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In the face of an increasingly volatile environment, ultra-high net worth (UHNW) families in Asia and the rest of the world are seeking bespoke wealth solutions that can meet their increasingly complex and unique needs.

The answer for many has come in the form of single-family offices dedicated to managing the finances of established families. These entities have been estimated to manage more than US$6 trillion in funds, or more than the total handled by hedge funds globally.¹

And, as Asia’s wealth creation story is still being written, such family offices—which typically cater to investors worth over US$100 million—are likely to gain even greater prominence. Experts argue that these entities offer the flexibility, balance sheets and long-term horizon to thrive even in a downturn.

“It’s hard for business owners or wealthy families to decipher everything that’s happening in the investment world on their own because it has become more uncertain partly due to a complicated global macro environment between inflation, currency volatility, energy supply and growth uncertainty. In the past these families would focus on equities and bonds, but as their understanding of long-term wealth management increases, many are starting to realize that they need to build a balanced portfolio with exposure to different asset classes to help them achieve their multi-generational financial goals,” says Ulysses Lau, Managing Director, Head of Investments and Advice for Hong Kong and the Philippines at J.P. Morgan.

“So, this shift in needs, coupled with the creation of new billionaires, has pushed up demand for single-family offices over the past few years.”

Meanwhile, with Asia preparing for a remarkable transfer of wealth to the next generation in the coming years, a younger set of investors are seeking more control over the way they manage their family fortunes; something a family office structure provides a platform for.

While family offices in some form have been around for centuries—indeed, J.P. Morgan has been an industry leader in serving the needs of ultra-high net worth families since its inception—today’s larger versions operate more like full-service global investment firms; trading not just traditional asset classes such as equities and fixed income, but also currencies, commodities as well as emerging asset classes such as digital assets.

Many also invest in real estate, private equity and venture capital funds, and even engage in their own private acquisitions and start-up deals. Such direct investments tend to provide family offices with better returns over the long run. It also gives business owners who have sold their enterprises a platform to lend their expertise to start-ups in an industry they are intimately familiar with.

“Single-family offices today are more sophisticated than ever before and tend to be a crossover private equity fund or a sovereign. Many have up to 100 to 150 financial experts, so they have institutional-level scale,” says Andrew L. Cohen, Executive Chairman of the Global Private Bank and a Global Chair of Investment Banking at J.P. Morgan.

Access to Institutional-Level Services

Global financial institutions such as J.P. Morgan have been helping their clients in the single-family office space for many decades by granting them access to the same level of service and expertise as their institutional clients.

“The needs of wealthy families today are very much institutional in nature, and they access all other lines of business within the J.P. Morgan franchise ranging from investment banking, corporate banking, asset management and risk management as well as custody and philanthropy services,” says Catherine Chin, Executive Director, Asia Head of Morgan Private Ventures at J.P. Morgan, who is responsible for providing institutional level access for the clients of J.P. Morgan.

The bank also facilitates the sharing of knowledge between its network of single-family offices around the world. “We are able to connect like-minded families and give them an avenue to share their thinking. This can range from sharing best practices for their family offices to exchanging thoughts on navigating volatile markets and the prospect of emerging risks given a backdrop of weaker global growth,” reveals Chin.

Aiding Philanthropic Commitment Amid Volatility

Having found success in the business world, more of Asia’s wealthy are now seeking to use their fortunes to make a positive social impact. J.P. Morgan leverages an endowment model of investing to help its single-family office clients meet their philanthropic commitments, regardless of how markets perform. An endowment model typically consists of a mix of traditional investments and alternative investments, such as hedge funds and private equity.

“For a traditional portfolio, it’s fine when there’s volatility in the markets because we look at it on a long-term basis. However, a family may have certain philanthropic commitments they need to fulfill every year, so we need to manage the portfolio differently so that it is able to generate enough returns to meet those commitments,” explains Lau.

To this end, J.P. Morgan’s Outsourced Chief Investment Office leverages expertise in endowment and alternative investments to help families to implement sophisticated one-of-a kind investment solutions designed to meet those goals.

