Introduction: Positioning essentially determines the relationship between family offices and customers as well as the objectivity and flexibility of future services. The positioning also determines the service available for customers.
Positioning: DNA of Family Office
Just like the DNA of family office, positioning, once formed, can constitute orders and lead the development and functional operation of organization. For family office itself, positioning bears the core service philosophy. For customers, positioning bears the core service values. From the perspective of inheritance, distinct and clear positioning, just like DNA, can constitute genetic instructions based on which teams can provide customer families with consistent services from generation to generation.
With the sharp growth of market demands, there emerges an increasing number of family offices, which offer various services with varying breadth and depth. Restrained by the industrial development, the services offered are of different levels. To identify a family office in a true sense, positioning is a very good starting point and a prerequisite to determine whether an organization has the essential connotation as a family office.
“Unlimited” Buyers VS. “Limited” Sellers
At present, many family offices are set up based on underlying financial institutions. It causes a wide misunderstanding to family offices. Many people wrongly consider family offices as financial institutions which sell financial products and focus on investment with simply more product types, higher levels, and larger scales, and thus regard them as sellers that earn commission revenue through the selling of financial products. Besides, some family offices mainly act as the agents for some organizations to sell financial products, coordinate the supply and demand between suppliers and customers, pocket the difference and do what typical third party does. In nature, they are equivalent to “seller”.
(1) Current demand and positioning selection of high net worth groups
The core service of family office is to solve customers’ problems. At present, many high net worth customers feel helpless in market. Domestic family wealth management industry is still at its initial stage, so it is hard to find a comprehensive service provider. In most cases, customers meet with financial products sellers, who communicate with customers on behalf of the organizations rather than helping customers think, make decision and manage for their benefits. Facing the separate operation of all kinds of financial institutions, customers don’t have sufficient ability, energy or specialized knowledge to select or make decision. They cannot bridge the gap between institutions and cannot form a systematical logic or structure accordingly, so the demands of most customers are “disrupt”.
Customers need a professional team to stand for them as buyers and select, communicate with, manage, supervise and even negotiate with all financial institutions on behalf of customers. Customers are required to do such things, but in most cases, they don’t have enough time, energy or specialized knowledge to do them personally or by building a team. To offer services for the maximum benefits of customers and maintain the objectivity and future extensibility of services, Panhe Family Office chose to be “buyer” and took the lead in developing the mode of yearly consultation service fee. Panhe signs relevant agreements with customers, who pay Panhe for working as their family offices. According to the specific demands of customers, Panhe assists customers in the overall management of all matters. Only very few family offices adopt such positioning and are capable of offering such charging mode.
2) “Unlimited” buyer to realize truly customized FO services
Being customers’ private “buyer” means making reasonable planning and selections for the exclusive benefits of customers. Each family customer is different, so customized service is the essential and core demand of high-end customers. Many people consider offering services based on customers’ demands as being “customized”. In the opinion of Panhe, however, the true customization is to fully perform the role as an “unlimited” buyer with both the capability to satisfy demands and the capability, space and resources to select.
Panhe Family Office doesn’t belong to any financial institution and doesn’t have any of its own financial products. Instead, it is a management team employed by the customers. While choosing organization or product, Panhe team is not restrained by any organization. It only needs to uphold the benefits of customers, stick to the neutral and objective attitude, take into account the comprehensive market situation, policy environment and customer’s situation, and help customers build strategic and customized wealth management system, which covers wealth management, tax planning, trust planning, insurance planning, legal risk control, foundation planning, holding company architecture construction, marital asset protection, international identity arrangements of family members, etc.
The ability, space and resources to select is closely related to the experience and qualification of the service team. Without the capability to implement the scheme designed based on customers’ demands, it would also be impossible to truly realize customization and become an “unlimited” buyer. To this end, while building an expert team, Panhe Family Office requires its team members to have at least 20 years of working experience, several years of experience in world famous financial institutions in the industries like private bank, securities, insurance and trust, experience of serving over a hundred Chinese families and profound understanding of Chinese market and demands of Chinese entrepreneurs. Only with sufficient resources and strong investigating power can Panhe find experienced expert teams as well as back-end cooperating organizations like private banks, trust/insurance institutions, accounting firm and law firm to provide detailed services on a global scale and carry out overall management of them.
3) “Limited” seller to restrain and divide customer demands
“Seller” is the owner of goods and is willing to transfer them to “buyer” at reasonable price. While providing products and services as a “seller”, they tend to consider things for the benefits of the organizations and hope to sell more products to customers so as to gain benefit or commission. Meanwhile, the types and scope of products and services recommended by the practitioners are also impacted by the business focus of the organization. Just like a “container” with a fixed shape, customers can only make passive choices. They cannot shape things in the desired way or carry out overall management of family wealth. To achieve such an objective, customers have to deal with different organizations, thus leading to divided demands. Therefore, financial institutions as “seller” can only make choices within the limited product scope set by the organizations. They cannot make comprehensive comparisons in the broad market and recommend most suitable services to customers. The service scope offered by them is also limited.
To effectively integrate and satisfy customers’ demands, Panhe Family Office will stick to the orientation as an “unlimited” buyer, focus on customer demands, provide services and create values with professional teams, and realize the true “management” of customers’ family wealth.
(This article was included in the first issue of Family Office (Collector’s Edition) in 2017)