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    rethink sustainability

    Planning for family succession: open communication is key

    Planning for family succession: open communication is key
    Lee Wong - Head of Family Services, Asia

    Lee Wong

    Head of Family Services, Asia

    At the heart of any healthy relationship is communication. Yet, we seldom find families making a concerted effort to create a safe space for honest and open communication.

    This issue is not confined to Asian families, but it is arguably more pronounced given our cultural inclinations and the patriarchal nature of our family construct.

    Many families we come across, even those who work together in their family enterprises and family offices, do not have formal meetings or any formal structure for communication. Succession and legacy structures are typically driven by aspirations and decisions of patriarchs and matriarchs, without consultation or communication with their next generation family members.

     

    Silence is not always golden

    Conversations about money are difficult, regardless of whom you are having them with. Most people feel both uncomfortable and ill-equipped to navigate discussions about their family wealth. Such dialogues are nonetheless essential for several reasons.

    Firstly, a failure to communicate may be misconstrued as withholding information, which in turn may generate distrust and lead to speculation. The perception of secrets is not healthy in a family setting since secrets, by definition, exclude someone; and no one likes to be excluded in a family context.

    Secondly, succession is an emotive subject. Inheritance is often viewed by heirs as an expression of parental love or a lack thereof, and therefore it frames their perceptions of their place in the family. Decisions regarding ownership and management succession, if not properly discussed, explained and understood, could cause resentment that may be expressed by disgruntled heirs in hostile legal proceedings.

    Decisions regarding ownership and management succession, if not properly discussed, explained and understood, could cause resentment that may be expressed by disgruntled heirs in hostile legal proceedings

    Indeed, in the context of family wealth, the lack of effective communication within families creates vulnerability to family conflicts, a perception of unfairness and other unintended consequences such as the misuse or loss of family wealth. Every now and then, we find next-generation family members lamenting about the opaqueness of their family succession plan.

    The uncertainty caused by the lack of an aligned vision for the family's tomorrow gives rise to anxiety and tension within the family.

    One may assume this desire for information is driven by greed. This is far from the truth. There is usually a deep love for the family and a fear that the harmony that exists today may be lost upon the passing of the elder generation, if succession matters are not properly dealt with and understood.

    There is also a fear among next-generation family members of being ill prepared for what is expected of them when their time comes to act as family stewards. The lack of clear career progression opportunities within the family enterprises may at times result in the unintended consequence of a talent pool drain, as the more able and ambitious next-generation family members decide to venture out to pursue their individual aspirations.

    On the other side of the fence, we also hear fears of the elder generation regarding the transgenerational sustainability of their family wealth, as well as their anxiety over the sense of entitlement and lack of drive and self-efficacy of the next generation.

    It is disheartening as a family adviser to feel so much love on both sides of the family spectrum, yet see so little understanding and alignment. Clear and honest communication in an open and safe forum translates the unspoken into the spoken, and issues can be discussed.

    Read also: Trends and changes among Asia's High-Net-Worth Individuals

     

    From confusion to clarity

    Why is effective communication difficult? Every individual's perspective is shaped by his or her life experiences. Communication can be challenging when individuals come to the table with different perspectives that they individually believe to be justified and therefore will vehemently defend. Disputes are often a result of not listening and not according respect to and acknowledgement of the other person's point of view.

    It is important we recognise that differences in opinions are inevitable, and that considering different perspectives often results in better decisions.

    Effective communication requires us to make a realistic assessment of self and of those with whom we are communicating. What are their beliefs and limitations? What do they value? What are their interests and priorities?

    It is also imperative to have clarity of one's communication objectives. Successful negotiators know where they are coming from and what they want to achieve. They also put themselves in the shoes of others and consider what others have to say. They listen actively and are conscious of their feelings, so that they do not react emotionally in a way that does not serve them.

    Resilient communication requires us to take stock of our communication style and the impact it has on others, and vice versa. It also requires us to take responsibility of our feelings and to be prepared to risk vulnerability by communicating our concerns and emotions without attributing blame. Such authentic dialogues build trust and deepen relationships.

    When a family is well-placed for resilient communication, it can then create a safe and open forum to discuss their philosophy of wealth, what it means to them, how they use it and how they pass it on.

    When a family is well-placed for resilient communication, it can then create a safe and open forum to discuss their philosophy of wealth, what it means to them, how they use it and how they pass it on

    Dialogues about a family's core values, its collective mission and its vision of tomorrow provide leadership and a destination for a family well into the future.

    Having a clear code of conduct for a common way of behaving helps a family put fairness in context and promotes family cohesion.

    Discussions about values give a family the opportunity to bridge generations - to combine the legacy of the founding generation with the dreams of the next generation as to the future they wish to create. It prepares a family to work towards common goals and establishes a sense of actionable priorities.

    Read also: The Giving Chronicles: 8 factors that influence giving in Asia

     

    All hands needed on deck

    As a family constellation grows, the alignment of the family group with a collective narrative becomes progressively important. Each preceding generation has a part to play to prepare the next for the diplomatic role it will eventually undertake to carry collective wealth across generations. The institution of a Family Council to drive resilient family communication and responsible decision-making is imperative.

    A family that is united by its mission and vision is a family of stewards who carry a sense of responsibility around wealth that looks to future generations

    A family that is united by its mission and vision is a family of stewards who carry a sense of responsibility around wealth that looks to future generations. As we cast a critical eye upon the state of our world today, we see a planet paying the dues of an economic model that is wasteful, idle, lopsided and dirty. Private capital has an important part to play to support the transition to a more circular, leaner, more inclusive and cleaner economy.

    Increasingly, we find families with an insurgent mission to embrace sustainability- not just in the way they invest, but also in the way they organise their family enterprises and how they express their social responsibility. By helping families to instil the practice of robust communication and a governance framework that aligns them to their values, mission and vision, we not only support families to achieve sustainability of their family wealth across generations, but also steer them to be a force for good.

    Important information

    This is a marketing communication issued by Bank Lombard Odier & Co Ltd (hereinafter “Lombard Odier”).
    It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a marketing communication.
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