For families who wish to build a legacy for many generations to come, it is necessary—not just important—to ascertain what the desired outcomes after the “glue” of the family is no longer.
Over the past months, in preparation for the 15th annual Asia-Pacific Family Office Conference (APFOC), on 25-26 October, 2017, I have had the privilege of obtaining some insights into what has worked for some families, and what causes a once-formidable family business to lose their fortunes.
One third generation member in his 30s shared this: “How a generation squanders away $1billion in less than a lifetime is beyond me, but it's happened.”
This G3, blessed with the ambition and capability afforded by his upbringing and education, wondered if the previous generation was given the same education, if the fortunes would have been intact today.
Beyond education, there are many contributors to how a family can preserve wealth. The concept of a family office in wealth preservation is obvious. Professor Roger King, a co-chair for this year's APFOC, believes the family office can also play a role in preserving legacy and family harmony—two outcomes that should not be taken for granted.
There is an abundance of empirical evidence to show that the third generation curse is not just a saying. And it pervades across cultures. Yet, in Japan, there is numerous examples of multigenerational families, beyond G3.
This summer, I visited Hoshi Ryokan, established in 718 (yes, it is more than 1,300 year old) and found out (too late) that the oldest surviving generation takes time every morning—before breakfast (hence I missed it!) to share the ryokan's history with guests. I did meet the next gen, a well coiffured young lady who bade us farewell before we took our leave. That was the level of hospitality displayed at this family-run establishment which has survived 46 generations.
Takao Kawamoto, the only Japanese next gen at this year's conference, offered a clue to how Japanese family business are able to withstand the ravages of time and fallouts that may lead to the collapse of a family business or name. The rule of inheritance is constant over history: the firstborn male inherits everything, and the rest are free to pursue their own interests. There is no room for negotiation. In families where there is no male heir, in-law's or unrelated persons can be adopted to carry on the family name—and legacy.
“From the time we were children, we were raised to respect this rule. There is no resentment, merely a fact of life.”
Just as death is a fact of life. Overcoming the taboo of talking about the end can help families avoid family fall-outs that have arisen—and can continue to pose a threat to a family's integrity and therefore legacy. To ensure a smooth transition or succession planning, an honest discussion about life after is a necessity, not a taboo.
For more information about the Asia-Pacific Family Office Conference, click here.