‘Wealth destroyer’ plans a family office
Genting Berhad’s Justin Leong is working on bucking a typical trend for wealthy families. “I’m the wealth destroyer because as you all know in every culture, whether it’s Chinese, American or European, the third-generation is very much the one that destroys it or loses it.”
Leong, the scion of a Malaysian conglomerate that operates casino, energy and plantations businesses globally, said he is in the midst of setting up a family office in Singapore. “The number priority for any family is the preservation of capital and preservation of wealth.”
During the 2008-2009 financial crisis, Leong said his family was “very busy moving money into the safe haven banks here in Singapore, in Malaysia and in Hong Kong”. The financial crisis had been a “wake-up call to formalise and to really figure out how we want to run the personal side of things, in wealth management, wealth preservation and transfer.”
Speaking at the SALT Asia Conference in Singapore recently, Leong said his late grandfather founded Genting and his uncle is now running the business. “We would like to create a return in the short and medium term but we must plan for multi-generation in the longer term.
“As a principle in my own family office, we obviously do look to generate a return over the short and medium term. But we do plan for the very, very long term. We’re able to look at things in terms of 50-year blocks. So when funds come up to us and say they are long term, we do ask them ‘what is your long-term?’ Because ours is 50 to 100 years. That shows when we invest in real estate, in property and homes, it’s my wish that not only my children but the grandchildren will be able to make use of all these places as well.”
In family wealth management, families need to know what they want, says Noor Quek, Founder and MD at NQ International, a family office advisory in Singapore. “It’s your money and you need to know what’s happening to it, where it’s going and you need to tell your advisors what you want so that they can give you what’s best for you based on their own resources.”
Families are complex and they are looking at very long term issues, she says, adding that it takes time to understand what goes through the patriarch’s mind. “I find that however modern your thinking is, however technical you might be, you have to be in cognisance of the cultural differences … you have to sit down and talk about family issues.
“It’s family dynamics which brings down companies, not family businesses. Family businesses will thrive if the family dynamics are good.”
Leong says communication in the families is not easy. “You all have your own families, your own children, your own brothers and sisters, your own parents and how often is that you sit in a room and there is really this giant elephant in the room and no one really wants to talk about it, everyone just wants to skirt around the issue.
“That happens a lot in families and addressing the key issues is very important and fundamentally very difficult.”
He adds: “Balance is very important, who is the person that brings out the opening in the room and how can you have a mature discussion. And be willing to segment the roles, what is family and what is business. Often times, the two gets intermingled and it really gets very, very complex because you’re using emotions to run a business which isn’t a very optimal way of doing this.”
Quek says there is no one solution and no two families are the same. “Start with very simple things and start to work your way through.”
Roxanne Davies, MD of Parly Singapore, a unit of the family office of the Spinolas in Italy, says families “do communicate, they do meet and it’s almost like a professionally-managed firm and the communication continues.
“They are on top of how the money is being managed and they can increase allocations to one asset class or lesser.”
The current generation, she adds, is still young and the next generation is the children. “We have a trust company with the purpose of helping our own family as well as other families, to structure, based on family values, what you want to do in terms of foundations, philanthropy and giving back. How much is education and health important and whether there is a dynasty trust left on for generations to come. You can control certain things but not everything.
“One of the main things that I’ve learnt working with all these families is really how the families interact on a daily basis with each other. So the parent wants the child to listen and to learn, it’s really how the value system that he imposes on the children, that’s really going to drive how the child will behave later.”
Quek adds that philanthropy can be a very strong glue for families and it “takes away the ugliness of money. In Asia, 80% of the businesses are owned by families and they provide livelihoods.
“I find that it’s not just writing a cheque but actually spending time at a cause, or with a cause together with the next generation. It’s an excellent platform for family members to communicate and to see the good in giving back.”
Communication is big topic among families, says Hansjorg Borutta, CIO at Swiss wealth manager Marcuard Heritage. “Between key clients, the families, there are a lot of similarities. You can have very sophisticated debates, up to the very basic debates, to keep talking and to find appropriate ways to make your points.”
At the end of the day, the professional managers are as good as the family’s ability to listen to them, Leong says. “Communication is one of the real critical things in any family office and it’s something we have to keep emphasising and to keep a focus on.”