Opportunities for S’pore as family offices look to hire outside talent amid wealth transfer to heirs

SINGAPORE - Single family offices (SFOs) in the Asia-Pacific, including Singapore, are recognising increasingly that such offices are sometimes best led by a professional from outside the family office.

This was one of the insights from an inaugural family office report from Deloitte Private and Raffles Family Office.

The Asia-Pacific edition of the Family Office Insights Series surveyed 89 family offices from the region between September and December 2023.

In-depth interviews were also conducted with 15 senior family office executives in the region.

The report found that four in 10, or 43 per cent, of SFOs in the Asia-Pacific are looking to shift towards more professional and non-family staff in 2024, higher than the global average of 29 per cent.

This will raise the proportion of SFOs in the Asia-Pacific which are led by a professional from outside the family office to 31 per cent, from 22 per cent currently.

The proportion is still lower than the global average, where 49 per cent of family office heads are expected to be an external professional.

Dr Rebecca Gooch, global head of insights for Deloitte Private, said SFOs now want to get the best talent in the market as they begin to realise that sometimes, another family member may not be the best fit for the job.

She added that these family offices are hiring mainly from the financial services, consulting and accounting fields.

However, some of the family office executives who were interviewed for the study highlighted concerns over the limited pool of talent with the necessary skill sets.

Mr Matt Norman, chief investment officer at Japanese SFO Kenjiro Private Office, added that the talent pool shrinks further when family offices narrow down candidates to those who fit into the culture of the family office.

The talent pool is there, said Mr Chi-Man Kwan, group chief executive and co-founder of Raffles Family Office. 

He said that it boils down to upskilling the current workforce, adding that “we need to unlearn and relearn”. 

“That is something which I think Singapore is doing very well in,“ he said.

To cope with the challenge of recruiting talent, some SFOs are also outsourcing parts of their work to other service providers, Dr Gooch said.

The head of a family office in China, another of the SFOs interviewed in the study by Deloitte Private and Raffles Family Office, said the new rich are more likely to partner with multi-family offices and external asset managers, compared with those who have inherited wealth for more generations.

These SFOs make up almost 40 per cent of the clients at Raffles Family Office, a multi-family office, which manages assets of two or more families.

Mr Kwan said SFOs may choose to outsource some of their services because they do not have expertise in those areas.

As an example, an SFO in the real estate space will know real estate investment inside out, he added.

However, it may not know much about equity or fixed income investments.

The SFO might therefore outsource these investments to experts in those fields, he added.

The demand for external professionals is set to pick up further as more than a third, or 35 per cent, of Asia-Pacific families will undergo a generational transition of leadership and wealth over the next decade.

Mr William Chow, deputy group CEO of Raffles Family Office, said he has come across a case of the first generation passing on leadership to the third generation.

The grandparents know property well, while the younger generation is into digital assets. 

The family office subsequently hired outside professionals to bridge the gap between the two generations and help them invest more wisely, Mr Chow said.

Ms Yali Yin from Deloitte Private Asia-Pacific said there are also instances where the outside professional serves as a communication link between the different generations.

She added: “The parents do not talk to the children, the children do not talk to the parents. His (the outside professional’s) role is just to talk to the parents, then talk to the children.”

One Singapore SFO interviewed in the report has made a transition to the next generation. The head of the family office is a third-generation family member. 

The family office has a formal board that consists of family members and two independent directors.

“My mother is a big advocate of managing family matters in a formal, professional way,” the SFO head said, adding that “my mother ensures that I am not the only one making decisions and that everyone has their share of responsibilities and involvement”.

Other Asian SFOs are still grappling with this generational transition, with 35 per cent of family offices expressing a lack of confidence in the next generation’s ability to take over the leadership role.

The main reasons cited are: The next generation is too young and lacks the qualifications to assume leadership; or that it is simply not interested in the family office.

The head of a Hong Kong family office said its next-generation members are all in their early 20s. 

The family office leader added that each family member will first need to gain experience in the business world and prove that they can take on more responsibilities.

As for the Singapore family office, its leader said the main purpose of establishing a family office is to provide the next generation with a learning platform and to teach them about managing the family assets. “If you want more power, then you need to demonstrate that you can shoulder more responsibility.”

Mr Kwan said the Asia-Pacific region is experiencing the fastest growth of wealth, adding that “Asia is definitely a more vibrant region in the past 10 years and in the years to come”.

“A lot of European and North American family offices are setting up another family office in this region, and Hong Kong and Singapore are always two of the top destinations,” he said.

He added: “Hong Kong and Singapore must work together. Both complement each other.”

Mr Chow said: “Hong Kong and Singapore are one plus one greater than three.” The two financial centres are not competing with each other but working together to be a “greater service centre for the rest of the world”, he added.