Asian business families make succession plans as fortunes rise

Weiling Chua’s paternal grandparents crossed the seas from China to Singapore in search of a better life. Her father, Chua Thian Poh, left school at 16 to start his own business and almost went bankrupt before he invested in real estate and built Ho Bee Land, a property empire now worth more than $1bn.

He encouraged his four children to join the family business. His son Nicholas works with him at Ho Bee, while Ms Chua (pictured above) oversees the family office, managing a global portfolio in co-operation with her younger brother. Only her older sister has opted for a different career — she is a school headteacher but still very much part of the family.

“Nobody was ever afraid of hard work,” says Ms Chua. “Times were tough for my grandparents. They had 14 children. But my dad was very entrepreneurial and could see how to provide better circumstances for his family.”

It is a rags-to-riches story that is both unique and familiar in the world of east Asian family wealth. The region’s economic rise has not only transformed the world but created large numbers of wealthy, family-oriented entrepreneurs.

Led by China, the Asia-Pacific region accounted for nearly 46,000 people with assets of $50m or more at the end of 2019, more than double the 2010 total, according to Credit Suisse, the Swiss bank. That was still short of the US, with almost 90,000, but well ahead of Europe, with just over 32,000. While one tier down in wealth terms, Asia’s affluent classes are also multiplying, as economic development spreads far and wide.

While the Covid-19 pandemic has clouded economic predictions, forecasters still expect Asia’s wealth to keep growing faster than elsewhere, not least because the region’s economy has so far been spared the worst of the pandemic. Boston Consulting Group forecast in June that Asian wealth would increase by between 5.1 and 7.4 per cent yearly between 2019 and 2024, depending on how the pandemic works out. That is far ahead of the outlook for the world as a whole, which is forecast to increase between 1.4 and 4.5 per cent.

This means opportunities for wealth managers: McKinsey, the consultancy, estimates only 15-20 per cent of the region’s wealth is under formal management, making the rest an undeveloped gold mine for private bankers and asset management companies.

“The idea of wealth management is very new in Asia, especially if you look outside of key hubs like Hong Kong and Singapore,” says Yoon Ng, Singapore-based director of Asia-Pacific insights at Broadridge, a US fintech working with asset managers. “It’s only in recent times that investors are really embracing that wealth management is about holistic management [of a client’s needs].”

Prospects for wealth managers are also enhanced by the generational change sweeping rich Asian families. Few company founders are willing to give up control to their heirs entirely. But the entrepreneurs who started their businesses early in Asia’s post-1950 boom have either died or are in advanced old age and are relinquishing control to the next generation. Others are prudently making succession plans while they are still in charge.

In the Chua clan, 72-year-old Chua Thian Poh remains firmly in command. However, says Ms Chua, who is 37, he has been persuaded to formalise the arrangements he developed over many years in his businesses and in his family, which now extends to a third generation, with 11 grandchildren. Initially Mr Chua was reluctant to make changes. He had, after all, achieved great success as chief executive of Ho Bee, a substantial listed company, and in other investments. “It was a hard decision,” says Ms Chua. “He was not too keen because he thought, ‘Why rearrange everything when things are running perfectly in my head?’”

But after discussions with his wife Doris and four adult children, Mr Chua agreed in 2016 to put his wealth on more structured foundations, says Ms Chua. A constitution set out in writing the family’s aims, the responsibilities of each member and plans for the education of future generations. The Chuas established a family office, called One Hill Capital, with a portfolio of around $200m and a philanthropic foundation. “We now have decision-making processes,” says Ms Chua. “We know what happens if there is a dispute to resolve. Our roles are defined.”

In 2018, her brother Nicholas, now 45, was appointed deputy chief executive of Ho Bee, where the bulk of the family fortune still sits in the form of a 75 per cent stake. This prompted speculation that he was his father’s chosen successor, but no announcements have been made.

At the family office, Ms Chua says “proper processes” are in place to monitor the portfolio and diversify from property into different asset classes. She heads a team of six that includes Bhavik Doshi, an ex-banker who serves as chief investment officer, which maintains “key strategic relationships with a couple of global banks”. One Hill Capital makes its own asset allocation decisions, consulting selected advisers. “We cherry pick from the best skill sets and partner accordingly,” Ms Chua says.

Like other large Asian investors, One Hill Capital is spoilt for choice. Asian Private Banker, a Hong Kong-based research group, lists the 25 largest private banks by assets under management: UBS of Switzerland leads with $450bn in Asia at the end of 2019, followed by Credit Suisse on $227bn. HSBC, Morgan Stanley of the US and Swiss-based Julius Baer complete the top five. Sizeable regional competitors are expanding fast, including Singapore-based DBS and Bank of Singapore, China Merchants Bank, Bank of China and Malaysia’s Maybank.

