Race to Attract Ultra-High-Net-Worth Clients: Securities Firms Compete for Family Office Dominance [Family Office Competition] ①

Number of Ultra-High-Net-Worth Individuals Surpasses 10,000 Last Year
Growing Demand for Tax Savings and Successor Training
Eight Securities Firms Compete, Two More Considering Entry

# Mr. A, who runs a transformer manufacturing company, has recently found himself in a dilemma. It is time for him to step back from the front lines of management and prepare for retirement, but his children do not wish to take over the family business. Appointing a professional manager is not easy either, as it is difficult to find a trustworthy candidate and the costs are high. He needs to find an investor to acquire his company under favorable conditions, but he feels lost about where and how to start. The service that resolved his concerns was a 'family office.' Through a securities firm's family office, he was able to sell his company under favorable terms.

# Mr. B, an owner of a mid-sized company, also entrusted his succession issues to a securities firm's family office. He had been relying on the securities firm for asset management for a long time, which gave him confidence, and the family office service enabled him to comprehensively address all the issues related to succession. He also received support for aspects of successor training.

With the aging of Korean society, interest in post-retirement asset protection and intergenerational wealth transfer has increased, prompting securities firms to actively expand their related businesses. These firms are aggressively targeting ultra-high-net-worth individuals by expanding family office services that manage the assets of wealthy families and assist with inheritance, business succession, and tax-saving strategies.

Increasing Number of Heirs... Spotlight on Comprehensive Asset Management

According to the '2024 Korea Wealth Report' published by KB Management Research Institute, the number of 'wealthy individuals' with financial assets between 1 billion and 10 billion KRW reached 421,800 last year, an increase of 5,900 from 2023. The number of 'ultra-high-net-worth individuals' with assets of 30 billion KRW or more rose by 1,500, surpassing 10,100. What are the characteristics of these individuals? Survey results show that 60.8% of 'Korean wealthy' have experienced inheritance or gifting. They prioritize stability over profitability, yet remain open to new investment opportunities such as virtual assets. In particular, they have a strong interest in intergenerational transfer strategies for wealth accumulation. Securities firms, eager to find new sources of revenue, have seized this opportunity.

The family office services of Korean securities firms began in earnest in 2020 when Samsung Securities launched the 'SNI Family Office.' This was soon followed by other major securities firms such as NH Investment & Securities (Premier Blue Family Office) and Mirae Asset Securities (The Sage), creating a competitive market. According to the Capital Market Research Institute, as of last year, eight securities firms?Samsung Securities, NH Investment & Securities, Korea Investment & Securities, Shinhan Investment & Securities, KB Securities, Hana Securities, Mirae Asset Securities, and Shinyoung Securities?offer family office services, while Hyundai Motor Securities and Meritz Securities are considering launching similar services.

The client eligibility for family office services varies by securities firm, but generally, the threshold is financial assets of 10 billion to 20 billion KRW or more. Samsung Securities applies the strictest criteria, requiring investable assets of at least 100 billion KRW and deposited assets of at least 30 billion KRW. Last year, Samsung Securities attracted 100 family clients, with total assets under management surpassing 30 trillion KRW.

Beyond Stock Recommendations, Becoming a Lifetime Partner

The key difference between family office services and traditional asset management is continuity. Rather than focusing on one-off investment opportunities for short-term gains, family office services focus on the long-term sustainability of the family and the transfer of wealth.

Securities firm family offices assist business owners and wealthy individuals approaching retirement with business succession, successor development, and inheritance and gifting planning, building lasting relationships with clients' families. Advisory services are provided free of charge. When a deal is successfully closed under favorable conditions for the client, the securities firm naturally takes on the management of the client's assets, generating revenue in the process.

Family office clients, in particular, are offered a wider range of investment opportunities. While general asset management focuses on constructing portfolios centered on traditional financial products such as stocks, bonds, and funds, family office services provide access to diversified asset classes and exclusive investment opportunities and strategies, such as private equity funds (PEF), private deals, and co-investments.

Securities firms are also actively leveraging their global networks to create diverse investment opportunities. Samsung Securities exclusively offers its family office clients private alternative funds managed by global firms such as Goldman Sachs, Carlyle, and MBK Partners. NH Investment & Securities collaborates with Knight Frank, a global real estate investment consulting firm, and Estate & Trust Advisory, a company specializing in overseas asset succession, to support overseas real estate investment and consulting on overseas asset inheritance and gifting. Korea Investment & Securities recently signed a memorandum of understanding (MOU) with Goldman Sachs Asset Management, securing the right to distribute Goldman Sachs Asset Management funds in Korea. Last year, the firm also signed an MOU with Alcion Group to strengthen overseas real estate investment advisory services for ultra-high-net-worth clients.

Securities firm family office services are expanding beyond asset management to support clients' lifestyles and successor development. Samsung Securities operates customized seminars and educational programs for family office clients, especially providing one-on-one tailored education for second-generation owners who may lack financial knowledge, helping them prepare for long-term business succession. KB Securities offers networking and business exchange opportunities through forums for CEOs and business owners. NH Investment & Securities provides lifestyle services such as global immigration and study abroad consulting.

Although the number of securities firm branches is gradually decreasing, branches for ultra-high-net-worth clients are an exception. Mirae Asset Securities recently opened a 'The Sage Family Office' branch in the Gangnam area to respond to the rapidly growing domestic ultra-high-net-worth asset management market. In April, Korea Investment & Securities simultaneously opened 'PB Lounge Seocho' and 'PB Lounge Pangyo.' PB Lounge is a new premium financial branch concept by Korea Investment & Securities, offering tailored financial services in areas densely populated by high-net-worth individuals.

Choi Soonyoung, Senior Research Fellow at the Capital Market Research Institute, said, "Family office services are becoming a key strategy for Korean securities firms to secure ultra-high-net-worth clients," adding, "Family office services can help diversify securities firms' businesses and play a positive role in the domestic capital market and financial industry by encouraging ultra-high-net-worth individuals to become sources of venture capital and risk capital."