One of the important – not to say fundamental – topics when assessing how to manage your family’s wealth is family heritage building, i.e. the art of assessing your personal situation and clarifying what ought to happen to your family members.
Naturally, everyone’s needs should be taken into account in order to build a consensus around the family’s shared goals. This is even more important considering that full co-operation and involvement of members will be required moving forward.
So, where do we start? Truth be told, there are key decisions that need to be taken now and realities that must be recognized in order to prepare effectively for the future. With every family member having different objectives and life opportunities, the situation is naturally complex and therefore the planning process is essential to mapping out the family’s future.
Ultimately, the in-depth planning process helps to identify clear goals. It offers alternative paths, helps to uncover obstacles and provides perspective. A clear direction also helps to bolster the confidence of family members by injecting professionalism and a degree of spontaneity that together help to maintain a comfortable balance for everyone.
It all starts from creating a sense of place. Knowing where you will reside in the future can be fraught with uncertainty – because life can unexpectedly take different directions. So, while accepting that all the relevant facts may not be available, it is nevertheless important to discuss the expectations of the family in as much detail as possible to make the planning process truly meaningful.
Any family group of multiple generations will likely have members living in several different countries across Asia and perhaps also in Europe and the US. These individuals will be overseas for varied reasons – including work, education, leisure and retirement.
Now is the time to explore ways to accommodate it. The process starts by mapping out the current and future objectives of each one, asking fundamental questions such as:
While discussing future plans as a group, it is important to review the family’s history and take a fresh view of its heritage. A coherent story can be truly inspiring and can help to build a strong identity that drives a future shared direction.
Looking at the past, the picture may be complex, but there will likely be identifiable themes that can be drawn together to paint an illuminating picture. This heritage update will serve to reinforce the values built over recent decades and help to develop a vision for the time ahead, providing a direction for the next generation and encouraging their full participation in management of the family’s current assets and future investments.
Building this vision requires a degree of patience and commitment that should not be underestimated, including numerous meetings among family members (both formal and informal) to fine-tune the details and involve each one as far as possible.
Help is available to do this, of course, and in many occasions one’s ability to involve a third party in the process has made a very significant difference. Indeed, only when the vision is clearly articulated and agreed by everyone, can your family take a well-defined step forward towards successfully managing its shared wealth.
Although decisions are often determined by senior family members, the important point here is that younger generations deserve equal consideration because they will carry forward the heritage – hence their full participation is required to secure the family’s future.
However, before children can fulfill this role, they first need support for their own academic goals. While strategies are being mapped out, there is an excellent opportunity to set out the terms of direct financial support to meet educational requirements; whether at home or overseas, at junior school or university.
This can be done cost-effectively by leveraging a Family Trust arrangement and in return, each of the youngsters can be asked to participate in an educational program around the family values and vision. While the youngests just need to learn about the family’s history, older children can actually contribute to helping make the family office work.
This approach is efficient because it builds a more motivated and better-informed group of young members who can see the benefits of playing a fuller role in the family’s future. Yet, several points should be added to the equation
Additional considerations should be listed. For instance, all of the planning outlined above can be represented in a Family Trust which maps out future financial dispensations at different stages of life for varying needs including education, career support, housing and retirement. This legally binding blueprint for the management of family wealth operates in line with the agreed heritage, values and vision.
Tax-efficient planning is another key part of protecting family wealth, and part of this process involves accounting for family members living in foreign jurisdictions, especially low tax markets such as Hong Kong and Singapore as well as in higher tax environments. Note that educational requirements may also have a significant bearing on tax management plans, but in general terms, a family must ensure that its tax requirements are covered for short, medium and long term implications and care must be taken to avoid the risk of double taxation.
Building for the future by managing the family heritage and optimizing your place in life also requires looking at wealth management. Again, topics you might want to keep in mind include risk profile assessment, asset identification, and investment strategy updating.
First, a family’s Risk Profile depends on its values and heritage and a central issue that needs to be determined is whether its culture is entrepreneurial or risk-averse. While some families may still be in a more entrepreneurial stage, many more are focused on managing their accumulated wealth – in which case, a more conservative approach makes sense. Once this has been determined, an investment style can be set in place which will dictate future wealth management strategy.Second, when wealth management plans are being put in place, it is important to assess the total of assets controlled by the family. Once a comprehensive list has been prepared, an effective investment strategy is easier to implement. Interestingly, young family members can be called upon to participate in this task as part of their education process, giving them a more nuanced understanding of family vision and values.
Third, with the agreed Family Risk Profile in mind, an updated investment strategy can be introduced to cover a full range of assets that include real estate, gold, stocks, shares and bonds. Well qualified family members can be appointed to play a full part in this process.
When you want to optimize your family’s place in the world and solidify its legacy, it is important to look at the past to see what lessons can be learned. It is also necessary to accommodate the family identity: its heritage, values when building a vision for the future.
A comprehensive plan is needed to account for all family members – including their long- and short-term ambitions and residency, plus the educational requirements of the next generation.
With these building blocks in place, you are well-placed to start the wealth management process by listing assets, agreeing on a risk profile and commencing the long-term investment management of all family assets.
This process presents numerous challenges and becomes even more complicated if the involvement of many close family members means that emotions get in the way of clear-sighted decisions.
Whether you decide to take on this task personally or want to consider how professional support can help, you are welcome to contact our team of Family Office specialists for a free consultation.