As the number of ultra-high-net-worth individuals continues to rise in Korea, the demand for specialized wealth management services, such as family offices, is driving a significant shift in the securities industry.
Mr. C, who is in his 40s and became a multi-billionaire after selling his company, faced a dilemma. He wanted to secure stable returns from the sale proceeds while also exploring new business opportunities.
To address his concerns, he turned to a family office service provided by D Securities. This service not only crafted a portfolio to achieve the desired returns but also facilitated seminars to help him research potential new ventures. Mr. C stated, “I’m also considering venture investments after attending private investor relations sessions of other companies.”
Recently, there has been a growing trend in the securities industry to cater to ‘ultra-high-net-worth individuals’ by attracting family office clients. A family office, an evolved concept from private banking, offers comprehensive asset management services to high-net-worth individuals, covering areas such as legal affairs, taxation, and succession planning.
The concept dates back to 19th-century Europe, where wealthy families like the Rothschilds employed estate managers to systematically manage their assets. While common overseas, where multi-generational wealth is more prevalent, family offices are now gaining traction in Korea as well.
Samsung Securities was the first to introduce family office services in 2020, with an entry requirement of over 100 billion KRW in assets, and the number of eligible clients has now surpassed 100 households. Other firms like KB Securities, Shinhan Investment Corp., and Hana Securities have also launched their own family office services, often in collaboration with their parent financial groups. Korea Investment & Securities joined the trend two years ago.
Family office services generally encompass asset management, business growth, and succession planning.
Asset management often involves investing in private equity funds managed by global firms like Goldman Sachs or Carlyle, or participating in premium, unlisted domestic projects. For instance, last year, Samsung Securities involved its family office clients in investments in unlisted companies such as KT Cloud and SK Pharmteco.
Jeong Yeon-kyu, the director of Samsung Securities noted, “With this level of assets, the investment approach differs significantly from that of the average investor, resembling that of institutional investors.”
What sets family offices apart from other services for high-net-worth individuals is the focus on business growth and succession planning. They provide consulting for corporate growth strategies such as IPOs and M&A deals. Investor relations events are often conducted on an exclusive basis, similar to luxury brands hosting private fashion shows for VIP clients. When it comes to succession planning, services extend to comprehensive management, including tax planning and training for successors.
The expansion of family office services among securities firms is driven by the growing number of young wealthy individuals. According to a report by KB Financial Group’s Management Research Institute on wealthy individuals in Korea, the number of people with financial assets exceeding 1 billion won ($748,000) reached 456,000 in 2023, an increase of 7.5% (32,000 people) from the previous year.
These individuals are not content with merely holding their company shares; they are eager to leverage these assets for more aggressive investments or business ventures. An analysis of portfolios of clients with over $2.2 million in assets by NH Investment & Securities revealed that stocks accounted for 44% of their investments, followed by bonds at around 20%, while gold and other physical assets made up less than 1%.
