When wealthy families fight, here's how they avoid ugly public battles
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When wealthy families fight, here's how they avoid ugly public battles
A growing trend in Asia, family offices help stave off acrimony amidst Asia'southward wealthiest, while safeguarding their e'er-evolving portfolio of investments.
Family offices are positioned as all-inclusive vehicles for wealth management and dispute resolution, in a landscape bristling with contentious problems. (Photo: Freepik)
19 May 2022 06:30AM (Updated: 10 Jul 2022 05:13PM)
Theorize and intrigue trail closely at the heels of any public dispute involving a wealthy family unit, especially when the dynasty in question is among Asia's almost prominent.
Last year, a fracture in the Kwek family unit became apparent when 2nd-generation scion of Hong Leong Group Kwek Leng Peck parted means with the conglomerate's real estate business, City Developments Limited (CDL).
The billionaire cited disagreements with the board and management over a now fraught investment in a Chinese property firm led by his nephew Sherman Kwek – fomenting speculation of an intergenerational rift. Only such disharmonize among the monied isn't new, despite the conscientious divvying of trust funds.
Co-ordinate to The Wealth–Ten Billionaire Census 2020, Asia showed the largest percentage jump in billionaires in 2019. This new class of ultra-high-net-worth individuals (UHNWI) brings, forth with its curious juxtaposition of pleasance craft and philanthropic banners, complexities in areas from succession planning to Environmental, Social, and Governance (ESG) investment. The latter was thrust into the mainstream consciousness past the ongoing pandemic.
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Vast intergenerational transfers of wealth in Asia take prompted a growing demand for more bespoke and independent wealth management solutions, which have materialised in the family office. Such privately-held companies are positioned as spread-out vehicles for wealth management and dispute resolution, in a landscape bristling with contentious issues.
"Nosotros handled a instance involving siblings who were at odds with their mother and male parent over how much of their parents' wealth would exist donated to charities. At the same time, the sister and brother were at odds over what types of charities they should donate to," shared Chiman Kwan, CEO and founder of Raffles Family Office (RFO), which has offices in Hong Kong, Singapore, Taipei and Shanghai.
The multi-family function, which serves families with a liquid net worth of US$50 one thousand thousand to US$300 million (S$67 one thousand thousand to S$400 1000000), helped broker an internal resolution, reaffirmed by the creation of a family constitution and investment governance frameworks. Incepted in 2016, it recently launched an independent advisory board, comprised of manufacture veterans with specialist skills in the areas of dispute resolution and philanthropic planning.
With high stakes involved, the goal is to prevent conflict from devolving to the point of litigation, which isn't the remit of family offices. This is especially of import in traditionally patrimonial Asian systems, where constructs such as award and harmony prevail.
"There are certainly situations where professional legal advice – which we don't offering – may be needed. But nosotros tend to view information technology as incumbent upon ourselves to take every action possible to help our client resolve such matters amicably, in a manner best suited to preserving their wealth and relationships," explained Kwan.
While family offices typically act as intermediaries between stakeholders that place systemic safeguards to avert future disputes, professional partners such equally family lawyers and accredited mediators are consulted when necessary.
"Disputes oft occur when there is a lack of clarity and fair process, and when decisions are made based on emotions and articulatio genus-jerk reactions. Mayhap due to our Asian culture, these frequently lead to cold wars between family unit members." – Robin Pho
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A Rising Trend IN ASIA
Family unit offices such as RFO – while rooted in European institutions – are condign increasingly prevalent in Singapore and the region. The Monetary Authority of Singapore (MAS) reported a v-fold rise in the number of unmarried family unit offices set upwardly in Singapore between 2022 and 2019, while Senior Minister Tharman Shanmugaratnam shared last year that Singapore has about 200 single family offices managing some United states of america$twenty billion in assets.
Unmistakably, the Lion City'south deepening appeal as a family office hub stems from its reputation as an international arbitration heart with a strong regulatory framework and foreigner-friendly revenue enhancement incentives. Calculation lustre to her mane, such factors have enticed the likes of billionaires Sergey Brin and Eduardo Saverin into basing their family investment activities hither.
