September 2017

WEALTH CLUBS: Members only

YahtElite investment clubs are emerging in Asia as wealthy families look to their peers to solve problems and manage their money. Indrajit Basu reports. As Asia’s moneyed families climb the ranks of the world’s rich, a growing number of high-net-worth individuals are forming elite groups. Over the past few years, close to a dozen high-net-worth clubs have quietly sprung up in Singapore, Hong Kong and Mumbai, some of which are so discreet they do not even have a website or listed phone number. Like any exclusive society, these clubs have strict codes of conduct and are open to invited members only. Such clubs do not exist solely to make money. The main objective, say club managers, is to provide a place for rich people who are struggling with family or personal challenges to come together and help one another through networking and education. While the elite club concept is entrenched in the US and Europe, it is gaining traction in Asia, with implications for the entire wealth management industry. Succession
Having built wealth during an economic boom, affluent Asians have begun to feel the need to protect what they have. Soon, many of them will need to pass it on, too. According to UBS’s global family office group, about a third of the wealth of high-net-worth families in Asia will change hands in the next five years. The accumulation of wealth has not stopped either. According to last year’s ‘Asia-Pacific Wealth Report’ by research firm Capgemini, the wealth of Asia’s high-net-worths is on track to hit $42 trillion by 2025. But as these wealthy families establish governance structures and inheritance arrangements, one of the problems they face is that “they are always wondering who they can trust when it comes to money and wealth-related matters”, says Graham Rowan, a founder of the Elite Investor Club. Based in London, the organisation has more than 3,000 high-net-worth members in 15 countries including Singapore, Hong Kong, Malaysia and Australia. “When it comes to money matters, there are lots of snake-oil salesmen – people who are not transparent and ethical – in the market,” he says. “I have seen, at many events in Singapore, people trying to sell investments in a sort of boiler room.” One of the common characteristics of the Elite Investor Club’s members, he says, is that they have had their fingers burnt before, himself included. “In fact, I founded the club after losing £150,000 through my wealth managers in months in the Nasdaq boom and bust,” he says. Whizz kids
Many say that in Asia, the emergence of elite investment clubs marks a transformational shift. Rather than jealously guarding the family assets, high-net-worth individuals are reaching out to other wealthy people for advice and guidance. “The desire to network with, learn from and collaborate with their peers is strong,” says Henry Samuelson, director, education and membership of London-based Campden Wealth, which operates an office in Hong Kong as well as offices in the US and UK. However, he says the reality of the club scene in Asia is that it is not driven by the patriarchs and matriarchs but by their relatives, such as their children. The younger generation are often educated internationally, either in the US or Europe, and have an international and global mindset. “Building a network or relationship outside their home markets is something they are comfortable with and see value in,” he says. “They are also tech-savvy, unlike their elders.” In countries such as India, elite investment clubs can make up for a lack of professional advice in the market. Aditya Gadge, founder of a Mumbai-based private wealth network called Priwexus, says wealthy Indians are frustrated by a shortage of capable professional advisers and would rather find solutions from their peers. “While professional family offices can also address their issues, they are fee-based and often have a revenue or profit motive,” he says. “This is why families almost invariably join us to seek non-professional and neutral advice that only peers can provide.” As an example of the benefits these clubs offer, Gadge refers to the case of a family in Mumbai that owns a major consumer brand. With the help of fellow Priwexus members, the family, which is in its third generation with 16 inheritors, created a charter setting down the inheritance of each member and the role they would play in the family business for the next 20 years. All this was done without the help of a professional wealth manager. The next Uber
Another attraction of elite clubs is access to niche investment opportunities. The younger generation of wealthy families often want to own stakes in the next Uber or Tesla rather than buying conventional assets. Emerging sectors such as financial technology, or fintech, are particularly appealing, yet these kinds of companies can be hard to invest in. Marvelstone Group, a Singapore-based private investment network that specialises in investments in high-potential businesses, counts many wealthy, next-generation Asians among its members. “We see increasing demand for newer investment avenues like start-up investments and investments in fintech, but few private banks have started offering such investments to their clients,” says co-founder Joe Seunghyun Cho. However, regardless of the opportunities elite clubs can offer, it is essential they follow strict codes of conduct and, most importantly, guarantee discretion. “We ensure that no one indulges in lobbying of any form and no one is allowed to offer wealth advisory services or hawk products,” says Amit Patni, founder of Mumbai-based Campden Family Connect, a high-net-worth club that was set up with Campden Wealth as a partner. The club is for networking and all events are structured around education and sharing experiences, he says. “Also, membership is solely by invitation.” Entry fee
Of course, club managers have to cover their costs somehow. Mumbai’s Campden Family Connect derives its primary revenues from membership fees. Priwexus offers membership for free but covers its running expenses by charging for the events it organises. “Our main job is to create a platform so families can connect and get educated,” says Gadge. Elite Investor Club, by contrast, offers free membership but earns commission for providing access to “secret investments that many can’t find anywhere else”, says Rowan. In the property sector in Singapore, Malaysia and Hong Kong, for instance, most of the readily available investments are residential, he says. “But we introduce our members to much less-known investments like care homes, hotels and commercial theme parks where one can get 10% net yields easily.” Running elite clubs is not easy. Clubs must remain relevant by understanding what families need and suggesting new areas of interest. Convincing individuals to join can be a challenge. High-net-worth individuals tend to wrap themselves in a shell, the better to repel the advances of the many salespeople who pester them. In addition, a club has to ensure it attracts the right members, who must be able to offer something to other members. Still, these clubs are proving their worth. Dominic Samuelson, chief executive of Campden Wealth, says: “We see our greatest success when families come to us and say that by virtue of being part of the club, they have seen progress and development of their children.” ©2017 funds global asia

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