DBS Private Bank - "Governance and succession: Family offices and the Chinese diaspora in Asia"

Sep 23, 2021 Hubbis

This report chronicles the history and dynamics of the Chinese diaspora in Asia, the cultural constructs and other factors influencing their wealth planning decisions, and the family office and family governance structures taking shape today.

Lee Woon Shiu, Group Head of Wealth Planning, Family Office and Insurance Solutions, DBS Private Bank said: "Despite being a key contributor of global wealth, many of the Chinese diaspora have yet to institutionalise a formal system with which to manage their assets, oftentimes due to deep-set traditions or cultural reasons. However, we do see this changing in view of these families’ evolving dynamics and growing wealth, and with many now on the cusp of passing the baton to the next generation.

The pandemic is further accelerating this shift, having reminded families of their potential vulnerabilities and the importance of planning with stability and longevity in mind. For families that have already set up family offices, many are also relooking their structures to ensure greater agility and adaptability in times of change.

Against this backdrop, the beauty of ‘Singapore Inc’ – a cocktail of attributes including a strong force of law, political and economic stability, and high quality of life, as well as its position as a lighthouse to the region’s opportunities – continues to be a compelling magnet for families worldwide. We see a long runway of growth for Singapore’s family office landscape, and as a leading bank in both Singapore and Asia, our deep understanding of regional business dynamics, regulations and cultural nuances, as well as our extensive Asian insights, networks, and connectivity to the family office ecosystem, leave us in good stead to partner these families on their wealth journey.”

Summary of report takeaways

Companies started by ethnic Chinese entrepreneurs and investors in South-East Asia are often referred to as the “bamboo network” due to their localised Asian connections and success. Built on the foundation of Confucian values—including respect for hierarchy and harmony, relationships and networks (or guanxi 关系: guān xì), these businesses have grown over the years through hard work, optimism and a sharp eye for commerce.
Wealth sources in Asia are increasingly tech driven.
Estimates indicate that in 2019, overseas Chinese families controlled more than three-quarters of billionaire wealth in South-East Asia.
The adoption of a family office among overseas Chinese HNW business families in Asia is growing, but there are various cultural reasons as to why family governance mechanisms, such as succession planning and risk management strategies, are slower to catch on, including a hesitation to seek or trust outside advice or an unwillingness to break with birth-order hierarchy or succession traditions.
Effective family governance consists of a written agreement and/or a formalised structure that includes guidelines for succession planning and risk management, designed to preserve a family’s wealth, harmony and legacy.
As wealth in Asia grows, new Chinese families join the HNW ranks, and the structure and investment objectives of Chinese families change, the adoption of family governance has the potential to protect family businesses for generations while allowing all family members to be involved in advancing their legacy and wealth into the future.
Family governance in the East does not have to strictly follow Western guidelines and can incorporate a more collectivist approach to its implementation, seeking a balance between the East and West.

(Please refer to the full report for more details)

DBS Private Bank - "Governance and succession: Family offices and the Chinese diaspora in Asia"

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