Family offices in Asia, traditionally seen as bastions of privacy and wealth management, are now facing a peculiar and growing issue: imposters. These fake or exaggerated peers are emerging within the ultra-wealthy circles, often with little to no substance behind their claims. This insight delves into the implications, causes, and responses to this unusual trend.
Rising Imposter Incidents
Edoardo Collevecchio, managing director of Oppenheimer Generations Asia, recounted an incident at a conference in Singapore where a fellow panellist could not answer basic questions about his supposed family office, revealing himself as an imposter. This scenario is becoming increasingly common, with imposters seeking to leverage the family office label to gain trust and access in elite circles .
Attracting All Players
The allure of the family office space is not only attracting legitimate players but also those looking to exploit the system. According to Collevecchio, the sector’s rapid growth and the significant benefits it offers, such as tax breaks and simplified visas, have made it a target for fraudsters . The managing director’s observations are supported by multiple principals and professionals from Asia-based family offices, highlighting a rising trend of vigilance within the community.
The Low Barrier to Entry
One of the core issues is the low barrier to entry for claiming family office status. Joe Qiao, Chief Investment Officer of Globaltec Capital, notes that the private nature of founders’ wealth makes due diligence challenging, providing ample opportunities for misrepresentation . This problem is exacerbated in regions like Asia, where the family office concept is relatively new and lacks stringent regulatory frameworks .
Government Initiatives and Their Consequences
Asian governments, particularly in Singapore and Hong Kong, have rolled out the red carpet for family offices, hoping to attract global wealth. Notable billionaires like Ray Dalio and James Dyson have set up family offices in Singapore. However, these initiatives have sometimes backfired. For instance, the Hong Kong government’s Wealth for Good summit faced embarrassment when a supposed member of Dubai’s royal family, who spoke at the event, was later found to have questionable credentials .
Cases of Imposters and the Need for Vigilance
The industry has witnessed various forms of imposters, from those exaggerating their roles to creating entirely new, unbacked firms. The case of Sheikh Ali Rashed Ali Saeed Al Maktoum at the Hong Kong summit exemplifies how even high-profile events can be infiltrated by dubious characters. His sudden exit and the subsequent revelations about his background highlight the need for stringent vetting processes .
Implications for the Industry
The rise of fake family offices poses several risks:
- Fraud: Wealthy families and governments offering tax incentives are at risk of being defrauded.
- Reputational Damage: The credibility of the family office sector could be undermined, especially if such incidents continue unchecked.
- Regulatory Scrutiny: Increased fraud could lead to more stringent regulations, potentially stifling the industry’s growth .
Responses from the Community
In response, family offices are increasingly adopting detective roles. Messaging groups, once used for social interactions, are now forums for background checks and verification. This ‘full CSI’ approach, as some dub it, involves rigorous scrutiny of new acquaintances’ resumes, educational backgrounds, and business claims .
The Need for Better Definitions and Transparency
One fundamental issue is the lack of a clear definition of what constitutes a family office. This ambiguity allows many to claim the status without meeting significant criteria. As Marta Widz from SDA Bocconi School of Management points out, the term ‘family office’ has become a buzzword, further complicating the landscape .
Conclusion
While imposters pose a significant challenge, the family office community’s proactive measures, coupled with better regulatory frameworks, can mitigate these risks. Increased transparency and a clearer definition of family office requirements could help maintain the sector’s integrity. For now, the onus remains on family offices to conduct thorough due diligence and remain vigilant against potential frauds.
