“There are a thousand Hamlets in the hearts of a thousand people, and there are a thousand different family offices within a thousand families.” Different families encounter distinctive problems at different stages. They have different areas of focus, so there is no “one-size-fits-all” solution. As with iPhones, they look alike, but each one of them has its own interface and software since the owners have different tastes.
As we all know, Apple’s iOS system is popular thanks to its security, stability and user-friendly design. It is said that “a different profession is like a different world”, but in terms of strategic thinking, the concept of Apple’s iOS mobile phone system has something in common with the family office service philosophy that I have already insisted on.
As a multi-family office operator who positions himself as a “buyer” and devotes himself to incubating a single family office for customers, I divide the service field into three stages, i.e. “defense”, “progression” and “succession”.
It covers ten service modules, each of which focuses on solving a major problem and, in practice, uses iOS system-based thinking to help customers modularize their exclusive family offices on demand.
Commitment to building a stable and secure “family iOS system”
At present, most Chinese family office customers are first-generation entrepreneurs who hold assets in a very “primitive” way. During the rapid pursuit of development, therehas been no time or energyleft for straightening out property rights, leaving many potential risks to arise from assets, trusts, marriages, laws,and tax affairs. Only wealth thathas its risks squeezed out can be preserved and inherited.
Therefore, during the “defense” stage, the first thing to do is to conduct a comprehensive professional review of property rights, including classifying property rights, analyzing their features, potential problems and risks, and eventually organizing the family assets in terms of property sectors, holding structures, and division of powers in a comprehensive and professional way. Afterwards, based on the purpose of the family’s plans, their priorities and areas of focus, cost efficiency, and the types of assets, they should create the appropriate structure using a mainly non-American or a mainly American system for offshore structuring, and then build a Chinese structure according to their requirements. Due to the complex legal and tax environments at home and abroad, as well as the relationship between different business entities, it may be necessary to combine the family members’ nationality, tax status, and place of residence at the advice of a professional team in order to carry out systematic planning.
As with the iOS system, when you start using an Apple device, it not only provides you with extremely secure built-in devices, but also hardware and software that is specially designed by technicians to prevent malware and viruses. Similarly, tools that do not meet certain standards or buyers’ needs cannot be built into our systematically-designed structures.
Integrating resources to create a customized “family wealth management iPhone”
At the “progression” stage of family investment, focus is placed on the establishment of family funds and investment portfolio management. Horizontally，this stage is complementary to the cultivation and development of family enterprises and family members. Vertically, its steadily-upward trend can offset period risks and provide steady cash flow for the families. From a service perspective, investment management is an easy field for family offices to access, but it may cause an inclination towards product-based or project-based operations. Therefore, it is necessary to distinguish institutional investment logic from family investment logic.
With regards to family investment, this should firstly be considered from the family’s strategic level, with the family investment system constructed by focusing on the family’s members, affairs, and investment purposes. The purpose of the investment is not simply to make money, but to develop along with the family business, to cultivate the second generation, and to create wealth. Profits are just the result of such a process. There are a great number of investment institutions and teams in the market, but the most famous ones with the most comprehensive services may not be the best choice for a certain customer. Combining their different family businesses and industries and relying on different innovations and accumulated resources, every customer, in my opinion, should have a customized “family wealth management iPhone” exclusive to his/her family.
Following an iOS system-based way of thinking, and based on a secure and stable wealth management system, a fixed professional project team should be offered to each customer. Experienced expert teams, institutions, and resources are all available on a global scale based on different areas of focus and demands for business coordination, risk-hedging, transformative innovation, and the cultivation of successors. Just like there is a number of high-quality apps listed and recommended in the App Store, customers may select exactly what they want to assemble their own system interface.
Coping with shifting circumstances by making changes: systematic and regular updating, reviewing and optimizing
Victor Hugo once said: “Progress stands for constantly-displaced goals and stages under constant change, marked by a shifting horizon”. The family is like an ecological system undergoing long-term development and changes, with internal factors like the increase of family members, changes of marriage and changes of personal pursuits, as well as external changes in the market’s environment and economic policies, and should therefore follow the systematic philosophy of “coping with shifting events by making changes”. The customer’s system should be reviewed, updated and optimized on a regular basis.
The stage of succession means moving into the stage of family management and family office set-up, which should build a customized family management system based on the diagnosis of family problems, determine what “should be succeeded” and accordingly guide the path for setting up a family office, including the positioning, model, team building and IT management system building, i.e. “How to succeed”. Family offices should cultivate successors and gradually make it clear what should be succeeded to whom, according tothe direction of the family’s development.
Supposedly “not even good officials can settle family troubles”. Things become very complicated when you enter the stage of family management. Metaphysical factors like the mental status of family members and family vision can make implementation even harder. As a “buyer”-positioned family office, you need to see things from the customer’s point of view, assist customers in monitoring whether institutions operate within agreed frameworks, and make reasonable adjustments to satisfy the family’s needs and wishes. Just like constantly upgrading and optimizing the iOS system, only through modularization based on their needs at different stages can a family office gradually evolve into an ideal choice for high-net-worth business families.
