The rise of Asian family offices beyond wealth management
Since the turn of the millennium, Asia has witnessed an eruption in the value of family businesses, as well as a rise in newly anointed billionaires seeking professional guidance for their burgeoning wealth. As a result, in recent years, there has been a boom in single family offices across Asia. This ascendance has led places like Singapore to implement new regulatory measures aimed at strengthening the governance frameworks of both single and multi-family offices.
According to Bloomberg, the dynamic terrain of family wealth management is increasingly marked by burgeoning fortunes and a diminishing number of heirs, leading to fewer familial disputes and underscoring the critical need for stringent governance.
In India, the family Office model is similarly transforming, with a pronounced emphasis on wealth preservation and accumulation, albeit with a wider focus on the well-being of people (family members, professionals) and the health of the planet.
In this changing context, the role of a family office should extend beyond the conventional scope of wealth management to become an internal sentinel, where governance is paramount. This evolution requires a more sophisticated oversight of business operations, strategic planning, resource allocation, interpersonal dynamics and the overarching mission of the family enterprise. For example, ‘if my suggestion was not accepted years ago now, how can it be accepted or implemented when suggested by a next-generation member?’
Times have changed and a vital area that warrants increased focus is mental health, an often-overlooked element that is essential for comprehensive well-being. The fundamental questions for family offices revolve around the purpose of the family business and the strategies for its smooth transition to subsequent generations. The ATM for Happiness model (‘acceptance’, ‘take charge’ and ‘making the most of it’) provides a valuable framework for fostering this mindset, highlighting ‘acceptance over expectations’, ‘proactive engagement over fault-finding’ and ‘making the most of available resources instead of dwelling on what is lacking’.
A family office acts as a central hub where diverse viewpoints are methodically evaluated to arrive at optimal decisions. They play an essential role in understanding the underlying purpose of each family, thus enabling well-organised successions. By integrating mental health considerations from the beginning, family offices can establish precedents for the proactive management of potential issues.
To cultivate effective family governance, several key principles are recommended:
Financial independence: Advocate for the use of personal funds for lifestyle purchases to promote financial responsibility, moving away from dependence on joint financial accounts. Balance safety of return of capital over return on capital / investment.
Financial transparency: Maintain openness in financial transactions, investments and returns to build trust and understanding within the family
Philanthropy and legacy building: Allocate a portion of profits to reinvestment and charitable endeavours, nurturing a sense of responsibility towards society. Investment strategies across various asset classes should be explicitly outlined. Here, personal involvement can be very useful for family members of different generations. At times there are no heirs, which can be a great source of worry for the existing generations. Here, a lot of planning can be done to ensure that the legacy of the family continues in their absence.
Harmonious resolutions: Promote peaceful resolutions in both personal and professional spheres to reduce emotional distress. Do not let majority opinions, good-looking opportunities or silence become the crutch of wrong decisions. Succession is not enough. Well-planned succession requires a lot of letting go and resolution of differences of opinions between different generations. A fair process of each party being heard is when a professional family office plays a significant role – although, in a lot of cases, the head plays this role informally. Legal documentation exists on paper, yet it’s to be followed in the spirit of fairness for all.
Access to essentials: Ensure all family members have reliable access to necessities, including healthcare and financial support.
Compassionate support: Designate a family representative to offer support during times of loss, especially for members who live afar.
Inclusive family retreats: Strengthen family bonds through annual retreats that incorporate spiritual discussions, along with activities suitable for all ages.
Proactive mental health monitoring: Regularly evaluate mental health to identify and address concerns early, emphasising the significance of mental well-being.
Candid communication: Encourage the open sharing of challenges and discourage the assignment of blame and focus on learning from setbacks.
Foster collaboration: Enhance teamwork within the family's business ventures, dismantling barriers to create an environment where joint efforts contribute to collective success, in alignment with the family's goals.
Networking for mental wealth: Facilitate professional interactions focussed on mental wealth, inviting substantive discussions and collaborations in the realm of mental health. Share expertise and strategies that enhance mental resilience and well-being, welcoming others to connect for support.
An often-heard sentiment is, ‘I am doing my best to collaborate and communicate, but what can I do if others don’t respond?’ This highlights a crucial aspect of family governance – the need for a culture that encourages open dialogue and feedback. Sometimes, despite best efforts, communication barriers may persist, possibly due to unintentional actions or an ingrained culture of silence. It's important to reflect on and address these barriers, fostering an environment where every member feels empowered to speak up and engage.
By embracing these principles, a family office can transform into a dynamic, comprehensive entity that not only manages wealth but also significantly contributes to the well-being of its members, the business, and the wider community.
