Challenges to Asian family transfers leave $5.8tn at stake

Patchy implementation of governance frameworks by wealthy Asian families means outsourcing to expert partners is becoming crucial to the preservation of assets.

Wealthy Asian families, most of whom are currently undergoing a transfer of assets and responsibilities between generations, are increasingly looking for external assistance to manage investments, legacies and transitions.

A 2024 McKinsey analysis projects that between 2023 and 2030, ultra-high net worth (UHNW) and high net worth (HNW) families in the Asia-Pacific region will undergo an intergenerational wealth transfer estimated at $5.8tn, with UHNW families expected to account for 60 per cent of the total wealth transfer.

“We’re witnessing a significant trend across Asia, where single family offices increasingly choose to outsource their functions to professional firms like multi-family offices (MFOs),” says William Chow, Hong Kong-based chief executive officer of Raffles Family Office in Hong Kong.

This shift reflects a desire for cost efficiency and professionalism, he believes. “It not only leads to cost savings but also ensures that family wealth is managed with greater professionalism, fostering better governance and protection for future generations.”

For Mr Chow, MFOs are uniquely positioned to help families navigate generational divergence. “Each generation’s investment appetite can vary, with preferences spanning from traditional real estate to innovative cryptocurrencies. The MFO serves as a vital bridge connecting these diverse perspectives.”

Scalability is key, he adds. “A well-managed MFO possesses the scalability to adapt and grow with evolving needs,” he says. “Families are also recognising the value of outsourcing their functions to MFOs for enhanced governance, cost efficiencies, and professional expertise across various asset classes, including cryptocurrencies.”

Families are increasingly drawing on external expertise to manage succession more effectively, agrees Cherry Ng, head of wealth planning Asia at BNP Paribas Wealth Management in Hong Kong.

Cultural divides

Involving ‘neutral’ third-party advisers can bridge generational and cultural divides, particularly when families are dispersed globally, she believes.

Families in Asia are taking cues from more mature markets. “They learn from families from Western countries. Especially recently, Warren Buffett announced his estate plan. That’s a wake-up call for a lot of families.”

Philanthropy is often the entry point to intergenerational dialogue. “It’s easier to engage other family members around a common purpose,” she says. “If they want to establish a foundation for a good cause, it can help bring the family together.”

This reflects a broader shift “from financial to non-financial goals”, with more families exploring impact investing and social enterprises. “It depends on the core values of the family,” she adds.

More formalised governance is emerging as a priority. “When the wealth grows, things get more complicated. You want to diversify, and once you get external professionals to take care of the parts you are not good at, then governance structures must be in place,” she says.

Rather than relying on informal family ties, families are recognising the need to define roles and responsibilities. “Traditionally, they were bound by blood relationships, but now the trend is to shift the focus to talent.”

“It’s easier to engage other family members around a common purpose. If they want to establish a foundation for a good cause, it can help bring the family together” — Cherry Ng, BNP Paribas Wealth Management

Family councils

She describes a hybrid approach, where family councils set long-term values, while external professionals manage execution.

Compared to Western markets, Ms Ng sees key differences in approach. “In Asia, they are more likely to stick to family members for decision-making. It’s a control issue.” She contrasts this with Europe and the US, where families are more open to involving external professionals and where the family office industry is more mature.

“Lots of family members are still involved in family office roles in Asia,” she says. “They want to learn, but they also want to keep things within the family. And sometimes, they just don’t know where to find the talent.”

There are extra hurdles for families operating in several jurisdictions. “There’s no single solution. Some families need multiple family office locations,” Ms Ng says, noting that Singapore and Hong Kong are favoured for their simplicity and infrastructure. “They help engage advisers and create a decision-making base without adding extra tax burden.”

There is much more work to be done for Asian families, she says, adding that bringing in external advisers can be crucial for families whose members worry about losing control, a consistent roadblock to progress.

Today’s older generation, she says, “have been controlling everything and don’t want to give up. And then they don’t believe the next gen would have the capability to go through the effective management of their assets.” This lack of trust, she says, often delays wealth planning, leaving a “huge gap in expectation and certainty”.

Families are beginning to address these gaps, but remedial action, including appointment of family councils and other governance frameworks, remains patchy. “They follow the academic guidebook, but at the implementation stage, there are struggles, particularly involving persuading all family members to be involved in the discussion.”

Changing attitudes of younger generations are also reshaping the conversation. “They prefer something more certain. They want to do things with a purpose,” says Ms Ng. “They see legacy beyond financial elements. When you own family wealth, you don’t own it yourself, you own it collectively. It’s about developing a sense of responsibility as a steward, not an owner.”

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