Updated from : The Straits Times, 25 April 2022
You are the chief executive who oversees investments at a family office. When your principal – the owner behind the family office – excitedly tells you that he wants to invest in his friend’s latest venture, what do you do?
A) Immediately get cracking on the deal.
B) Put your foot down and say “no” as your boss has already put way too much money in this sector.
C) Persuade the owner to think through the pros and cons further before he decides.
On top of this, you have to articulate your arguments in fluent Mandarin if your principal hails from the Greater China region.
There is no “right” answer to the question above. It depends on who the owner is and a whole host of other factors. But it illustrates the challenges those who want to work in a family office are likely to face.
No doubt asset management is a growth sector. Singapore’s rule of law and political and economic stability are cementing its reputation as a safe haven in a world of growing uncertainty. Assets under management in 2021 expanded at a pace of 16 per cent – faster than the global growth rate of 12 per cent – to a whopping US$4 trillion (S$5.3 trillion).
Alongside that, the number of family offices in Singapore shot up to 700 at the end of 2021, from 400 at the end of 2020. The number is likely significantly higher by now given that anecdotally, 2022 continued to be a strong year and 2023 likely will be too. In a parliamentary reply in March, Senior Minister Tharman Shanmugaratnam disclosed that there was currently one multi-family office application and about 200 single-family office tax incentive applicants.
These family offices, which are privately held entities that wealthy individuals use to handle their financial and non-financial assets, tap tax incentives and bring their funds to Singapore.
As an indication of the large sums involved, one scheme requires a minimum fund size of $10 million at the point of application and $20 million within two years. Another requires funds of $50 million. There are also requirements around the hiring of local investment professionals, as well as business spending amounts.
With so many family offices setting up shop in Singapore, the sector looks set to pay dividends in terms of job creation in the financial sector, from wealth and asset management to fund administration. But finding the right people with both the requisite technical skills in areas such as tax regimes as well as a suitable temperament can be a tall order.
Finding the elusive captain
One of the most difficult positions to fill comes at the start. The principal has to find his CEO, the captain to run the ship, someone who is a jack of all trades and master of everything.
Kamet Capital Partners is a multi-family office that services over half a dozen clients. Its CEO Kerry Goh explains: “The first person the principal hires will determine the feel of the family office. This person has to be a leader, an all-rounder, not just one who is good at investing.”
That said, on the investing front, it’s no walk in the park either. This CEO needs to be familiar with not just bonds, equities and gold but also alternatives such as private asset classes and how to allocate funds between them.
This first hire is critical as there may also be a language requirement, such as Mandarin. Even if language is not an issue, it often helps if the CEO is one who is experienced in how business operates in the owner’s home country.
This leader then has to find a core team to set up the family office. This team usually comprises Singaporeans as they are familiar with the lay of the land, so to speak. They may have to assist family members as well.
“One moment you may be handling investment analysis, the next moment, you may be arranging for the children to attend school. You have to be a specialist and yet be able to multitask at the same time,” Mr Goh adds.
The initial set-up
After landing the CEO, there are board advisers to be hired and legal and trust structures to be decided upon. People to take care of IT systems and legal advisers need to be selected too. Functions can be outsourced or handled in-house. With such a lengthy initial to-do list, it is a challenge to put together a competent team who can also “click” with the principal.
The backdrop
Most of the family offices in Singapore are headed by first- or second-generation business owners from Asia, although there is an increasing trend of families from Europe and the United States setting up a presence here, according to McKinsey & Company’s expert associate partner Vishal Kaushik.
Among the first-generation entrepreneurs, many have made their wealth in tech. These may be hotshots in their 30s or early 40s, quite a bit younger than their CEOs who may hail from a decades-long career in banking or the corporate sector.
DBS Private Bank group head Joseph Poon notes that someone who heads the family office “needs to have more of a start-up mindset” to fit in with the fast-paced, hands-on working style of entrepreneurs and their less structured decision-making rubric on investments.
Most of the family offices in Singapore, bankers say, have yet to evolve to have the clear management and responsibility structures found in multinational corporations or multi-generational family offices such as the Rothschilds.
