Building a successful family legacy involves more than just transferring wealth from one generation to the next. Chin Chin Koh looks at how family offices assist ultra-high net worth clients in their succession planning, and identifies key trends that are unique to Asia.
Chin Chin Koh
Family Advisory Asia Pacific
To many people, succession planning simply involves putting a wealth-transfer structure such as a trust in place, to ensure that family assets are passed on from one generation to the next.
Nowadays, clients running a family business face more complex decisions in succession planning than before. How do they choose and nurture their successor? What roles in the business will the next generation take? How will resources be allocated across different businesses or family branches? Who will inherit shares in the business? How do they balance the interests of their family and business?
"To ensure a successful transition across multiple generations, clients need to establish clear legacy strategies for their family business and wealth."
Making fortunes last
Increasingly, ultra-high net worth clients in Asia are concerned with ensuring their wealth lasts for multiple generations. To build a legacy, they understand that beyond bestowing wealth, it is the family values, dynamics and heritage they impart that will guide the way descendants build on their achievements.
Hence to ensure a smooth transition of their wealth and business for successive generations, clients need wealth managers with the relevant skills and experience in legacy creation and asset succession.
A trusted family advisor
In recent years, a growing number of ultra-high net worth clients in Asia are using a family office to professionalize the way their family wealth is structured for the future.
Managed by a dedicated team of professionals, family offices adopt a systematic approach to developing and implementing a long-term succession strategy, tailored to their clients’ individual goals.
Trends in family offices in Asia
In Asia, many family offices are strongly linked to clients’ family businesses, with more than 80% still connected to the primary business where the money was first made.1 When private and business assets are not clearly separated, any downturn in the family business may adversely affect the value of the family’s investments.
Another discernible trend in Asia is a high level of family involvement in the running of the family office, compared to European or American families. Unlike western families who have experienced many generations of transitions and are more likely to outsource services, Asian families are still at a relatively early stage of their wealth creation cycle. As such, they are more likely to bring services in-house, with the first and second generations retaining control of the family office. Hence family offices in Asia tend to be a natural extension of the family and family business.
Creating a successful legacy
To ensure a successful transition across multiple generations, clients need to establish clear legacy strategies for their family business and wealth. These strategies often involve the development of a framework for family governance and decision-making, putting ownership principles and business engagement rules in place, and creating impactful philanthropic arrangements.
The next step would then be to appoint an internal and/or external specialist to implement the legacy strategy effectively.
In conclusion, creating a structure and legacy strategy is important for ultra-high net worth clients, to ensure their wealth and family business are handed successfully to the next generation, and for their family vision and values to live on.