This publication interviews the CEO and founder of the Singapore-based wealth management organisation about its thoughts on family offices, inter-generational wealth transfer, and other hot topics.
Singapore-based multi-family office Golden Equator Wealth has launched a next-generation programme to tap into the market of ultra-high net worth Millennials. The Golden Equator NextGen Programme, as it is called, “aims to mould next-generation members of business families into future leaders through a highly customised curriculum across finance, wealth management, entrepreneurship, and leadership development”.
Although officially launched at the start of this week, the programme has been working since May 2017 with its first participant being a next-gen member of a family office managed by Golden Equator Wealth. This publication caught up with Shirley Crystal Chua, founder and group chief executive of the organisation, about what the programme is about and what it aims to achieve.
Please give an overview of what the publication’s main conclusion is about the market.
The economic and business landscape is rapidly changing and if clients are not equipped with the resources and solutions to address their business and wealth needs, they will be at a disadvantage.
The family office concept has been around for a long time in the Western hemisphere but specifically in Asia, the understanding of a family office and what it can do is still lacking. This results in family offices that are often formed informally, with a small team involving NextGen, but without the proper structure, network, and resources to ensure its sustainability.
Some 17 per cent of families in Asia have a succession plan versus the global average share of 57 per cent. While the shift in focus towards succession planning and wealth preservation in Asia is encouraging, there is a gap in the knowledge on how to plan ahead and what are the key considerations, which was why we wanted this publication to help deepen the understanding of the family office concept and what it can do for business families in the region.
How do the authors of the paper characterise the Asia-Pacific family office landscape at the present time do they see it as still very much a young market with a lot to learn, or becoming more developed, etc?
The Asia-Pacific family office landscape is still a young market, with many business families still unaware of the concept. All in all, an underserved region. However, compared to a year ago, the industry has seen tremendous improvement – and the rise of independent asset management firms in Singapore is testament to that. There is also increasing client interest from around the region.
The learning in this region will be very fast as it will adopt some of the structures and stability observed from our Western counterparts, while combining these with Asian culture and nuances. All in all, we hope to see more players and industry partners entering the market so that it creates more service offerings, traction, and learning for the families
Are most family offices attached to operating companies that throw off cash and is that situation likely to remain the same for a while? (If so, this will affect governance and asset allocation strategy, among other features)
The cases of family offices being attached to operating businesses are similar to what we earlier mentioned about the “informal” family office setup. These often arise out of the need to ensure their NextGen are somewhat involved in the family/business legacy without much focus on setting the family office up properly, hence sometimes not having the right structure, management, and talent to ensure that it is sustainable in the long run.
The governance for the business and family assets needs to be separate and independent but must also come with regular alignment to ensure coordination and synergy wherever possible including for asset allocation, risk exposure, diversification, etc.
In Asia, how precisely is the term “family office” used – there can be lots of different business models which people call “family office” but this can make comparison and benchmarking hard or even impossible. Thoughts on this?
Indeed, the term “family office” has been loosely defined and has made benchmarking difficult. Family offices exist mostly in two forms – the single-family office or the multi-family office.
For single-family offices, it will be difficult to make a benchmark out of them simply because the nature of these institutions is very private. MFOs also range in level of profile and breadth of services but both can co-exist and can complement each other’s strengths. We have also observed that SFOs, especially the smaller ones (informal family office), are starting to realise the inefficiencies of doing everything alone, the lack of scale and access to deals, and hence have started considering migrating or expanding into the multi-family office model.
With succession planning and next-gen issues, how much variety is there in the issues that arise in Asia? In some countries, such as mainland China, the recent one-child policy causes a succession headache. In others, older family members can be reluctant to hand over business/wealth control. Can we discuss this?
There are some similarities in issues surrounding succession planning e.g., discrepancies in mindset and lifestyle between the first gen and their successors, lack of communication, etc.
As you’ve rightly pointed out, there are policies that make the Eastern hemisphere different from the Western one in succession planning i.e., the one-child policy, but there’s no clear advantage or disadvantage here in terms of succession planning. For succession planning, there’s a general assumption that more children is better to “hedge” the risk and to delegate different roles to different ones, but there’s also the strong possibility of the same generation may not see eye-to-eye especially when it comes to decision-making.
But the core difference lies in the cultural nuances. Asian parents tend not to want to communicate openly to their children in terms of wealth for the fear of them being entitled, and you rarely here the term “trust fund kids” in this part of the wealth. But this can be attributed to 80% of wealth in Asia is first generation.
There is also a lack of education about how best to manage wealth transfer to ensure that it endures for generations. In many European countries such practices go back centuries, meaning there is greater understanding. Not so in Asia, in part because great wealth is not something that many UHNW families were born into, again, as majority of wealth is first generation.
We have also seen issues including:
-- Bad decisions and influence, entitlement, dependency, lack of planning, disclosure, transparency, inability to communicate clearly (because of taboo) – which resulted in not only wealth loss but reputational loss and legacy loss;
-- We have seen families where the NextGen caught up with what’s trending like digital assets and lost half of the wealth;
-- Asian Families have a lot of desire to pass on wealth to their NextGen but lesser desire to prepare the Nextgen or set a vision for their family – which needs to change to ensure a legacy that lasts for generations
-- We have also seen loss of assets because of inability to keep up with times and the economic changes;
-- First Gen or Patriarchs/Matriarchs would like to and have the ability to teach business skills but will not be as so for wealth skills; and
-- Too many informal family offices that’s poorly managed and created with lack of purpose and sustainability