Even before the phenomenal hit Crazy Rich Asians hit the cinemas middle of last year, Asia has already been attracting tons of attention for its growing number of wealthy populations. Two of the most populous nations on earth are in Asia – China and India – and are both minting millionaires and billionaires faster than ever before. Add to that, the rapid technological advancements are creating huge advantages for businesses run by Asian families, allowing them to directly compete with their Western counterparts. The result is an unprecedented explosion of opportunity for wealth creation.
The growing number of Ultra-High Net Worth Individuals (UHNWI) in Asia is certainly an indication that a lot of correct decisions were made by the current generation of business owners. However, faced with digital disruption brought about by things such as big data, artificial intelligence (AI) and fintech, how are the current generation of business owners preparing the next generation in line? How are the next generation in line going to confront technological disruption in the family business? Is proper succession planning in place? The Digital Banker investigates.
Asia – Home of the Ultra-Rich
The Asia Pacific region is home to the world’s richest families. According to a recent study by UBS and PwC, the region had 814 billionaires at end-2017, an increase of 14% from previous year. This accounts for 38% of the global billionaire population. It’s also interesting to note that China’s billionaire entrepreneurs are not only leading their country’s economic transformation but that of Asia’s as well. In fact, many Chinese entrepreneurs are challenging Silicon Valley, producing many unicorn companies (companies with a valuation of US$1 billion or more) that rival that of the United States’.
Fueled by China’s economic rise, the net worth of APAC billionaires grew by 32% to USD 2.7 trillion in 2017. With this trajectory, it is projected that they will be wealthier than their American counterparts in about three years or less.
After China, India and Indonesia both provide a conducive atmosphere for wealth creation. According to the same study, “India’s billionaire wealth increased by a substantial 36% in 2017 at USD 440.1 billion. The number of local billionaires increased by 19 to 119. In Indonesia, billionaire wealth increased by 37% to USD 72.5 billion, while the number of billionaires stood at 20.”
In terms of High Net Worth Individuals (HNWI), or individuals having investable assets of US$1 million or more, Asia Pacific remains a global powerhouse. A report by Capgemini reveals that APAC generated 41.4% of all new global HNWI wealth and is on track to surpass US$42 trillion in HNWI wealth by 2025.
Biggest Technological Trends That Will Disrupt Business
Over the last ten years, the scale of technological advancement has increased manifold. Brought about by the democratisation of data and hyper speed connectivity, we are now faced with a uniquely different set of challenges – or opportunities, depending on how you look at it – that will surely have an impact on how family businesses are being ran. In fact, according to a whitepaper recently released by J.P. Morgan entitled “Embracing Data, Digital and Disruptions: Planning ahead for Succession”, it revealed that “two thirds of family businesses indicate that technology advancement has altered business operations in the last ten years.” Looking at the current technological landscape, the next ten years would be absolutely game-changing.
Big Data Analytics
Big data refers to large sets of data obtained from multiple sources such as customer databases, business transactions, usage patterns, medical records and activity logs. Because of efficient management of data, companies can take advantage of operational efficiencies resulting in reduced costs and improved profitability. The challenge is with the democratisation of data, valuable information can now be easily obtained, and using the right tools, can be harnessed for monetisation purposes. Businesses that used to benefit from the exclusive possession of valuable data will now find themselves losing their leverage. In addition, due to existing laws and regulations, managing large volume of data now require significant infrastructure investments to ensure privacy and safeguards are in place.
Artificial Intelligence
Many business owners know that artificial intelligence (AI) has the power to alter the way they do business, either positively or negatively. Standing still, when it comes to AI adoption is no longer an option. The bigger question is: HOW. Some organisations are slowly trying to adopt through the implementation of chatbots and other similar initiatives. But this is barely scratching the surface of AI. How will you define your AI strategy? How can you find AI-literate staff to fill in key positions of your organisation? How do you ensure the reliability and trustworthiness of your AI? These are just some of the questions, whose answers will create a cascading impact in the way wealthy families run their business.
Fintech
Perhaps one of the most consequential technologies we see of late is Fintech. A portmanteau of finance and technology, fintech represents a collision of two worlds that are locked in a tight embrace creating unprecedented disruption and synergies. We now see traditional banks being disrupted by neobanks or digital banks, whose customers don’t need to visit a physical branch to perform regular banking transactions. We see the rise of digital payments and how this mode of payment cuts away the middlemen. We also see governments recognising the growing impact of fintech in their economies and in response, creating laws and incentives to ensure its smooth implementation. The businesses of tomorrow will be impacted by fintech, one way or the other.
J.P. Morgan Surveys Present and Next Generation of Ultra-Rich Families
J.P. Morgan Private Bank, the industry’s most illustrious name when it comes to financial advice and solutions for wealthy clients and families, ran a survey of the current and next generation of business owners. The respondents span across 10 different countries in Asia whose annual turnover is less than $50 million to more than $1 billion. Its findings revealed that:
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