Lee Woon Shiu, regional head of wealth planning, family office and insurance solutions at DBS Individual Bank, shared that the proportion of locals to foreigners among family part families served by DBS stands at roughly 2:8.
Established in 2019, the banking concern's family part unit of measurement advises high-net-worth families on the planning and execution of cross-generational legacy succession and family unit governance strategies. It reported the completion of more than double the number of family office structures in 2020, compared to 2019.
"The landscape for dispute resolution in Singapore is constantly evolving along a positive trajectory, with the latest development being the signing of the new cooperation understanding between the Singapore International Mediation Middle and International Centre for Settlement of Investment Disputes," said Lee.
This follows the enforcement of the Singapore Convention on Mediation in 2020, which provides a simplified and harmonised framework translating into a higher degree of certainty and significant cost and time savings.
"We handled a instance involving siblings who were at odds with their mother and begetter over how much of their parents' wealth would exist donated to charities. At the same fourth dimension, the sis and brother were at odds over what types of charities they should donate to." – Chiman Kwan
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IN SINGAPORE, A NEW TYPE OF Family OFFICE
Singapore's burgeoning investment landscape has given ascent to new forms of the family unit office beyond the binary of multi-family versus unmarried-family iterations, the latter of which typically requires liquid assets of upwards of US$100 1000000 to be viable. This includes independent hybrid structures that outsource certain functions to stay cost-efficient, while untangling knotty family unit issues discreetly.
Robin Pho, CEO of renewable energy first-upwards Correct People Renewable Energy, established such a family function to consolidate, review and rebalance his family unit'south wealth and assets when his father passed away in 2014. Equally the family unit's appointed wealth manager, Pho has the latitude to make investment decisions, with the help of trusted advisors.
A onetime private banking professional, he is no stranger to clients locking horns. "Disputes frequently occur when in that location is a lack of clarity and off-white process, and when decisions are made based on emotions and knee-jerk reactions. Perhaps due to our Asian civilisation, these often atomic number 82 to cold wars between family members," he shared.
Possible incendiary areas of ambiguity Pho highlighted include wealth distribution policy – should dividends be paid out yearly regardless of financial performance, tied to portfolio, or based on whim? – besides as caveats for loans disbursed to family members. He recounted the case of an "entitled next-generation family unit member" who was incensed at having her business organization loan denied, despite it comprising less than one per cent of the family's full wealth.
"If the family had established clear rules and policies on when capital letter could exist loaned out, and so the aspiring entrepreneur would not have simply expected an easy handout. Criteria tin can include insisting that the borrower complete their academy education, or find a co-investor who believes in the idea in social club for the family unit to lucifer the investment," he said.
"The landscape for dispute resolution in Singapore is constantly evolving along a positive trajectory." – Lee Woon Shiu
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The father-of-two sits on the lath of directors of Family Business Network Asia, a not-profit organisation that shares best practices for family businesses. Members receive training, which may involve part-playing sessions, on how to deal with tough conversations and accost problems respectfully. Such initiatives – alongside sound frameworks – caryatid families from being caught on the dorsum foot, especially when individual values can be diametrically opposed.
A report deputed by DBS Private Bank noted that a generational shift in how the purpose of wealth is perceived has recently taken place in both the East and West, with the younger generation placing greater accent on impact investing.
"When we think of wealth, we recollect of financial capital, merely in that location is so much more than that. Families likewise take social, spiritual, human being and intellectual majuscule, which they need to preserve, manage and develop. This is where working with family unit offices helps," asserted Pho.
If anything, family offices are a barometer of changing priorities.
"Following COVID-xix's emergence, high-net-worth families share heightened sensation of their potential vulnerabilities, and are placing greater urgency on long-term needs such as succession planning. They're also more than cognisant of societal issues, and increasingly slap-up on driving meaningful change in their communities," said Lee.
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