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The pursuit of happyNEST: A guide on family wealth management
Learn strategies for effectively transferring assets and preserving family wealth for future generations. Secure your legacy with our comprehensive guide.
By Lizette Perez
Wealth management and preservation for the ultra-high-net-worth (UNHW) is a daunting task which goes beyond financial management. More importantly, it involves the perpetuation of the family legacy. This is why it is equally important to ensure the general well-being of family members across generations.
Family wealth management and preservation for the ultra-high-net-worth (UNHW) is a daunting task which goes beyond financial management. More importantly, it involves the perpetuation of the family legacy. This is why it is equally important to ensure the general well-being of family members across generations.
UHNW families have various business interests and own substantial assets locally and offshore. With multiple sources of income including income generating assets, they have complex needs and face numerous concerns that need to be managed well. First among these is BUSINESS — the setting up of strategic vision & direction as well as day-to-day business demands. Second is management of financial and & real ASSETS, owned individually and by the family. Third is FAMILY MANAGEMENT.
The first generation is usually focused on business and asset management because wrong decisions could result to huge financial losses. For this reason, they engage the best consultants in the industry to deploy or reallocate assets to the next most promising venture, talk to their bankers about loans and investments to maximize business profits and optimize portfolio returns.
The Filipino family and wealth
What about Family Portfolio Management? How important is this for the UHNW?
Many among us are familiar with numerous celebrated “Family Feuds” that have turned mean and ugly that has led to costly legal tussles over control of business and assets, which sadly ends up in the tragic breakdown of family relationships. This estate planning mistake goes against the long-term vision of the wealth creator for the clan.
This leads us to the main thesis of this piece:
“That breakdown of the family system is the single biggest destroyer of wealth and the one true source of unhappiness among the affluent. Wealth is not meant to destroy family relationships, it is meant to forge it.”
Pinoys are generally known to be ultra family-centric. Parents look to accumulate wealth over and beyond what they need because it is critical to leave something substantial to the children. However, only a few believe that their children are prepared to handle a huge inheritance and even fewer have revealed their actual wealth to their heirs. Most Filipino families have weak successor training and very restricted information sharing.
Why is this so? Why are Filipino families not actively addressing this area of concern?
Parents are rightfully concerned that knowledge of wealth may affect their child’s values, work ethic and security. Some parents are even concerned that their inheritance can affect their children’s marriage. And while they truly believe that the family would benefit from developing a formal set of principles to guide the purpose and meaning of their wealth for an effective transfer of wealth, only a selected few have actually done so. Why? Perhaps because crafting a family vision is a long and tedious process that involves commitment from all family members.
The role of trusted advisors in wealth transfers
Filipinos are innately family-centric. I often see this in parents who look to accumulate wealth over and beyond what they need because it is critical for them to leave something substantial to the children. Only a few of them, however, believe that their children are prepared to handle a huge inheritance, and even fewer have revealed their actual wealth to their heirs.
This is where trusted advisors come in in the process of asset transfers.
Usually, there is a need for an objective third party to fully unearth and understand interpersonal relationships, historical conflicts and other family needs. There are multiple providers & products available that help address specific areas of Family Management. Metrobank is well-placed to partner with independent counsellors who are experts in Family Education & Governance.
For us, the state of “health” of our families is as important as the weather-proof portfolios that we build for them. In order to ensure the family’s well-being over time, these are some things that the first generation can reflect on:
- How are the children being prepared to handle bigger responsibilities?
- Are succession lines clear and defined?
- How will the perpetuation of the family legacy be ensured?
- Is there a STEWARDSHIP mindset in the family, or just consumption?
- Is there an effective conflict resolution process in place?
Preserving legacy and family harmony with Metrobank
Preserving wealth for future generations is a complex endeavor that extends far beyond financial management. Metrobank understands that for UHNW Filipino families, family must come before wealth. By prioritizing family management alongside financial planning, families can safeguard their legacy and ensure a more financially savvy future for succeeding generations.
At Metrobank, we encourage clients to think about both Family Management & Portfolio Management because each family is unique and there is no one-size-fits-all solution for a successful wealth transfer strategy in the pursuit of a happy nest.
LIZETTE PEREZ is Head of the Private Wealth Division of Metrobank and has over 20 years experience in Private Banking. She is a B.S. Business Economics graduate of the University of the Philippines and earned her master’s degree in Economics at the University of Southern California.
This opinion article is part of Metrobank’s Financial Education campaign series.