The family office track is becoming increasingly hot, with insurance institutions entering one after another. Who can take the lead?

In the past June, it was a "busy" month for the insurance industry. Two insurance companies that have been highly anticipated in the market made significant progress in expanding their family office business, indicating a crucial step forward in advancing their high-net-worth business into the "deep water zone".

Firstly, on June 8th, Evergrande Life Insurance held the CGI Family Office Incubation Center Service Ecology Launch Conference, officially releasing the CGI Family Office Incubation Center Service Ecology System to the public. The aim is to establish a customer-centric ecosystem empowerment system by selecting professional cooperation agencies worldwide, providing customers with one-stop, customized comprehensive services.

Following that, on June 22nd, Taikang held the "Harmony of Heaven, Earth, and People; Taikang's Beautiful Life" Taikang Family Office Equity Upgrade Release Conference in Suzhou. At this conference, Taikang upgraded its family office equity system around the four major themes of "Heavenly Strength - Family Wealth Creation, Earthly Stability - Family Wealth Preservation, Long-lasting - Family Wealth Transmission, and Harmony and Far-reaching - Outstanding Life", introducing seven major upgrades to the family office equity system, aiming to become a Chinese-style family office serving Chinese families.

With the continuous expansion of high-net-worth families in China, the service model of "family office", originating from overseas, is gradually emerging and becoming increasingly popular in China. These institutions are tailored for families with substantial wealth, providing comprehensive and professional management consulting and financial appreciation services. Therefore, more and more high-net-worth families are inclined to adopt family offices and choose suitable models to efficiently manage their vast asset portfolios.

In this background and trend, the family office market, as an important part of wealth management, is attracting more and more attention from insurance companies, actively entering and deploying, intending to take the lead in cutting a "big cake" in this emerging and hugely potential market. So, what are the prospects for the development of family office business in the domestic market? Can major domestic insurance companies take the lead in this blue ocean market? It is worth our in-depth exploration.

Supply and demand "scissors difference" has formed, insurance family offices actively entering the market

In recent years, insurance-based family offices have been expanding. As of now, among the 66 life insurance companies with individual insurance channels, at least 20 insurance companies have increased their layout in the family office market.

From the potential demand side, the reason why many insurance companies are competing in the family office market is closely related to the strong demand for family office services in the current domestic financial market.

According to the "2023 CITIC-Prudential 'Inheritance' · Hurun China High Net Worth Family Inheritance Report", the number of high-net-worth families in China has reached 2.06 million households; the number of "ultra-high-net-worth families" with net assets of over 100 million RMB has reached 130,000 households. The total wealth of wealthy families in China is 160 trillion RMB, of which investable assets amount to 49 trillion RMB. It is estimated that 18 trillion RMB of wealth will be inherited by the next generation in 10 years, 49 trillion RMB in 20 years, and 92 trillion RMB in 30 years According to the "2023 China Private Wealth Report" released by China Merchants Bank, the total scale of investable assets held by individuals in China reached RMB 278 trillion in 2022, with the ultra-high net worth individuals holding RMB 101 trillion of investable assets, accounting for 36.3%, and the number of high net worth individuals reaching 3.16 million.

It is obvious that the number of high net worth clients in China is steadily increasing, and with the growing awareness of wealth management and inheritance concepts, more and more entrepreneurs and high net worth families have a genuine demand for professional wealth management services.

However, currently, there are only about two to three thousand family offices in China covering various levels, and nearly 80% of high net worth families have not yet used family offices.

Caught in a supply-demand gap, this invisibly creates a dilemma for the family office market where the user demand side is growing, but the supply side lacks a sufficient quantity and appropriate products and services to effectively meet the demand.

As a result, finding a suitable wealth management model has become the most urgent task for high net worth individuals.

Three distinct models of insurance-based family offices with different characteristics

So far, banks, securities firms, insurance companies, trust companies, etc., are all increasing their investment layout in family office businesses. However, family offices with different licensing backgrounds will have different service strategies, and different industries will gradually explore family office business development models that suit their own genes and endowments.

