Reflecting the current demands of wealthy families in China, less than a quarter of the specialists at Shanghai-based Deyu Family Office have a background in banking – the company employs five former bankers and 17 tax planning, trust, insurance and legal services professionals.
That resonates with a recent report by Huiyu Family Office Think Tank, which says that within Chinese multi-family offices – two-thirds of which were established in the past five years – asset and risk management businesses see lacklustre demand as they wait for entrepreneurs to hand over control of their wealth.
Legacy and tax planning are the main focus areas for Chinese family offices, the report says.
“High net worth clients are becoming more aware of the concept of ‘family office’, but they just don’t feel safe to hand over their assets to a third party. Trust-building takes time and effort,” Deyu’s executive general manager and partner Jianlai Lu tells Asian Private Banker.
The multi-family office – which was founded two years ago by banker Yong Zhang, who was also a founding member of China Minsheng Bank’s private banking arm – has “10 to 20” ultra wealthy family clients with assets over CNY2 billion, Lu says.
Deyu’s average client, across all wealth tiers, has CNY100 million to CNY200 million of investable assets.
The family office targets wealthy clients who are either willing to pay its CNY1 million annual advisory charge, have CNY50 million under Deyu’s management, have more than CNY100 million worth of investable assets, or have total assets of more than CNY2 billion.
“Ultimately, we are targeting the UHNW family with total assets worth over CNY2 billion, especially those who run family businesses, by providing an all-round service package. In the meantime, we provide standalone services to lower-tier HNWIs.” Lu says.
Deyu has an offshore office in Hong Kong. Led by Judy Lau, a former executive director at Julius Baer, the office caters to Chinese clients’ offshore interests, and offers global asset allocation, trust, insurance planning and other solutions.
Discretionary demand to lift in coming years
Unlike in Western countries, most Chinese HNWIs created their own wealth as entrepreneurs, which means they tend to make investment decisions on their own.
A joint survey by Boston Consulting Group and Industrial Bank shows that 45% of HNWIs in the country manage their assets based on their own knowledge or suggestions from friends and families, while only 4% rely on discretionary portfolio management services. Just over half (52%) turn to professional advisors.
However, Lu says that discretionary portfolio management will get a lift in five to 10 years’ time, when the first generation of wealth is expected to hand over the reigns of their companies and look for solutions to pass on their wealth.
Indeed, the survey shows that 45% of HNW respondents have already started their wealth succession planning or plan to start in the next three years.