Introducing philanthropy as a glue to bind families together is one way to overcome the difficult conversations surrounding succession, according to this month's WealthMatters conference.

We are on the cusp
of the biggest intergenerational transfer of wealth that Asia – and possibly
the world – has ever witnessed. Handing over control of a business and family
fortune is never going to be easy, but in Asia, cultural conflicts could lead
to catastrophic breakdowns in communications.

But this doesn’t
have to be the way. Introducing philanthropy as a glue to bind families
together is one way to overcome the difficult conversations surrounding
succession. That was the message that came out of WealthBriefingAsia’s inaugural Singapore WealthMatters event, held
last week at the prestigious Fullerton Hotel.

Around one hundred
senior executives from the Asian wealth management industry gathered together over breakfast and coffee on the
morning of September 13, to hear from a distinguished panel of philanthropy and
wealth management experts. The event was sponsored by Coutts, Sungard, Asia Wealth Management Search and Christie's Fine Art Storage Services.

Stephen Harris,
managing director of Clearview Financial Media, publisher of WealthBriefingAsia, chaired the panel. He introduced the first speaker, Eli
William Leynoun.

Family values

Leynoun founded consultancy Family Wealth Solutions in 2008, and advises
business-focused families, with assets under advice in excess of US$10
billion. He is a member of the Society of Trust and Estate Practitioners, a
member of the Institute of Banking & Finance Practice Standards
committees and Wealth Management Working Group. He also lectures at the Wealth Management Institute in Singapore.

Leynoun opened the discussion by
underlining the lack of planning in respect to family business succession in
Asia. “I don’t hear as much talk of Asian family values anymore, as we did just ten years ago."

He highlighted the importance of the health and survival of Asia's
family business community, for the sake of the global economy. "Europe
and the US have their sets of global economic and political problems. Asia is increasingly becoming the engine of global recovery. The vast
majority – around 85 per cent of businesses here - is either family
owned, influenced or controlled. Therefore Asian family businesses, in
many ways, hold the key to global recovery.”

Leynoun believes that philanthropy and its related values, is "a glue which has tremendous potential to hold families and family-owned businesses together." But it doesn’t start with a family constitution, or a private trust, he said. It starts by "establishing a sense of family, vision, values and beliefs."

"The wealthiest individuals are trying to figure out how to address the world’s issues, and a lot of this responsibility for finding solutions is falling on the shoulders of the next generation as they will benefit from the fortunes made by the first generation and want to preserve and protect their legacy," he added.

Leynoun is determined to see Singapore develop as Asia's philanthropy hub - as the infrastructure, systems and processes are the best in Asia and benchmark well against industry best practice standards. "We want to develop Singapore as the centre of philanthropy for Asia, to complement Singapore's commitment to family enterprise and global fiduciary services."

Philanthropy in 3D

Next to speak was Maya Prabhu,
executive director of Coutts’ philanthropy services. She joined Coutts, the UK private bank, in
2008 and has over 16 years of experience in the field, gained in the UK and
India. She previously worked at New Philanthropy Capital, and prior to that,
at The Prince’s Trust.

She opened her discussion with a light-hearted personal story of a conversation she had with a gentleman at
a 2005 Gala dinner. He confused her previous employer, New Philanthropy Capital, with stamp collecting. "I don’t believe you would have that conversation today," she said. "It doesn’t
matter where you are in the world, but philanthropy is at the centre stage of
family’s hearts and minds as they think about their wealth."

She gave five examples of
families and how they are integrating philanthropy into conversations about
wealth. Philanthropy can be an integral part of binding a family together, she said, citing a study by Oxford Place, which showed that 70 per cent of wealth transitions fail. When succession goes wrong, she said, it is usually down to poor preparation of heirs, ineffective family governance and a breakdown of communications. But philanthropy can be used to negate these pitfalls. "Philanthropy provides a forum to talk about money which has balance and is acceptable by everyone."

One example of a situation she frequently sees, was a family with a twenty-something daughter. Because she had inherited a lot of wealth at a relatively young age, the daughter found it hard to be motivated to work. "When you have US$10 million in your current account, you might think 'why should I get out of bed in the morning?'" But philanthropy can give meaning to a vocation, said Prabhu. 

"Where wealth transcends through the generations is when a family thinks about wealth in three dimensions - namely financial capital, human capital and social capital. We don't live in a vacuum, we live in a society. Families that think in all three dimensions tend to be more successful at wealth transfer. And philanthropy is an integral part of that," Prabhu concluded.

An Asian taboo

Next on the podium was Laurence
Lien, chief executive of the National Volunteer & Philanthropy Centre and
the Community Foundation of Singapore. Formerly the director of governance
and investment at the ministry of finance, Lien served 14 years in the
Singapore Administrative Service, and is currently a nominated member of
parliament. He is also chairman of the Lien Foundation.  

Lien had just himself finished organizing a major philanthropic event, which he now focuses on "as a vocation." 

He pointed out that although it is difficult for families to talk about wealth, it is even harder to talk about death. "The squeamishness of discussing death is the stumbling block we face, particularly in Asia. Here it is even more of a taboo."

He said that this creates a lot of problems when it comes to succession planning, as many people believe they are too young for philanthropy, even when they are 70 years old. "This idea has to be changed. Philanthropy is very fulfilling, it makes you happy. Why would you want to put off something that makes you happy?"

Lien pondered the point of why, from a family perspective, does it make sense to do philanthropy? He pointed out that individuals need to think about their legacy, and
whether they want their lives to be significant, as well as successful.

"If you are passing just the financial assets down, you are more than likely lose it within a few generations. If you want to preserve the human capital, you have to look beyond preserving money in the family. And philanthropy is a way of doing that. It is not just social glue, it is a way of teaching values. Families can be very diverse, some want to be involved in the business, some don't. Whether they are competent enough, is a different matter. But philanthropy can bring everyone together and it can make a huge contribution to society," he concluded.

The banker's view

Rounding up the panel was
Dominique Boer, head of relationship management for Southeast Asia, at Standard
Chartered Private Bank. Boer has over 20 years of experience in financial
services with a focus on wealth management and SME banking. Prior to Standard
Chartered, she owned a consultant which advised small businesses and financial
service providers in Australia.

Boer cited various quotes about philanthropy which she believes sums up a modern day financial approach to giving. 

She quoted: '"Philanthropy is not too different from making financial instruments. Skills are needed to ensure that a philanthropic project will yield a social return or yield the desired humanitarian benefits'."

She appealed to the other wealth managers in the audience, saying that bankers can help in this space. "We have reach to so many
different clients and such a wide geographical reach that we can help
enable connections."

She added that there are five reasons why most people give to charity, which relationship managers can help clients to explore. These are: having an emotional connection, taking social responsibility, creating sustainability, creating a family history, and leaving a local legacy.

She rounded off with a quote predicting that philanthropy will become increasingly structured, as individuals seek more efficient ways to give. '"Giving is not new to Asia but how it done has and will change. The old style of cheque book giving will become more structured forms of giving like venture philanthropy'."

The next WealthMatters event will be held on 9 April 2013 in Hong Kong. Please click here to register your attendance.