Taking insurance-based family offices as an example, the following three operating models have mainly been formed:

The first is the embedded family office within insurance institutions (including insurance companies and insurance intermediaries), which is the most common form in the insurance industry.

In the insurance market, ZhongAn Insurance can be considered the first to "eat the crab." In 2014, ZhongAn Insurance launched the "Chuanjia" business brand, entered the family office business, and provided comprehensive customized insurance financial services mainly focused on wealth preservation, accumulation, and inheritance for high net worth clients.

In the following years, many insurance companies' family office businesses have sprung up like mushrooms. Domestic leading insurers such as China Life Insurance, Ping An Insurance, AIA, Sunshine Insurance, Taiping Insurance, and Dajia Insurance, as well as non-listed insurance companies, have launched family office businesses of various forms based on their own business models, making a big splash in the market Overall, the family office services currently provided by insurance companies mainly cover wealth preservation, asset inheritance, legal and tax planning, and similar insurers with strong capabilities in the health sector such as Ping An and Taikang also provide related medical health services, offering comprehensive protection for high-net-worth clients.

In addition to the insurance companies mentioned above, many insurance intermediaries have also begun to focus on the family office market. For example, in February 2023, the leading domestic insurance intermediary Fanhua Insurance Group launched a high-end business brand "Fanhua Family Office" for the market, adopting a "1+1+N" service model. With this model, one client is connected to one family office consultant, enabling them to enjoy a full range of wealth inheritance, children's education, legal and tax consultation, high-end health care, and other services provided by professional teams from N external institutions for comprehensive asset allocation and inheritance, among other high-end financial services.

Another model involves celebrity agents or senior insurance agents establishing family offices. In this model, the family offices or family studios established by these insurance agents often have very rich high-end client resources, providing comprehensive family office services to their high-end clients locally, with insurance companies mainly playing a role in empowering the brand, providing professional support, and operating systems for the agent's family office.

For example, founders of family offices such as Xin Chengmai Family Office founder Chen Wenqi, Daolin Family Office founder Zhou Yuzhu, Baofuluo Family Office founder Luo Guangji, and Linghang Family Office founder Li Yi, all had years of experience in major insurance companies such as China Life and Ping An, were million-dollar insurance brokers, and then independently transitioned to establish insurance-based family offices to serve family businesses and manage wealth for high-net-worth individuals.

In fact, from the perspective of insurance agents and agent teams, by their own efforts, establishing independent family offices outside of the insurance company platform has more long-term benefits and value, better meets customer needs, and can elevate their business, achieving significant breakthroughs in business and customer relationships.

The Family Office Incubation Center of Dajia Life represents the third model, which is a family office established based on cooperation between insurance companies and agents. Compared to the first two models, its unique feature is the "S (company) + 2B (family office, store, family affairs office) + 2C (customers)" model and the "independent + integration" ecological cooperation approach.

In this model, the insurance company builds an empowering platform, including an ecosystem, training system, and product platform, while the agent is fully responsible for the operation and management of the family office, operating independently and assuming profits and losses, with the insurance company not involved in the operation of the family office.

It is evident that the core logic of creating the third type of family office model lies in the deep understanding by insurance companies that the operational characteristics of family offices are driven by customer needs, designing solutions based on customer issues. However, in this process, different management objectives require different tools, and the collaboration of multiple professionals is needed to sustain operations. This means that no matter how capable the agent or insurance company is, a powerful and closely linked family office ecosystem service system is needed to support them Opportunities and Challenges Coexist in the Family Office of Insurance Sector

It can be said that the current family office market is showing a flourishing trend, with different financial industries competing vigorously. So, what are the advantages of insurance companies in the family office sector? Can they stand out in the fierce competition with banks, trusts, and securities firms?

"Daily Financial Report" believes that a dialectical perspective is needed. Firstly, we cannot deny that insurance companies do have many advantages in the family office market.

On the one hand, compared to securities firms, trusts, and banks, insurance companies often have stronger comprehensive platform advantages, which means they can provide customers with a broader range of financial services including insurance, asset management, medical care, and health preservation. Here we take China Life Insurance as a case study to elaborate on this point.

