A conversation on Family Offices in Asia with Dominik Heer

Dominik Heer is the COO of Alpadis Group, based in Singapore. An expert on Family Offices, Dominik works with the Alpadis Group Singapore and regional teams to advise family offices around the region and beyond, offering expert counsel on how to structure their office, tax incentives, fund administration, succession planning, relocation and more.

Here, Dominik tells us about Alpadis Group’s services:

Please provide an overview of the role of Alpadis Group’s Family Office Services

Alpadis Group assists international families with the setup and day-to-day back office administration of their family office. In addition to that, we offer a suite of value-added services around insurance solutions, citizenship by investment, private equity, origination and support among other things. So, it’s a pretty full suite of services specifically targeted at family offices.

We mainly work with Single Family Offices (SFOs) rather than Multi-Family Offices as, from a regulatory point of view, they are able to administer their own assets. While we ourselves are not independent asset managers, we build on our core service offering and adapt it to the needs of the family offices. Ultimately, we look to facilitate intergenerational wealth management, provide a very high level of professional management of family wealth and build a strong family and business governance framework.

Please describe a typical family with whom Alpadis Group would work with

The types of families that we work with are typically multi-generational centred around the family business. So, dynasties in which the family business would have been built a few decades ago and there are now second and third generation family members. While there is an operational business at its core, these families will usually have a portfolio of investments such as venture capital or private equity investments or other assets that need to be administered such as yachts, aircraft, a wine or art collections.

Additionally, these family members and their assets will be spread across multiple jurisdictions so there is a lot of complexity in terms of regional and global footprint, cross border transactions, different laws and regulations etc. Geographically we work with families from all over the world including ASEAN, the UK and further afield.

There are often quite complex family dynamics, especially in larger families. How do you navigate these dynamics?

Every family is unique and come with their own complexity which, given our own experience, we are very well placed to handle. It is important to understand exactly what it is they are looking for, is it the day-to-day administration of their high-value assets, relocation services, estate planning, concierge services etc? We act as the main touchpoint for them and offer turnkey solutions in terms of the infrastructure that needs to be put in place to allow them to achieve their goals.

It is important to note that we are neutral service providers, we do not have any preferred strategy or product and are completely impartial with every client that we work with. As mentioned earlier we are not asset managers and we take our independence very seriously – we are independent from any financial institution, any bank, any service provider, insurance company etc. With this in mind we are then able to act with the clients’ best interest in mind, only working with partners who we believe offer the best solutions for our client.

Are the family office structures different in Asia to the rest of the world?

I think the single-family and multifamily office concepts are quite ubiquitous around the world although of course the individual set-ups will differ depending on the needs of the family(ies). I think family offices in Asia tend to be very reliant on in-house capabilities and prefer to keep more control over the core functions of a family office. This is different to Europe and the USA where families are much more comfortable outsourcing to experts. However, this mindset is changing, and we are seeing more Asian families look to professional service providers such as Alpadis Group.

One observation in Asia is that the older generation were very much driven by offshore jurisdictions whereas recently we see structures beginning to move onshore – a trend that is unlikely to reverse. Lastly, there is no ‘one-size-fits-all’ structure for family offices and structures, locations and set-ups change especially given geopolitical, economic and taxation changes that tend to happen regularly around the world.

What are some of the challenges involved in managing intergenerational wealth transfer in Asia?

In Asia, typically succession is a much longer process that involves many stakeholders. Families tend to be larger than in the West, much more akin to dynasties. Founders tend to stay at the helm of their empire much longer which usually makes it harder for the next generation to step up and take over. Furthermore, we often see quite a number of owners that have built substantial businesses, yet the second generation is just not interested in running their ‘old school’ business. These businesses are typically in brick-and-mortar manufacturing or distribution, yet the younger generations tend to prefer tech firms.

So, we find that there are no willing successors and we see an increasing interest to explore alternative models. These models could include achieving a managed succession by divesting business to a private equity firm or bring in outside management to run the firm and turn it into a more passive investment. As mentioned earlier, succession is a long process – anywhere from one to three years – and requires a lot of thought and planning. These are major life decisions especially when it comes to selling or partially selling a business that has been the life’s work of the founder. So, we provide a lot of counselling and hand-holding throughout this process.

The importance of having a robust structure ensures that not only are family dynamics improved and strengthened, but wealth is preserved. With succession there is always the chance that the next generation jeopardises the wealth created. That is why it is very important to create an institutional plan to install a dedicated team and create the network of professional advisors, so that ultimately there is an enhanced governance framework. So, rather than few people taking a gut feel decision, we now have a more collaborative, structured approach towards taking investment decisions, strategic decisions and risk diversification

Are you seeing a change in the priorities of some of the younger generations? Such as a preference for environmental and social causes?

Generally speaking, there is a trend towards transparency and compliance. The younger generation are more interested in these concepts and tend to avoid complex tax-driven structures, preferring less complicated set-ups. The younger generation are gravitating towards alternative assets, in particular venture capital and private equity investments which are proliferating across Southeast Asia. These investments themselves need to be structured and administered properly so Alpadis Group are seeing more demand in this area.

These are early days of venture capital and private equity and they will typically invest into a fund where they have a channel partner investing their money – basically a blind pool concept. However, we are seeing a shift away from blind pools – though they are still dominant – and towards entrepreneur families who want to go direct and take a direct position and also actively manage them. The younger generation want to have a say on which sector, what type of business etc and this is clearly a trend that we see. Sometimes they do it alongside a private equity firm, sometimes they do it as a club with other families, and sometimes they do it on their own. So, we see that the family themselves, even though they may have a core business, branch out and venture into unrelated business and diversify their family wealth.

Last but not least, both philanthropy and impact investing are clearly on the rise. We have seen quite a bit of interest in philanthropy projects across the region, where we also maintain a network of providers that can help to create a bespoke philanthropic project in any of the ASEAN countries. I think the impact investment trend is on the rise and we see a lot of managers emerging that that offer products that to go well beyond just financial returns but also look at ESG – Environment, Social and Governance.

Where is the best place to set up a Family Office? Why?

Singapore is of course one of the best places to establish an SFO for a number of reasons. There are three fund tax incentive schemes that are available for funds managed by a Family Office as well as a network of over 100 Double Taxation Agreements (DTAs). There are regulatory exemptions, the Monetary Authority of Singapore (MAS) provides exemptions for SFOs engaging in fund management and financial advisory activities from licensing and regulatory requirements. Furthermore, Singapore is an easy place to set up and do business and boasts an “ecosystem” of banks, asset managers, lawyers, fiduciary firms and other professional service providers that cater to the specific needs of family offices. Switzerland also remains firmly on the map for both European and Asian SFOs. We are seeing a lot of interest in our Swiss offering.