International banks are basing more of their decision makers from London, New York and Switzerland in the region. Boston Consulting estimates that last year $1.9tn of cross-border wealth was managed out of Hong Kong and $1.1tn out of Singapore; together they were already larger than Switzerland (on $2.4tn).

Meanwhile, Asians increasingly are securing top regional private banking jobs. It is an ideal business environment for go-ahead executives such as Joseph Poon, group head of DBS Private Bank, who has a personal story as dramatic as the Chua family’s.

Born in the mid-1960s in Saigon, South Vietnam, in the middle of the Vietnam war, he had to flee his home with his family in 1975 after communist North Vietnamese forces captured the South’s capital and renamed it Ho Chi Minh City. “I was born in a city that does not exist any more,” says Poon wistfully.

Poon’s father, a wealthy businessman with ties to the pre-communist government, secretly organised an escape boat, with Poon and his six siblings sworn to secrecy. The family muddled its way across the Gulf of Thailand to Malaysia, where they were thrown in a refugee camp — “a prison”, according to Poon.

But the Poons were lucky: after seven months they were resettled in New Zealand, where Poon’s father found work and rebuilt the family’s wealth. The children worked part-time as they attended school. Poon eventually went to university in the US before moving back to Asia in 1992 to start his career in Singapore, where he worked in wealth management and private banking at JPMorgan and UBS before joining DBS.

The Singapore powerhouse was among the first local banks to look beyond commercial and retail banking to wealth management for the affluent middle classes and private banking for the rich. While DBS has less in assets under management than the top international banks, it sees itself as a rising force. In recent years, it has bought the regional private banking businesses of France’s Société Générale and Australia’s ANZ.

“Clients want continuity,” says Poon. “What clients don’t want are banks that operate in Asia and leave when things get tough. We know Malaysia, Thailand, the Philippines, China and Indonesia much better and in a much more granular way than the foreign banks that come to Asia. We go in at the ground floor, whereas the global banks come in at the second or third.”

Rebecca Gooch, director of research at Campden Wealth, a London-based research company, says there is growing recognition that western banks, which “embrace shareholder-based markets and institutional money, are not always the right fit in the east, where [personal] trust and family ties are often paramount”.

Clients want continuity, not banks that operate in Asia and leave when things get tough

But that is not the whole story. As Poon himself says, clients have become more outward-looking, instead of just focusing on their own business. Their children, typically educated in the US or UK, have aspirations beyond running the family company. “That has caused a lot of soul-searching for the founders of these businesses,” says Poon. It has also put greater emphasis on wealth planning, legacy and philanthropy. Families who once might never have contemplated selling their core business might now consider it, just like their western counterparts.

In any case, international banks are hardly outsiders. At Credit Suisse, Benjamin Cavalli, head of the Singapore operation, has spent a full 24 years in Asia. He sees local banks not as competitors but as complementary. “These banks have developed into the private banking area, but their bread-and-butter business is not private banking. We are complementing their offering by introducing traditional wealth management services,” he says.

International banks also make the most of their own longstanding Asian ties, none more so than London-headquartered HSBC, a global bank with Asian origins. “We believe our deep historical roots in Asia-Pacific, international connectivity and [wide] product range allow us to bring synergies together” in wealth management, says Siew Meng Tan, regional head of HSBC private banking for Asia-Pacific.

Other western banks have formed partnerships with local players — for example, Swiss bank Lombard Odier, which has agreements with banks in Thailand, Indonesia, Taiwan, the Philippines and Singapore.

While there is room for many competitors in an expanding market, the rivalry is visible in the poaching of staff, especially of established relationship managers (RMs). As one family office executive says: “It’s a game of musical chairs. You develop a relationship with a bank, then the RM is off and tries to get you to change bank. Meanwhile, the first bank finds you a new RM.”

At UBS, Amy Lo, co-head of wealth management in Asia, says one of the big problems in the region is the “talent shortage — there is a talent war”. A Hong Kong-based executive who has spent most of her 30-year career in the territory, she sees the answer as expanded training to increase the pool of future Asian private bankers.

Moreover, as well as financing the talent war, banks are having to fund the huge costs of the digital revolution. While banking technology may have started with simple operations such as payments, it is now reshaping asset management — and nowhere faster than in Asia, where people are often early adopters of new technologies.

The Covid-19 crisis has sped up the shift to digital, with the switch from face-to-face meetings to online. “The pandemic has accelerated the transformation of the whole business with the use of the digital channels,” says Lo.

Looking to the future, Boston Consulting predicts the cost of delivering multiple services globally will aid the biggest wealth management companies at the expense of the rest. That might comfort the likes of UBS and Credit Suisse, but BCG also warns that the advance of tech companies challenges the whole sector. Amazon and Alibaba, of the US and China respectively, are already offering financial products and could “in time” move up the ladder of financial sophistication, says BCG.

“The last 10 years, it’s been a huge transformation,” says Poon. The next decade is likely to see just as much change, if not more.

This article is part of FT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investment