Undoubtedly, China Life Insurance Group has already established a large number of professional companies including comprehensive financial businesses represented by insurance and asset management, as well as medical health and elderly care businesses represented by China Life Health Industry Investment and China Life Elderly Care, covering various fields of finance, medical care, and elderly care. It has developed into one of the few enterprises in China that can provide customers with comprehensive financial and medical health products and services.

China Life has been actively building a "life insurance +" comprehensive financial ecosystem, continuously exploring the synergy between insurance and investment businesses, deepening cooperation with asset management subsidiaries, China Life Investment Corporation, and others, innovating and exploring new models of insurance investment interaction, and providing customers with one-stop, comprehensive, high-quality financial insurance services. For example, by the end of 2023, China Life's collaborative sales of pension insurance subsidiary business reached 8.655 billion yuan; Guangfa Bank's agency bancassurance first-year premium income reached 1.799 billion yuan, a year-on-year increase of 16.6%.

It is not difficult to see that with the continuous empowerment of a comprehensive financial platform, insurance companies like China Life, which have stronger comprehensive service capabilities compared to other financial institutions, are more conducive to mobilizing various resources to design and develop a series of targeted and personalized wealth management solutions and products for customers when developing family office businesses.

On the other hand, the inherent huge human resource advantages of insurance companies can continuously provide assistance for selling family office products to customers and providing a series of services.

In the past two years, the insurance industry has carried out profound supply-side structural optimization of the agent team by eliminating inefficient and ineffective agents, actively promoting high-quality recruitment plans, significantly enhancing the professional quality, service quality, and sales efficiency of agents. Data from multiple insurance companies also show that this measure has successfully led to a significant increase in the individual productivity of each retained agent.

Taking Ping An Insurance as an example, data shows that in 2023, on a comparable basis, Ping An Life and Health Insurance's new business value increased by 36.2%, mainly due to an 89.5% increase in new business value per agent, a 40.3% increase in new business value through the agent channel, and a 39.2% increase in per capita income of agents. In terms of stabilizing the team, Ping An continues to focus on "enhancing the best," improving the scale of enhancement, carrying out standardized operations, enhancing the overall professional capabilities of the team, stimulating long-term willingness to work, and stabilizing the team size. In 2023, the proportion of "enhancing the best +" in new manpower increased by 25.2 percentage points year-on-year Therefore, from this perspective, whether we can serve well in the future and create long-term value for this group of high-net-worth clients with family office needs, we believe that with the strong overall strength of insurance companies elite workforce, there is still a group of high-end agents that can be matched with them.

However, the development of anything is accompanied by certain pressures. On the other side of the coin, when insurance companies focus on developing family office business, they also need to face and solve some of the current difficulties and challenges.

Firstly, in China, family offices are emerging wealth management institutions that have developed in the past decade. The percentage of people using family office services is still relatively low. According to Forbes China's research, only 20.9% of entrepreneurs in China use family office services, while the other 79.1% of ultra-high-net-worth entrepreneurs, due to a lack of understanding of family offices, have not yet made family offices their primary choice for wealth management.

Therefore, as a new way of wealth management, insurance companies still need to break through the segmentation of high-net-worth client circles through various forms and continuously enhance the popularization and awareness of their family office business.

Secondly, as a company and private chief financial officer that provides 360-degree wealth management services for ultra-rich individuals or families, including investment, charitable giving, budgeting, insurance, taxation, multi-generational guidance, etc., family offices clearly have extremely high requirements for the financial diversification business level of insurance elite talents. This requires insurance companies to cultivate composite talents who are proficient in a wide range of wealth and non-wealth management businesses such as insurance, asset management, legal affairs, and taxation for the family office market. This is indeed a significant challenge.

Overall, the competition in the domestic family office market is not yet very intense compared to other financial industries such as banks and securities. In this blue ocean market of family offices, insurance companies have a great opportunity to carve out their own territory. In this process, how to leverage their own advantages, fill in the service gaps compared to banks and securities, and truly complement each other's strengths and weaknesses is the long-term research topic that various insurance companies need to focus on