Asia holds one-third of global wealth, according to Forbes Media. The region’s 20 richest families control at least $450 billion.
As the business boom in Asia started in the 80s, succession planning is now a hot topic as family-owned companies face the first-wave of succession challenges.
Opportunity for knowledgable, trusted adviser to make a difference
Lee Chiwi, CEO, PreceptsGroup International, said in his message that against the backdrop of Covid-19 and its impact on the economic and business landscape, it is even more timely to bring together a panel of well-respected industry veterans to discuss issues faced by modern Asian families with regards to legacy and succession planning.
He said: “We are now at the crossroads of significant wealth transitioning as the founder, patriarch or matriarch are looking to efficiently groom the next generation to not only sustain their successes but to continue their legacy.
“As many intangible aspects such as family dynamics and governance come into play, the adviser role has become all the more important in addressing the unique challenges and balancing interests between generations.”
Intergenerational wealth management should be looked into cautiously with proper planning, and even giving back to the society by leaving a legacy through philanthropy.
“There is great unease and anxiety for everyone worldwide. But this is also the time when the knowledgeable, trusted adviser can step up and make a difference in helping their clients plan for their wealth succession,” said Mr Lee.
Watch: Grow your Legacy with the PreceptsGroup
Preparing the next generation of successors
Keynoting day one was Claire Chiang, Co-Founder of Banyan Tree Hotels & Resorts. Interestingly, as part of her preparations for her session, she had asked her three children (26-38 years old) to share their experience growing up and being prepared as a family member being a legacy custodian and steward.
Some of the key points mentioned by her children include exposure to the business since young as they volunteered and worked in the different parts of the company in various countries; the encouragement to pursue their interests and find their own passions without feeling pressured to be part of the family business; the importance of a family culture where everyone’s opinions matter and family council meetings are structured with agenda and minute taking; the transparency in dealing with matters; and how formal procedures can help provide clarity.
While the youngest son is still studying, her eldest son and daughter are now working in the company after forging their own paths in the initial years after graduation.
It is important that the next generation find their own path. Otherwise, they will feel that it is a family legacy for which individual ambition must be subsumed instead of seeing it as a platform to blossom on, her daughter had shared.
Avoiding family feuds
Examining fallouts and wealthy family spats, Kee Lay Lian, Partner, Rajah & Tann Singapore LLP, spoke on leaving a legacy, family disputes conflict resolution, and the importance of family governance.
Kee Lay Lian
Sharing some examples of prominent family feuds, she said there are two lessons if it is to be in line with the founder’s intentions in that his legacy will continue as long as the business continues to operate, while his descendants enjoy the fruits of the success.
Firstly, separate management from ownership. To preserve family harmony, members of the family ought to entrust the management of the company to competent professionals while retaining ownership as stakeholders, to split the fruit from the work.
Secondly, have a controlling interest, instead of equal shareholding where parties or members of the family may sell out.
On family fortunes, good family governance is critical to establish conventions and protocols which the family sets up for itself, she said. Best practices of multigenerational business-owning families include instructions and rules for future generations to follow.
These instructions and rules can be in the forms of
- hard structures: legal structures put in place including wills, trusts, tax strategy and investment and bank accounts, or
- soft structures: such as the “endowment model” including setting up an investment committee to professionalise asset management, an education and mentorship programme and a family philanthropic committee with a unified purpose and the family culture.
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Legacy through philanthropy
At the opening of day two, successful entrepreneur and respected philanthropist, Toh Soon Huat, Executive Chairman of Novena Foundation and Executive Chairman of Sian Chay Medical Foundation, shared his journey, “From rags to riches, charitable giving to benefit the community. What is the true meaning of wealth?”
Toh Soon Huat
He sold his business to take up the full-time volunteering role at Sian Chay Medical Foundation. He turned around the medical foundation, which has more than 100 years of history in Singapore, from being on the verge of closing to serving 1,000 patients a day, 70% of them fully subsidised.
When asked what made him give up his thriving business and take up a no-pay role? He answered, “A successful person is not how much wealth he has built; or how capable he is; or how high his status is. But his contribution, his gratitude and how many lives he has changed.”
He added, “When you have wealth, you have to cultivate your character to match the value of your wealth, because when you have wealth and do not have any mental or spiritual cultivation, you race to luxury and spend indiscriminately, and do things which cause harm to others. Then what is the purpose of your wealth?”
The true meaning of success to him is about integrity, having a good and kind personality and a grateful heart. “I hope there would be a successor and Sian Chay continues to be around for the next 300 years, 500 years.”
Mental incapacity and special needs planning
Chong Yue-En, Managing Director of Bethel Chambers LLC, spoke on the issues of mental incapacity and special needs planning.
What is quality of life? The definition according to Oxford, quality of life is the standard of health, comfort and happiness experienced by an individual, he said.
There are six domains to measure the quality of life: physical, level of independence, social relationships, environment, psychological and personal/religious beliefs. To plan for the quality of life during mental incapacity is to take stock on current resources first.
On the legal framework in managing a patient’s affairs, one can choose a donee for lasting power of attorney or a deputy who is appointed by the court. He recommends using professional donees and deputies.
Professionals can include lawyers, doctors, allied health, chartered accountants and social workers in managing both personal welfare and property and affairs. A trust company can also be set up as a professional donee and professional deputy, however, it is only allowed to manage property and affairs.
A donee and deputy have a duty to make decisions in a patient’s best interest and to take note of the patient’s expressed wishes and feelings. However, donees cannot make decisions over a patient’s life-sustaining treatment, he highlighted.
The Mental Capacity Act introduced legal solutions for the planning for special needs person’s legal needs. There are choices of an individual person as deputy/donee or corporation (eg. a trust company). He reminded four documents are required for planning: Will, lasting power of attorney (LPA), advanced care plan (ACP) and advanced medical directive (AMD).
“We plan so that we have a plan when we do need a plan,” he concluded.
Read also: AIA and EY reports 90% of HNWIs in Singapore leverage on insurance for their wealth and legacy planning
The two-day Estate Planning and Wealth Succession Asia Forum 2020 organised by Precepts Academy was a sold-out event, and one of the first physical conferences in Singapore since the introduction COVID-19 circuit breaker measures. Asia Advisers Network is official media partner.
Report by Benjamin Ang & May Chinmay-Low
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