A Bespoke, Global Partnership Model

J.P. Morgan’s commitment to single-family offices is best reflected in its establishment of a specialized offering known as 23 Wall; a reference to the bank’s original address on the corner of Wall Street and Broad Street in Lower Manhattan.

23 Wall is a specialized global team that provides the world’s largest and most sophisticated families with access to the firm’s overall intellectual capital, balance sheet, and deal flow around the world. The team engages with more than 700 families, representing over US$4.5 trillion in private family capital globally.

“At J.P. Morgan we’re constantly innovating and identifying solutions as well as leveraging intellectual capital across the firm that is valuable to families. Due to the size and sophistication of these families, we treat them as an institution. They have direct access to the investment bank (or another line of business) and 23 Wall acts as the connection between the two,” says Cohen.

23 Wall leverages J.P. Morgan’s comprehensive capabilities to ensure the power of the full J.P. Morgan Chase franchise is brought to bear for the benefit of the world’s largest families and their family offices.

“We understand that every client has different complexities and needs during different times of their wealth lifecycles. We have therefore built a team of global specialists with different capabilities and skills that are able to deliver seamless global coverage and facilitate access across every region to the relevant JPM experts,” says Natacha Minniti, Managing Director and Head of 23 Wall for Asia, Europe & the Middle East, and Latin America at J.P. Morgan.

CARRYING FORWARD THE BESPOKE BANKING LEGACY THROUGH A MODERN LENS

Andrew L. Cohen, Executive Chairman of the Global Private Bank and a Global Chair of Investment Banking at J.P. Morgan, talks about what makes the bank’s bespoke team, 23 Wall, relevant for today’s largest and most sophisticated families.

What was the motivation for setting up 23 Wall?
The name 23 Wall refers to the address of the original J.P. Morgan headquarters in New York. The name reflects the firm’s commitment to work with families today as we did originally—holistically across all lines of business as one firm and one responsibility to conduct “first-class business in a first-class way”.

We wanted to embrace the legacy of J.P. Morgan himself and subsequent generations who have continued to innovate—bringing us to 23 Wall today. Essentially, we have taken that historical context and reconceptualized this for the pressing needs of today’s accomplished families. We want to deliver the entirety of J.P. Morgan to the right families matched by their sophistication and the size of their assets. This means that we will treat our subset of sophisticated clients like institutions in terms of capabilities, intellectual capital and offering.

What are some of 23 Wall’s unique capabilities?
The purpose of 23 Wall is to help families navigate the firm for their personal, family office, and operating business needs. The beauty of our coverage model is that we have an unrivaled global network. First, we have members of our team on the ground in 6 countries and 12 cities. Second, we have access to our partners across lines of business and finally we are able to facilitate knowledge sharing between our network of single-family offices around the world. All of this ensures seamless global coverage at every level.

Additionally, we are focused on technology and enhancing processes via digital enhancements for our clients. The digitalization of the business enables a more effective way of interpreting data into intelligence, which in turn helps to determine what is needed to map a path to the client’s goals. So, we’re using our technology platforms not just for trading and execution, but for data aggregation and figuring out how to intelligently match the client’s goals with sophisticated, diversified opportunities they can only access at J.P. Morgan’s 23 Wall.

Can you provide an example of how 23 Wall supports the aspirations of its clients?
23 Wall’s unmatched advantage is in helping clients simultaneously navigate our solutions and capabilities across lines of business as well as across regions, which is the value of having a truly global team. A more recent and relevant example was during the height of Covid-19, when a large European industrialist family approached us as they had a position in a NASDAQ-listed stock that was held via their holding company based in Singapore. Due to the nature of the complex structure, the family required a unique derivatives transaction executed in New York. The family was based in Europe, the holding company was based in Singapore, and the transaction was completed in New York—a fully cross regional effort, which the team was able to seamlessly complete. This scenario showcases the power of 23 Wall’s seamless, global coverage model and experience.

