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Family succession takes centrestage
THE thought provoking issues of family succession, legacy and governance occupy Asian families who are clients of LGT Private Banking, says Lim Ping Ping, LGT Asia head of wealth planning. ''(The topics) are in all of my discussions now with entrepreneurial families. The reason the issues come up a lot is that some of the families, who have learnt quite a bit about the basic tools of succession, are now trying to put the tools together,'' she says.
Ms Lim, a lawyer by training, is a veteran of about 14 years with LGT and a member of the executive board of LGT Asia.
Perhaps nowhere can Asian families fi nd a better model for family governance and succession than the Princely Family of Liechtenstein, which has a heritage of 900 years. The Princely Family owns all the shares of LGT Group - itself over 80 years old - through the LGT Group Foundation. The LGT Group prides itself as being the largest private banking and asset management group that's wholly owned by an entrepreneurial family. The LGT Group has assets under management of about US$215 billion as at end-June.
The Princely Family has navigated 30 generations of wealth transfer. Says Ms Lim: ''Having always been business owners with independent wealth and who contribute to their community rather than rely on taxpayer funding, their insight on what works for their family can be a helpful reference for other families. This is where LGT and the Princely Family can talk to our clients as entrepreneur to entrepreneur, and family to family. This is rare in modern private banking.''
Ms Lim says a conversation about wills and trusts may be a starting point, and families gain understanding of the implications of shareholder agreements, for instance. ''Eventually, you turn to the topic of the entire family as an ecosystem. My job is to sit with families to identify the most pressing issues.''
Among Asian families, some of the most thorny issues involve matters that were ''understood'' but not formalised and may not have any legal standing. ''There is a lot of potential for misunderstanding. A family member may say: Father entrusted this to a sister or the most capable younger child. But all this understanding is not translated into legal arrangements by the generation intending to pass on the wealth. Over time, that can create blind or black spots.''
Ms Lim says it is also important to clear up some misconceptions that private clients may have about the concept of family governance itself. One is that it does not equate to a family offi ce. Instead, she says a family governance framework sets out to enable communication among family members.
''Family governance is about building a platform or bridge for a family to be able to communicate with each other, but in a diligent way - not accidentally or ad hoc. It allows for a bridge to be used so you can start to understand each other.''
''For family members, it provides a way for them to speak up and be heard. Not everyone will agree with you, but being heard is very important. It makes people feel they are not marginalised, which can create resentment over time.''
A family governance framework has to be realistic as well. ''I do see that there are templates of family governance frameworks. The framework needs to be adapted to the family, and the adaptation needs to be realistic ... An unrealistic governance structure is one that perhaps does not take into account who will succeed you.''
''We sit down with clients and ask them to defi ne clearly who is the family they have in mind with the governance structure. Maybe it's his or her own family and there is no need to involve siblings. Over time, there may have been quarrels and you hope that with a family assembly, a family can start to feel unifi ed. But that's not going to happen overnight.''
Being realistic also suggests the need to take into account a child's individual passions, and how a family business may accommodate that.
''A wealth owner may need to make an assessment of whether it's good for a child who is grown and pursuing his or her own interests to return to the family business.''
She says one approach is to assess family members as one would assess candidates for a job. Doing so enables wealth owners to maximise family members' strengths and interests.
She says wealthy families are eager to learn about how other families navigate succession issues. LGT organises family education workshops to provide an avenue and environment for learning.
At the sessions, discussions may also centre around family values. ''Families hope that eventually they have nurtured members who will do them proud, because they contribute not just to the family but to the larger society. Many wealth owners don't want their children to be just benefi ciaries, but also to be custodians. For family members, it's very encouraging to see that the next generation can actually be stewards to lead the family.''
She says the Princely Family believes that it is important to lead by example when it comes to family values.
''Family values are usually more effectively communicated if reinforced by conduct. Taking the time for refl ection, reaffi rmation, revision, renewal of the different aspects of the succession planning are important steps for the family.''
The Princely Family of Liechtenstein has a set of ''House Laws'' or family constitution. She says that members of the Princely Family have explained that the House Laws work for their family from a family governance point of view, as it lends clarity about the authority for decision making, enables platforms for the airing of views, and the use of a family council to facilitate communication and to ''take the temperature'' on how family members may feel about certain topics.
Prince Philipp von und Liechtenstein is chairman of LGT, and Prince Max von und Liechtenstein is chief executive. They each bring a different perspective - two different generations of one family - to practical questions such as the way the House Law may be used to regulate their rights as family owners and how the family council is used.
''What families who work with LGT fi nd most interesting is that governance frameworks do undergo a renewal and the responsibility for that lies in the new generation ... How the next generation may best learn the values and skills required to be successful in their own time as leaders and owners of family businesses is often posed at family exchanges with the Princely Family,'' she says.