From Family Wealth to Family Civilization: How will UHNWIs Pass on their Wealth?

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Inheritance of wealth has become an urgent problem for the first generation of rich people in New China.


(Photo credit: Panoramic Vision)

After 40 years of reform and opening up in China, the first generation of entrepreneurs is aging. Can China's modern rich families break the curse of 'wealth cannot last more than three generations'?

'China's first-generation family businesses have made great contributions to social and economic development and are an important part of China's economy. We are committed to providing professional services for the spiritual and material inheritance of family businesses, and will build an open resource platform.' On July 5, Aladdin family office President BaiRuiMin in Aladdin holding group and the economic observer, the family business magazine jointly sponsored and hosted the first 2019 lake yanxi said on the BBS, Aladdin family office for the first time put forward the concept of 'family culture' in the industry, hope to help the family enterprise material wealth inheritance development at the same time, For China's family enterprises to bring 'family civilization generation inheritance'.

Inheritance of wealth has become an urgent problem for the first generation of rich people in New China.

According to the 2019 China Private Wealth Report jointly released by China Merchants Bank and Bain & Company, 53% of high net worth people have prepared inheritance arrangements in 2019, surpassing those who have not started to prepare for the first time. As the proportion of family trusts as inheritance tools increases, the acceptance and expectation of family offices among UHNWIs continues to increase. More than 75% of the extremely high net worth people are willing to try family office services, among which the rich generation entrepreneurs and second-generation heirs have more willingness to demand family offices than the average level.

However, China Private Bank 2019, jointly released by China Construction Bank and McKinsey, shows that domestic HNWIs are still relatively unfamiliar with 'family offices'. Of all HNWIs surveyed, less than 20% said they had some knowledge of family offices, and only 2% said they were using them. Most HNWIs are still at the stage where they have heard the term 'family office' but have no idea what it means; Or have some understanding of the function and role of the 'family office'.

'As the domestic family office market is currently mixed and the overall service level is far from leading international peers, UHNWIs have yet to develop strong interest in the service.' China Private Bank 2019 further notes that this is not to say that family offices have no business prospects in China. From overseas experience, family office, as a more private, personalized, comprehensive and professional private wealth management method for UHNW individuals, is one of the most mainstream choices for UHNW families. By the end of 2017, more than 3,000 family offices had sprung up in the U.S. market. With the continuous resource investment and capacity upgrading of domestic financial institutions for this business, the popularization of customer education and the strengthening of market publicity, there is great hope for the development of a booming family office market in China.

'The family office originated in ancient Rome. In the modern sense, it really developed in the middle of the 19th century. The most representative family office of Rockefeller was founded in 1882, which has a history of more than one hundred years. In the past 100 years, family offices have flourished all over the world, which is a new word for China. It has only been 40 years since China's reform and opening up, and the first batch of family businesses have just been established. Globally, family offices have become partners for rich families to inherit wealth and demonstrate social responsibility.' 'As we pass on wealth to the second generation, the question is whether we are passing on more and more money or the spiritual wealth of the family,' Mr. Bermin said. This is a very important element in the development and inheritance of a family business.

In the Chinese circle, the practice of wealth inheritance in Hong Kong and Singapore has taken the lead in China.

Dr Wong Kam-shing, Managing director of Kowloon Watches Hong Kong, one of the top 10 famous watch houses in Hong Kong, shared his views on 'family responsibility in the new civilization era' at the above forum. A sense of belonging and ownership is critical and necessary for heirs of a family business to build a strong family culture, he said. With cohesion and centripetal force, young entrepreneurs can constantly lead the family business to success.

Peter Tsao, chairman of the Singapore Shipping King, Pan-Asia Group and the Asia Branch of the International Association of Family Businesses, expressed his views on 'family responsibility in the new era of civilization' through a video message. He believes that after breaking the curse of 'wealth cannot last more than three generations', the focus of family inheritance is no longer wealth, but spiritual and cultural inheritance. The inheritance of family business is not the inheritance of the company, nor the inheritance of the family, but the inheritance of the essence of family spirit and culture, including the inheritance of world outlook, values, organization and talent evolution.

At present, extremely high net worth people use a variety of family office services and have rich knowledge and experience in various types of services. Tax planning and legal advice, family asset allocation and management, and family wealth protection and inheritance are the most widely used services.

Despite the strong market demand, what is the current supply side of domestic family offices?

'The domestic family business customer base is just forming and the market is very early. 'It is very difficult to change the old market supply system because we see a big difference between the needs of family business customers and the business providers in the traditional system.' BaiRuiMin said, plus professional talent is hard to find, lack of market research, market agencies need to reorganize the business model in the perspective of family and family privacy, personalization, customization, high specialization, the requirement of resource integration, the current family office can only be classified as the early development, is expected in the next three to five years, family office at the early stage of the industry will have great development, There is still a long way to go.

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