What is your outlook for the growth of 23 Wall’s business?
The types of families we get referred to are typically well diversified and have underlying operating businesses that are continuing to prosper. However, as the market environment continues to change and as intergenerational wealth transfer takes place in the next decade, our clients/families’ investment preferences and goals will inevitably evolve. 23 Wall will be there to prepare them for that change, and we see a robust pipeline of demand from the largest, global families over the long-term.

¹ Secretive family offices manage $6 trillion globally, more than hedge funds.
Available at: https://www.cnbc.com/video/2022/07/11/secretive-family-offices-manage-6-trillion-globally-more-than-hedge-funds.html
Date as of: 11 July 2022.

Click here for more information

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The world’s largest migrant population, the 32 million members of the Indian diaspora, have grown in both affluence and influence around the globe. Despite their geographic diversity, global Indians have collectively become an important wealth market that share a need for sophisticated financial solutions.

To this end, HSBC—with an unparalleled global footprint and a comprehensive suite of financial services—is ideally suited to service the wealth-related needs of this group.

“HSBC is in a great position to serve ultra-high net worth (UHNW) global Indians because we are present in 63 countries and territories, more importantly, in all the markets that are of primary interest to this group of clients,” says Philip Kunz, Head of Global Private Banking, South Asia, HSBC.

“They are financially knowledgeable and tech savvy, and by virtue of many having studied or worked overseas, they are also extremely mobile and global in their way of thinking. As such, they have high expectations from the bankers who support them,” explains Kunz. “At HSBC, our relationship managers, as well as investment and product specialists, have access to both local and global expertise and solutions that cater to this very sophisticated group.”

HSBC Global Private Banking is also able to deliver the digital wealth tools and touchpoints that global Indian clients expect and it plans to invest around US$200 million over a four-year period to enhance its core banking and digital platforms in Asia.

Diverse Portfolios
Given their international perspective, UHNW Indians abroad seek out investments that span geographies and asset classes; from real estate in the U.S. to private equity in Southeast Asia.

According to research by HSBC, some 80% of global Indians—especially those in Hong Kong, Saudi Arabia, the UAE and the UK—are making investments in India. The study also found that 59% are planning to increase their levels of investment in India in the next three years, while the same proportion plan to increase investments in their country of residence.

While equities (47%) and property (46%) are the most common asset classes in their portfolios, a significant proportion are also investing in local businesses where they live, particularly in Australia, Hong Kong, the UAE and the UK.

Furthermore, global Indians are planning to make a range of sustainable investments in both India and their country of residence in the next two years. Many have also invested in private equity, especially in sectors such as technology.

The Singapore Connection
HSBC continues to scale up its capabilities in Singapore across wealth solutions and digital tools to better serve global Indians based in ASEAN, India and the UAE. Singapore and India enjoy enduring historical ties and relatively close geographic proximity, while financial links are also common. Indeed, almost nine in ten global Indians have investments in Singapore, according to HSBC.

“Studies have shown that around 23,000 millionaires have left India since 2014. In recent years, this group has started to gravitate towards Singapore because of the stable environment, strong rule of law and the government’s support of the financial services industry,” says Kunz.

The potential of the Indian diaspora prompted HSBC to be organised in a way where they can seamlessly support the wealth needs of their clients and their families as well as their businesses, regardless of where they are located.

Singapore is also a highly desirable family office locale for UHNW Indians given its sound financial regulations, strong rule of law, as well as political and economic stability.

Given the strategic importance of Singapore as an international wealth and business hub for ASEAN, HSBC has established a strong coverage team led by Anthony Hingley, Managing Director—Market Coordinator, Global India, MENA and Europe, to serve global Indian clients in this region. Based in Singapore, Hingley was appointed at the start of the year to help HSBC Global Private Banking marshal the resources of the group to meet their diverse needs.

“Anthony’s role is to ensure that we offer a cohesive and consistent delivery of our proposition and solutions to global Indian clients, regardless of where they are based, be it in Indonesia or Singapore,” says Kunz.

