[Family Office Competition]③"Qualitative Improvements Needed to Respond to a Growing Market"

Growth Potential Driven by Rise in Ultra-High-Net-Worth Individuals
Qualitative Improvements Needed for Further Advancement
More Sophisticated Client Segmentation and Differentiated Services Required
High Inheritance Taxes and Other Barriers Remain Constraints

Family offices are expected to emerge as a core asset management business for securities firms. This is due to a continuous increase in ultra-high-net-worth individuals, as well as growing demand for succession and inheritance planning as business owners retire. However, some experts argue that for family offices to advance further, qualitative improvements are necessary, along with institutional support such as regulatory easing.

According to the Capital Market Institute, the criteria for providing family office services to clients currently differ among domestic securities firms. Depending on the firm, the minimum financial assets required for clients range from 1 billion won to 100 billion won, with the most common threshold being 10 billion won in entrusted assets. Samsung Securities applies the highest client standard among domestic securities firms, requiring investable assets of at least 100 billion won and entrusted assets of at least 30 billion won. KB Securities follows, setting its client standard at financial assets of at least 30 billion won. NH Investment & Securities and Korea Investment & Securities target clients with entrusted assets of at least 10 billion won, while Shinhan Investment & Securities focuses on ultra-high-net-worth individuals with financial assets of at least 10 billion won. Other securities firms do not specify clear asset criteria, but are generally known to provide family office services to clients with assets ranging from 1 billion won to 10 billion won.

As such, client standards vary by securities firm, and some firms operate by providing customized services tailored to the individual needs of clients rather than setting explicit criteria.

There are calls for more sophisticated client segmentation to improve the quality of family office services. Choi Soon-young, a senior research fellow at the Capital Market Institute, stated, "For domestic securities firms to deliver the comprehensive and all-encompassing asset management solutions they claim to offer through family office services, more sophisticated client segmentation is required." He explained, "Most domestic securities firms classify family office clients based on the amount of financial assets entrusted to the firm, but this does not reflect the client's total assets and is even further removed from the total family wealth, including that of family members." He added, "Furthermore, since clients often manage their assets across multiple financial institutions, securities firms are often limited to providing investment planning and intermediary services for only a portion of the client's assets."

Given the fierce competition to attract ultra-high-net-worth individuals, there are also opinions that differentiated services are necessary. A source from the securities industry said, "If you look at the family office services offered by securities firms, they are almost identical," and added, "Since firms are replicating each other's services to attract clients, it is difficult to find truly specialized offerings."

Choi emphasized, "Most securities firms are currently focused on expanding their client base, but going forward, they need to develop more sophisticated client segmentation strategies and create differentiated services based on these strategies."

There are also limitations arising from regulations and institutional frameworks. The main concern for clients using family offices is succession or inheritance, but high inheritance taxes and other factors impose restrictions.

Choi analyzed, "In Korea, the burden of inheritance and gift taxes is significant when transferring assets within families, and the compulsory portion system, which guarantees a certain share of inherited property, can impose limitations during asset transfers." He continued, "Overseas, trusts can be used more flexibly to reduce inheritance tax burdens or protect assets over the long term, but in Korea, trusts are rarely used as a means of intergenerational asset transfer within families. This acts as one of the factors limiting asset succession through family office services."