Multi-family office Farro Capital’s co-founder Manish Tibrewal notes that many professionals are hesitant to join family offices due to their wariness of the culture and concerns that their long-term career growth may plateau.
One former family office CEO said there was less leeway to drive investment decisions, as these were often made by the owner.
As many of the family offices in Singapore are newly established, they tend to be small, with a two- to three-person team, including the CEO. Even if some functions are outsourced, the CEO is still expected to oversee a wide range of tasks, from risk management and HR to cyber security and information technology.
Winfield Global Capital’s CEO Roger Zhu, who runs a multi-family office, reckons that the skill sets required come from experience and are difficult to be taught. Given their wealth, family offices are flooded with investment teasers from around the world, many of which could be scams; experience comes in handy here when deciding on the checks necessary before an investment recommendation is made.
While most family offices pay competitively, from a total compensation perspective, they may offer less on the variable pay front – which is largely determined by individual performance – compared with banks, said Mr David Hui, head of Heidrick & Struggles’ industrial practice in the Asia-Pacific region and the Middle East.
Those keen on working in a family office will also have to weigh the fact that the relationship with the principal will be much more personal, compared with the corporate networks they would have been used to in multinationals or global banks.
Investing-related skills and the right mindset
Apart from this, there is also the question of technical skills.
According to the Wealth Management Institute (WMI) – set up by GIC and Temasek to offer training in this space – there is strong demand for “investment-related skills” as family offices are looking for “local and regional investment opportunities to support innovation and enterprises”.
Family offices are keen on the alternatives investment sector, such as private equity, and venture capital or club deals, where a group of firms get together and buy out a company. Not all professionals, even from banking, are equipped to advise on these investments.
Another newish area is that of impact investing. Together with the rise of a family’s wealth, there is also a trend towards wanting to do good with their investments, says DBS’ group head of wealth planning family office Lee Woon Shiu. If it’s not about profits and return on equity, how does one assess whether a project has really benefited the community? Again, professionals with expertise in carbon emissions reductions and the like are not aplenty.
It is no easy task too managing the personal income tax of wealthy individuals who have assets in London and New York and hail from, say, India, but hold US green cards and wish to pass their assets to the next generation.
Such are the demands that family offices are finding it a challenge to fill not only the CEO position but also the positions of chief investment officer (CIO), chief operating officer (COO) and head of compliance, says Ms Sharon Sim, CEO of single-family office Ormand Corp.
She’s aware of a multi-family office that took months before it found a suitable CEO.
She said: “These are leadership roles that require not only technical skills but also entrepreneurial experience and mindset. These roles are about leading and building the business relationship with principals and other families, about how one successfully adapts to different family office set-ups and differing long-term objectives.”
Heidrick & Struggles’ Mr Hui says that as family offices try to fine-tune their operating processes, people for corporate functions such as COOs and chief financial officers are needed. “Good investment executives like CIOs and asset allocators are still in great demand,” he adds.
Solving the skills shortage
Meeting the demand for the skills is a multi-year process as experience cannot be acquired overnight.
Hong Kong, a competitor in the asset management space, is raising its game. In March, it indicated that it was considering cutting taxes for family offices. On the skills front, it announced plans for a Hong Kong Academy for Wealth Legacy to nurture talent for the industry.
While WMI and other education providers are ramping up training, many family offices in Singapore are working with less experienced folk in the meantime. And given the relatively small size of each outfit, they cannot hire in large numbers, while standards and training will vary across family offices.
Industry players could collaborate further, to grow the pool of family office professionals. For instance, there is the existing Women in Family Offices (Wifo) network.
“Wifo aims to partner industry players to, firstly, build a strong professional connection, secondly, grow a generation of women leaders, and lastly, bring more women professionals into the family office space,” says Ormand’s Ms Sim, who is one of Wifo’s six co-founders.
The established private banks with their resources can also expand their hiring and train more people.
What’s also needed is more awareness about the jobs on offer and skills needed and an idea of the career trajectory for younger people who join such an outfit. Extensive networking among family offices and the other industry players could serve this purpose.
For Singaporeans willing to pick up new skills and who possess the right mindset, this is a promising sector in the financial industry that gives them the chance to go places.
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