The first time Tim Kochis went to Asia, he ended up the hospital. It was 1969, and the Marquette University grad was wounded in action on a tour of duty in Vietnam. He got a purple heart.
He’s made dozens of trips since then, with far better outcomes. As the co-founder of Aspiriant, an independent California-based wealth management firm with some 800 clients and $7.5 billion in AUM, Kochis saw early on a growing opportunity in serving first- or second-generation Asian-American HNW consumers in the U.S. Many of these individuals have complicated ties to businesses and families in their home countries.
The lure is obvious: The continent’s high net worth population is expected to double to 2.82 million individuals over the next three years, and triple in assets to $15.8 trillion, according to Swiss bank Julius Baer. Much of that wealth will find its way to U.S. shores as more affluent Asians continue to immigrate. Last fall, Citi Private Bank launched a North American Asian Client Group to serve ultra-high-net worth Asian families.
But Kochis and his team are going a step further. They are exploring ways to crack the HNW market in Asia itself. It is a different challenge – in China, the Western idea of a wealth management industry barely exists. Kochis, among others, is leading the way to put stakes in the groud.
He served as chair of the International Advisory Panel for the Financial Planning Standards Council of China (now FPSB-China) in 2005-2006 and will begin serving a new term on the FPSB board in April. He is also on the business advisory councils of the Asia Foundation and the Center for the Pacific Rim of the University of San Francisco. He spoke with Registered Rep. on wealth management in Asia.
How have you cultivated Asian-Americans over the years as a client base at Kochis Fitz and Aspiriant?
We haven’t done anything special until very recently. Asian-Americans have been on the west coast for a long time and are very much part of the natural environment of accomplished wealthy people.
But more recently we’ve been more aggressive in targeting a specialized sub-segment of that market, specifically non-resident Indians, who are called NRIs, and Chinese-Americans who don’t see themselves as fully assimilated. We’re still in an exploration stage. But we see an opportunity to make ourselves attractive to these groups.
Would, say, a software engineer from India living in Silicon Valley be an example of someone in that segment?
Yes, although that is just one example, of course. Many people in this group have complicated wealth because they work for companies that have stock options and deferred compensation. Aspiriant has highly developed expertise in those areas but they don’t know that.
Many NRIs probably still have significant involvement with family and business in India and may return. We want to develop partnerships with firms in India that can demonstrate our familiarity with India’s business, cultural and tax environment. We also want linkage with firms in India that can look after the Indian affairs of NRIs in the U.S.
And how are you approaching recent Chinese immigrants to the U.S.?
For relative newcomers and first-generation Chinese-Americans, the same kind of thing we want to do for NRIs may be appropriate. We want them to know we have skills they may need and have links to firms and planning opportunities back home they might find helpful.
What kind of competition are you encountering for these markets?
We think we’re far ahead of other independent wealth management firms, but there is no question big financial service firms such as Citibank are very active. But we’re not in competition with them. The better they develop the market, the better for us. The Goldman Sach's and JP Morgan’s of the world are plowing the field for us. We can’t compete with big global banks; they do things we don’t do, like lend money.
We have an entirely different business model, that’s based on being an independent, unconflicted wealth management firm that’s owned by the people who do the work. It’s right for some people, and not for others.
What are your plans for Asia?
We’d like to have an effective way to serve wealthy Asians in Asia and are in the process of exploring how we can do that. In Asia, the primary prospect would be a businessman or woman. We’re deciding whether to be a super-prestige brand with a $25 million minimum for investible assets – versus our $5 million minimum in the U.S. The other option is to recognize that the scale of wealth in Asia is different than in the U.S. and that a $1 million or $2 million minimum may a threshold that is large enough to get started with. In Asia that would be considered a pretty good sized client.
We’re likely to look for some form of collaboration or ‘partnership’ with appropriate firms in places like China, India and Singapore.
It’s a major financial capital with a lot of talent that is locally available. And it’s a place where you can do business with Chinese and Indians, as well as Indonesians and Malaysians.
What about Hong Kong?
It’s a very interesting place for lots of reason. A great deal of new wealth in China is being served there and there’s a lot of local talent. Hong Kong also has a western legal system that makes doing business easier for Americans firms. But Hong Kong is not an ideal place to do business for people within India. Singapore is closer and there’s more cultural affinity.
So the Indian market for wealth management is important?
The category of independent wealth management already exists in India, although it’s quite small. The founding partners are still in place, although they’re younger than in the U.S. and still have a lot to learn. We think they might find it advantageous to have linkage to a highly experienced firm like Aspiriant for know-how and credibility. Brand is also very important there and we see Aspiriant as a prestige brand.
But doesn’t brand work against you if you’re going up against a truly global brand like Citi or Merrill or UBS?
We make the same argument there we make here about the value of independence and employee ownership. If you want a big global bank you’re not going to choose us.
How do you view the Chinese market?
The independent wealth management business hardly exists there at all. There isn’t any equivalent to Aspiriant or firms like Aspiriant, but it’s waiting to happen. The market needs an independent execution and custody platform. Those functions are now done only by banks and brokerage firm, like how it was in the U.S. forty years ago before Schwab created an independent platform. When that emerges in China it will be the necessary catalyst for independent firms coming into existence, just like in the U.S.
Any other differences between India and China?
The relative youth of India will be quite significant for the future. The total populations of India and China are about the same, but half of the Indians are under 25 years old, while the Chinese population is a lot older. The long-term market opportunity may be greatest in India.
How much of a head start do the big global banks have in Asia?
They’re all pretty new. The verdict is not yet in on anyone’s success. We’re happy that they’re there. The big global banks will expand the market and the awareness of the service offering.
We say we are different from them. The large banks and wirehouses have a huge market share in the U.S. and probably always will but they are not growing as fast as independent firms. We think that will be the case in Asia as well.