Meeting a Spectrum of Needs
By tapping into HSBC’s breadth of expertise, HSBC Global Private Banking can satisfy the increasingly diverse and complex demands of the global Indian client. “Whether it’s opening an additional account or getting a credit card or supporting clients’ philanthropy and legacy planning needs, we can support them given our universal banking model,” says Kunz.

Indeed, HSBC has an established retail, commercial and investment banking presence in most of the markets where global Indians are based.

“Besides being able to respond to all the variances and needs that may arise, it is particularly important to our clients that they are dealing with a brand that they can trust, and HSBC has been in most of these markets for over 100 years,” explains Kunz.

He notes that legacy planning and philanthropy are two important aspects of the global Indians wealth journey. However, these topics can be complicated as many in the Indian diaspora are made up of large families spread across many countries.

To help clients navigate this complex landscape, HSBC can tap into its experienced trustee company, which celebrated its 75th anniversary in 2021. HSBC Trustee offers clients global coverage, with trust companies conveniently located in Hong Kong, Singapore, Jersey and in Delaware and New York.

HSBC Trustee has the experience and expertise to not only provide befitting solutions, but also to ensure wealth structures remain compliant amid constant regulatory changes across jurisdictions along with trusted advisors.

More global Indian families are also keen to incorporate ESG (Environmental, Social, and Governance) factors into their investment, philanthropy and legacy planning decisions, Kunz notes.

“Their investment portfolio is becoming greener, mostly driven by the younger generation, as they want to invest their family fortunes in sustainable companies and assets. Besides being able to tap into HSBC Asset Management, given we operate on an open architecture platform, our clients have access to the best-in-class sustainable investments available in the market,” he says.

The global Indian business is an increasingly important piece in HSBC’s broader ambition to be Asia’s leading wealth manager by significantly growing its assets under management. Says Kunz: “We have the ambition to become the leader in Asia by connecting our clients to global opportunities across the wealth continuum. Regardless of where they are, we can help them fulfill not just their financial ambitions, but also realise their dreams and aspirations.”

Asia continues to generate wealth at an impressive pace, even as headwinds continue to moderate economic growth. According to HSBC Global Research, wealth in Asia excluding Japan could outstrip the U.S. by 2025. The number of millionaires across Asia is projected to jump from roughly 30 million to over 76 million by 2030, with Singapore expected to overtake Australia’s millionaire population.

However, managing these expanding pools of wealth has become more complex due to a confluence of factors, from the effects of the pandemic and inflation to heightened geo-political tensions and recession risks.

In particular, fears over stagflation have adversely impacted both bond and equity markets in the first half of 2022. Rising consumer prices have forced central banks around the world to tighten monetary policy, resulting in challenging conditions for bonds. Equities, too, have been hit by concerns over a slowing economy and the threat of inflation denting the bottom line.

“This complexity impacts our clients, their current investments and long-term wealth goals, so we have been focused on providing the advice and services they need during these challenging times, both with respect to managing the risks and taking advantage of opportunities,” says Annabel Spring, CEO, Global Private Banking and Wealth, HSBC.

In light of these challenges, clients are currently focused on increasing the resilience of their portfolios, as well as managing their legacy and succession plans. A younger
generation of affluent investors is also demanding mobile convenience when it comes to managing their wealth, and incorporating environmental and social purpose into their investment decisions.

In terms of diversification, investors should seek out alternative assets such as private equity or credit, hedge funds and commodities to potentially reduce the overall risk in a portfolio, and to uncover uncorrelated opportunities.

Clients should also consider building multiple income sources, with cash flows that can reset higher in the event of rising inflation. Such income streams include infrastructure, private credit, real estate, floating rate bonds and dividend growers. Finally, investors should favor the stocks of high-quality companies that have the capacity to maintain profit margins even as costs rise.

“In an uncertain world, it is wise to build resilient portfolios to weather the likely bouts of volatility and not to ignore the wide range of opportunities,” explains Siew Meng Tan, Regional Head of Global Private Banking, Asia Pacific, HSBC.

