East Asia's Young Rich Redefine the Concept of Legacy
Originally published in The Business Times TUE, JUL 02, 2019 - 5:50 AM
FOR a millennia, Asia's thinking about legacy has been framed by the Confucian ideals of family.
This is changing. A new HSBC commissioned report by The Economist on high-net-worth individuals - defined as people with more than US$1 million in liquid assets - in China, Hong Kong and Singapore reveals that rather than narrowly focusing on passing on the family business, this generation focuses on giving the heirs flexibility and securing their aspirations, while grappling with life priorities.
A combination of new money and new ideas has meant that a new generation of affluent Asians are expanding the concept, looking for ways to actively improve a much broader impact to the society in the long term, preserve culture, or take an existing family legacy in a new direction.
The study, Passing the Torch: Bridging mindset gaps between high-net-worth generations in Hong Kong, mainland China and Singapore, also highlighted that the new generation's business focus is shifting.
Many members of the younger generations are deciding to start their own businesses, frequently under the umbrella of the family business, and set up a charitable foundation or engage in corporate social responsibility.
For example, in Singapore, Mark Lee, the third-generation CEO of Sing Lun Holdings, has seen the vision of his family business change since his grandfather started the firm in 1951. While previous generations were focused on chasing opportunities, this generation is more concerned about stewardship or social investing.
He shared that a company is like a tree and each generation will create new branches, taking the company in new directions. His job is to ensure that the branches do not turn into splinters.
This generation is also expanding the concept of legacy to include the long-term impact they have on society. Beyond financial security, peace of mind of knowing your legacy will preserve not just the business, but also harmony within the family including philanthropic giving. As part of business succession planning, there is also a growing openness among entrepreneurs on letting professional managers run the business, something that was rare and culturally challenging even 20 years ago.
When business owners choose not to pass on their companies to familial relations, they tend to sell and shift into philanthropy and in many cases, see their philanthropy as the everlasting legacy. They want their children to invest time and talent, and cultivate enduring value, not just money.
There is a radical shift in legacy planning among East Asia's wealthy. The days when the patriarch went to his grave assuming that his eldest son would automatically take over the family business are fading fast. A large number of family-owned companies fail to transition to the next generation of leaders when the founder died. Even the most sophisticated and knowledgeable business professionals get caught in a web of complicated issues and fall victim to intra-family feuding.
This has amplified the necessity of effective estate planning for an increasing number of families that have assets spread around the world, crossing multiple tax jurisdictions. The fact that many people are redefining for themselves what they mean by legacy, and what they want their own legacy to be, has led to a welcome increase in the numbers who are seeking advice early on how to shape, manage and preserve their legacies.
It is tempting to see these shifts as symptomatic of a broader move towards an alien concept of Western-style individualism, and in some cases it is. But many are using their legacy to preserve the best aspects of their culture, such as buying back cultural artifacts and making sure they are accessible to the broader population, or supporting the villages that were home to their ancestors.
In the Asian context, it seems modern legacy planning combines the best of the family-oriented traditions of old with a more flexible and better-planned future.
The writer is head of Wealth & International at HSBC in Singapore