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WEALTH MANAGEMENT

'China's rich always ask how to keep wealth in the family', reveals Ariane de Rothschild

Ariane de Rothschild's family has kept its wealth for centuries, an issue which is now facing newly rich Chinese families

PUBLISHED : Monday, 02 December, 2013, 5:19am
UPDATED : Monday, 02 December, 2013, 11:22am

Ariane de Rothschild, who ranks second only to her husband, Benjamin, at the legendary financial dynasty's Edmond de Rothschild Group, says rich Chinese friends and clients ask her the same question whenever she visits the mainland: how can you keep your family wealth for generation after generation? And how has the Rothschild family done that for centuries?

Her husband is a sixth-generation scion of a dynasty that started more than two centuries ago.

The group's vice-chairwoman, who was born in El Salvador, educated in the United States and lives in Geneva, told the South China Morning Post that the question raised by many rich Chinese families, which had gathered their wealth rapidly in the past two to three decades, or even in just a few years as part of the national economic growth story, reflected the urgent need for those families to get to the real meaning of being wealthy.

"China is already in that kind of debate about their roles [of rich families] in the society, their contributions to the society and so on, besides just making money," Rothschild said. "Now it's also about how they can change the country or change the world.

"A lot of Chinese families that I see [ask me] the first question 'how do you do it?' as now we pass on [the wealth of the Rothschild family] to the seventh generation."

In recent years, family wealth and succession have been a hot topic on the mainland, already the world's second-biggest economy after the United States.

This year, a new Chinese phrase, tu hao - often translated as "nouveau riche" or "new money" - suddenly became extremely popular on the internet, especially in various debates about how rich Chinese families became rich so quickly and how they should manage their wealth and contribute more to society, rather than just enjoying their own luxury lifestyles.

Rothschild said she believed there was definitely something her group could do to help answer such questions, and that was why she had decided to focus more on the Greater China region - the mainland, Hong Kong, Macau and Taiwan - where many rich families faced similar questions about family business successions.

"Now the second generation [of rich Chinese families] is very well educated in the US or the UK and obviously this generation will challenge the previous one [in the way they do business and what they are interested in doing] and the pressure will be even greater for the third generation," she said.

"The first generation is always struggling to make money, then the second generation's job is to keep the money and the third generation may have very different objectives," she added, noting that many Chinese clients turned to the Rothschild group because they felt at a loss about how to ensure that their second or third generations kept the family wealth.

The group has about 70 professionals in its Hong Kong office, which serves as a "Greater China hub" for its clients in the region.

The top challenge for Rothschild in Hong Kong, as elsewhere in the world, where it competes with other private banks including two Swiss firms with long histories of their own - UBS and Credit Suisse - is more than just seeking high returns on investments, but rather finding enough talent to take care of clients.

"We want to hire as many as we can, which is a big challenge," Rothschild said. "In Hong Kong, it's a very difficult market to attract talents.

"Besides salary and bonus, there's also corporate identity that people do consider.

"I don't have an upper limit [in terms of hiring] as the more we grow, the happier we will be to hire. You can see there is still room [in the office]."

The group's Hong Kong office occupies the top - 50th floor - of Exchange Square One in the heart of Central.

Rothschild said that because Rothschild was not a publicly traded company, unlike big American banks, the family business structure gave her more flexibility in terms of its headcount and budget for hiring.

Rothschild, who worked with her husband to reorganise the group's resources in the wake of the 2008 global financial crisis, said she recently set a target of increasing the assets under group management by 40 billion Swiss francs (HK$342 billion) by 2016. It currently has more than 160 billion francs in assets under management.

In Asia, China, Singapore and Japan were the three key markets which Rothschild was keen to take on, she said.

More Chinese clients had recently shown growing interest in setting up their own foundations and charity organisations, rather than just seeking high returns on their investments, Rothschild said, adding that she believed that was a good sign of the growing social responsibility shared by more rich Chinese families.

"After all, you need to know the meaning beyond money. Money for money's sake is not enough," she said, with that principle also reflected in the investment style of Rothschild, which is fully owned by the family, which was different from that of "big banks".

"People say you are so conservative [about investing] but my rule is to fight with those short-term contemplations to earn some quick and easy money," she said. "My objective is to keep my family business in an ethical and sustainable manner. "If you are a publicly traded company, I know there are a lot of pressures on returns, but I can take a conscious decision to say no."

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