“Our investment strategy specifically focuses on quality earnings, resilient income and multi-asset diversification to dampen market volatility and help clients to stay invested and capture opportunities. A focus on quality means selecting companies and areas with the most resilient fundamentals. Looking at income allows investors to take advantage of increased yields and helps mitigate market volatility. Lastly, diversification helps uncover opportunities in alternative assets.”

Sustainable investments are another way to build long-term resilience and capture future growth opportunities. On this front, the bank is able to deliver innovative ESG (environmental, social, and governance) solutions to its clients. These include, among many others, a biodiversity thematic discretionary mandate, sustainable core multi-asset solutions and private equity impact funds.

Leveraging a Global Footprint
Investors should not only pursue asset class diversification, but also geographical diversification, in an effort to reduce portfolio risk. With its global footprint, HSBC is well-positioned to offer international opportunities and capabilities that span numerous markets around the world.

“Our international network and connectivity across the Group are particularly valuable for our ultra-high net worth (UHNW) clients, whose complex needs and objectives are typically global in scope and span personal, family and business interests,” says Spring.

HSBC has a unique client servicing model, where a primary relationship manager leads the global coverage team of relationship managers across Global Private Banking (GPB) offices to look after clients’ global portfolio and needs. With the client’s consent, HSBC is then able to work closely with the client and their representatives globally.

“We onboarded a new client in Hong Kong recently who was impressed by our smooth introduction and onboarding process in the UK for his child, who is studying overseas, as well as our capabilities across different GPB offices to meet his asset diversification and wealth-planning needs to align with his family’s global lifestyle,” explains Tan.

As the needs of UHNW individuals extend to their families and businesses, HSBC’s universal banking model enables the private bank to provide their clients with access to capabilities in Insurance and Asset Management, Commercial Banking and Global Banking and Markets.

These capabilities are increasingly being delivered through a hybrid service model that combines advanced digital platforms with value-added human engagement. This approach, which proved to be especially effective during the pandemic, addresses a broader shift in how clients want to interact with their private bankers.

Committed to Philanthropy
In an environment where wealthy families are increasingly concerned about addressing social issues, HSBC GPB actively supports its clients in their pursuit of driving long-lasting change in their communities.

“As our clients think about their legacy and leaving sufficient resources for their children and grandchildren to enjoy, they are aligning their family business, philanthropy and sustainable investment activities so that they are reflective of the family’s values,” says Spring.

“They want to realise the synergies across all three parts of the family enterprise to amplify the impact of their work. In terms of investments, they are increasingly interested in impact investing.”

HSBC GPB is one of the first international banks in Asia to set up a philanthropy advisory team, which aims to help clients navigate a complex landscape to achieve their philanthropic goals.

A Leader in Succession Planning
As affluent Asian families expand their global reach, their wealth and succession planning needs can also become more complex. HSBC helps clients on this front through their trust business, which was established in 1946.

HSBC Trustee offers clients global coverage in Hong Kong, Singapore, Jersey and the U.S., particularly in Delaware and New York. With constant regulatory changes across jurisdictions, HSBC has the experience and expertise to not only provide best-in-class solutions, but also to ensure wealth structures remain compliant.

HSBC Trustee also creates opportunities for wealthy families by connecting them to other parts of the Group, whether for their everyday banking, credit and investment needs, or to assist them with their wealth structuring planning.

Looking ahead, HSBC GPB is set to continue to expand its capabilities and presence in Asia. HSBC unveiled its new private banking business in Thailand in 2021 and earlier this year launched a differentiated onshore private banking business in mainland China, where HSBC is the largest foreign bank offering comprehensive wealth management solutions. The bank is also looking to India as its next market for the private banking business.

Says Tan: “Capturing the massive opportunity from Asia’s fast-growing wealth creation and what is expected to be among the world’s biggest intergenerational wealth transfer events is core to the HSBC Group’s strategic pivot to Asia, where it aims to be the leading international wealth manager.”