MERITZ Securities plans to launch a family office service in the first half of this year to capture 'ultra-high-net-worth' clients. The family office service, which provides comprehensive asset management including asset management and business growth and succession for families with more than 1 billion won in assets, is becoming a new source of revenue for securities firms.
MERITZ Securities has primarily focused on high-interest loans to corporations facing financial difficulties and real estate project financing (PF). Recently, however, it is expanding its presence in the securities brokerage market by offering a stunning promotion that exempts all stock trading commissions for two years while preparing for the family office service to strengthen its retail sector. It remains to be seen whether MERITZ Securities can successfully transform its image through this strategy.
MERITZ Securities plans to officially launch its family office business in the first half of this year. A representative from MERITZ Securities noted, "We are currently in the process of organizing the family office service team and recruiting talent such as private bankers (PB) and support staff."
MERITZ Securities established a Private Investment Bank (PIB) center through an organizational restructuring at the end of last year. MERITZ Securities, which previously had a somewhat weak retail sector, is actively working to attract high-net-worth individuals.
The concept of a family office began in 19th century Europe with the Rothschild family, who employed a steward to systematically manage their assets. Subsequently, the Rockefeller family, famous as America's oil king, and the Carnegie family established dedicated asset management organizations, leading the family office to grow into an important business in the financial market. The concept is familiar overseas, where wealth has been accumulated over generations.
Domestic securities firms are actively adopting family office services. The number of high-net-worth individuals is increasing, and the aging wealthy population is rapidly growing as they approach retirement, resulting in a higher demand for asset management due to wealth transfer.
While the existing VIP service focuses on investment and financial management, the family office service differs by providing comprehensive advisory services that include non-financial elements essential for the ongoing growth of the family, such as inheritance, succession, real estate, and legal and tax matters in addition to general asset management.
Currently, eight domestic securities firms are offering family office services, which include seven large firms (Samsung, NH, Korea, Shinhan, KB, Hana, Mirae) and one small firm (Shinyoung). In addition to MERITZ Securities, Hyundai Motor Securities is also preparing to introduce its service within the year.
If MERITZ Securities starts its family office service, it will become the ninth securities firm to enter this business. A representative from MERITZ Securities explained, "Our goal is to provide differentiated investment solutions. While other firms focus on services related to tax, legal, and succession matters, MERITZ is preparing to offer clients opportunities to invest in projects funded directly by the MERITZ Financial Group with its own capital."
Recently, MERITZ Securities has been strengthening its retail sector. The profitability of its PF business, which MERITZ Securities has focused on, has declined due to the downturn in the real estate market, and there has been continuous criticism that the high-interest loan business does not align with the firm's status as a large securities firm.
However, it is forecasted that it will not be easy for MERITZ Securities to stand out in a family office market that has already reached saturation. First, the number of its branches is relatively weak, as the retail sector has been weak. While other securities firms are opening dedicated branches for family offices, as of the end of last year, the total number of branches for MERITZ Securities was only eight.
MERITZ Securities' image is also a concern. Over the years, MERITZ Securities has been criticized for providing high-interest loans to companies that have difficulty securing funding.
A source in the financial investment industry stated, "The power of brand and image is formidable. Ultra-high-net-worth individuals who require family office services often possess a funding scale comparable to a corporation, resulting in a strong loyalty to financial brands."
It remains uncertain whether ultra-high-net-worth clients already using family office services from existing securities firms will move to MERITZ Securities. One PB explained, "In the case of high-net-worth individuals, moving with a relocating PB is generally considered case by case, but overall, less than 50% tend to switch. Particularly, clients managed by PBs at companies with established systems and brand value tend to avoid moving." However, MERITZ Securities will need to offer services that surpass those of other firms in both service quality and brand value to compete effectively.