UBS set up in January a family services unit in Asia, where much of the wealth was created after World War II, which provides non-investment advice such as philanthropy and wealth planning to its richest clients.
"Most families prefer to set up their own family offices with a combination of their own employees and external experts, with specialist skills ranging from accountants to legal and tax advisers to investment professionals," said Hong Kong-based Lo.
DBS built up its family office advisory business this year, offering services that include advice on private-equity investments and philanthropy. There's a "huge movement" of family offices creating their own funds and teaming up with other independent firms to co-invest, said Terry Alan Farris, who joined DBS's private banking unit in January as its Singapore-based head of family office.
Market gains helped boost assets managed by private banks by 11 percent last year with the top 20 in the world overseeing a combined $11.1 trillion, according to London-based Scorpio Partnership. The rate of net new money inflows fell on average by almost 19 percent from 2009 and many banks saw margins squeezed, according to the wealth-management consultancy firm.
There are about 50 established family offices in Asia outside of Japan that are managed professionally, according to Scorpio. Worldwide, there are an estimated 2,500 to 3,500 family offices, said Joseph Reilly, president of the Greenwich, Connecticut-based Family Office Association. The first family office was established in the U.S. by oil baron John D. Rockefeller in 1882 to manage his family's assets.
GFIA Pte, which advises investors seeking to allocate money to hedge funds and began its wealth-advisory business when it started managing Diggle's money, is in talks with other prospective clients, said Peter Douglas, the firm's principal.
As financial institutions curb risk after the collapse of Lehman Brothers triggered the global credit crisis, wealthy families are "stepping into the holes left by the exits of the banks" in making higher-return investments, Douglas said.
"It's partly the realization of the conflict between private wealth and the financial services industry, and it's partly because now there's a lot more opportunity out there for private wealth relative to that available for the financial services industry compared with pre-crisis," Douglas said.