Introduction

Virtual assets and digital currencies have always attracted people’s attention in the background of the traditional financial space since Bitcoin came to the knowledge of the mainstream media with its price rise. Recently, the Pan-Asian wealth manager Raffles Family Office (“Raffles FO”) and the global cryptocurrency technology service provider, Huobi Technology Holdings Limited (“Huobi”) have announced the signing of a cooperation agreement to establish a digital family office platform. As announced by Raffles FO and Huobi, the soon-to-be launched platform, which will combine Huobi Tech’s cryptocurrency know-how with Raffles FO’s expertise in wealth management for the ultra-high net worth segment, will be a force for change and a telling showcase of what the multi-family office of the future might look like.

What is digital family office

Family offices often are the obvious wealth preservation vehicle of choice and numbers are growing steadily. While many single-family offices (“SFO”) have been highly successful, relatively few families can afford to set up and run these types of organizations, which are, by nature, cost-intensive.

A digital family office, also known as virtual family office (“VFO”) is a solution for those wealthy families who want the services of a top tier family office without having to afford the costs related to an SFO or to work with a multi-family office. It is a lean single-family office that uses a high level of outsourcing to keep the staff as low-cost and flexible as possible.  Unlike a SFO, which is expensive to run, a VFO can keep the staff low-cost and flexible on the one hand and optimise the clients’ financial needs on the other hand. According to Anthony Glomski, author of Liquidity & You and founder of AG Asset Advisory, “The nature of the virtual family office enables a wider array of families to benefit from the same synergistic approach and extensive expertise of a single-family office. When done right, a virtual family office can provide with not only coordinated solutions that are in accord with your wants and needs, but a much broader array of high-impact solutions”.

Further, a VFO offers a more flexible and comprehensive wealth picture, ideal when managing disparate or displaced relationships. It can also scale and broaden the traditional family office remit - providing support for managing soft assets like branding or intellectual capital. Due to the advantages of the VFO, most families with just US$20 million to 200 million in assets under management typically use the VFO model when they need a customized model, but do not want all of the overhead and support of a fully-fledged SFO.

VFO in Asia

The Global Family Office Report 2021 by Campden Wealth showed that only 19% of family offices in Asia-Pacific invested in cryptocurrency, representing a notable shortfall in contrast to peers in North America, at 31%, and Europe, at 28%. Cryptocurrency formed a mere 2% of portfolio allocations in the region. However, the outsized returns made in digital assets have caught the attention of family offices in Asia-Pacific. As discovered by the Campden Research, more than half, at 53%, of families in Asia-Pacific hailed cryptocurrency as a “promising investment”, leading the pack compared to North America, at 43%, and Europe, at 33%.

With the emerging trend of investment in cryptocurrency, it is very likely that the Asia-Pacific family offices, including Raffles FO, are looking seriously at cryptocurrency as an asset class and expects to unveil a digital asset strategy. The emerging cryptocurrency investment in family office industry is definitely a lucrative market and everyone wants a piece.

As said by the CEO Chi-man Kwan of Raffles FO after the formal announcement in respect of the cooperation agreement, “For too long now, Asia’s private wealth management industry has turned its back on those that wish to grow, retain and pass down wealth through digital assets.”

As part of the cooperation agreement, Huobi has made a strategic investment in a Raffles FO venture company established to serve as the launchpad for the platform. The new company will initially offer ultra-high net worth individuals with access to cryptocurrency-based investments and related advice, as well as add-on services, such as wallet consolidation, succession planning counsel, and family governance solutions. Future offerings will include artificial intelligence-based safety protocols, integrated fiat-cryptocurrency dashboards and unique interoperability features that afford access to a wider range of digital assets.

Key takeaway

Digital assets are playing an increasingly important role in the global economy and are well on their way to becoming a mainstream investment vehicle, particularly for those in the high net worth and ultra-high net worth segments where interest in them continues to be on the rise. However, despite the increasing demands, the digital assets sector has yet to sufficiently cater to these individuals, who tend to expect and require more comprehensive services. Along with the move of Raffles FO and Huobi, it can be anticipated that more family offices with take this opportunity step into the new market and be part of it.