THE RAFFLES LEGACY LEARNING CENTRE Educating Legacy ... · • In-house vs. outsource revenues • Tax strategy • Currency • Manager philosophy/correction • Specific targets:

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THE RAFFLES LEGACY LEARNING CENTRE Educating Legacy Families Across Generations

LEGACY AND LEADERSHIP WORKSHOP

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Mark Haynes DaniellRAFFLES FAMILY WEALTH TRUST Pte Ltd

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“Private bankers: An old-fashioned private banker, knowledgeable of a family’s affairs and members, bringing to bear an understanding of the approaches taken by similarly situated families in similar circumstances, discreet, relationship-oriented and focused on the long-term welfare of the wealthy family, can be worth more than his or her weight in gold.

A well-trained and capable private banker can bring expertise to bear on investments, tax, trust, Family Office staffing, family business management and ownership, and would have an experienced view on the development paths of members of the Next Generation. Finding the right private banker, an enlightened individual who can see and act with a family’s long-term perspective in mind, may be both the key to financial success for the family and the means to unlock the door to the inner sanctum for that individual banker.”

Source: Strategy for the Wealthy Family: Seven Principles to Assure Riches to Riches Across Generations

Mark Haynes Daniell (John Wiley and Sons, 2008)

On private banks and private bankers

Legacy Strategy Scorecard - Current Status

Integrated Legacy Strategy

(Planning Legacy)

Score / 10

Score /10

Family Organization and Governance

(Legacy Family)

• Vision• Objectives• Family and Buy-in• Appropriate Resources• Measures of Success

• Identity and Unity (as appropriate)• Leadership Model• Succession Plans• Organisation and Governance• Participation by Family• Roles/Responsibilities• Documentation/Formalisation

Score / 10

Family Eco-system(Legacy Advice)

• Structure• Quality• Performance • Cost• Management

- Performance reviews, comps, etc

Score / 10

Family Wealth Preservation

(Structuring Legacy Wealth and Values)

• Family Values• Asset Structuring

- Quality of Structures- Diversification

• Investment Philosophy• Distribution Principles• Responsibilities/TeamScore / 10

Risk Management(Legacy Risk Reduction)

Family Foundation/Philanthropy

(Philanthropic Legacy)

Score / 10

Score / 10

Family Wealth Management

(Preserving Financial Legacy)

• Investment profile• Investment Process• Asset allocation – purpose driven• Portfolio and manager/product

performance• Risk and cost management• Responsibilities/Team quality

Family Business(es)(Advancing Business and

Family Together)

Score / 10

Score / 10

Individual Family Members

(SWOT by Person)

• Strategy • Leadership• Financial performance (current, future)• Family participation

- Ownership- Management- Governance

• Vision• Accomplishment/impact• Amount of funding• Fund management• Family involvement

• Identification- Financial- Fiscal- Family- Other

• Response

• Entrepreneurial Spirit• Legacy• Understanding• Happiness (collective /

Individual)• Roles• Rights in Family• Responsibilities

Shared Legacy/Concept− Past (History)− Present (Values)− Future (Vision)

Score / 10

© Raffles Family Wealth Trust Pte LtdNot to be used or reproduced without permission

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LEGACY TOTAL / 100

Leadership Scorecard

Module Score

1. Family organisation/structure(s) /strategy correct? ___ / 10

2. Leadership structure clear and agreed – leadership model aligned with vision, culture, issues, values? ___ / 10

3. Leadership style effective? ___ / 10

4. Current leadership team accepted? ___ / 10

5. Effectiveness of leader and leadership team (based on successes and failures) ___ / 10

6. Succession plans in place and accepted (short term, long term) ___ / 10

7. Eco-system high quality? ___ / 10

8. Philanthropic activities appropriate and effective? ___ / 10

9. Performance feedback for family members and staff? ___ / 10

10. Development plans for leaders, successors and family members? ___ / 10

LEADERSHIP TOTAL ___ / 100

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Possible Asset Structure (Trusts, Corporations or Partnerships)

Child 2 Family Foundation

Child 1 Child 3 “HEW”Trust

Jersey – 40%

Capital Growth Assets

(Family Office + Manager/Bank)

Bermuda – 40%

Income Generating Assets

(Manager/Bank-led)

Domestic

Mixed Assets(Manager/Bank/FO)

Singapore – 10%

Back-up Jurisdiction• Flight Jurisdiction

Cayman

PTC

Jersey/Singapore

Corporate Trustees

Safety Money

Eco-System

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Like-minded Families

Social Contacts

1. FAMILY MEMBERS

Lead Advisor

2. INNER CIRCLE

3. TRUSTED ADVISORS AND STAFF

4. NETWORK OF PROFESSIONAL ADVISORS

5. BROADER NETWORK

Kitchen Cabinet

Family Office

Executives

Trusted Advisors

Trustees

Money Managers

Philanthropy Advisors

Social Clubs

Community Boards

Churches

Schools

Business Contacts

Accountants

Tax Advisors

Bankers

Attorneys

Other Families

Family Counselors

Circle best 3 and worst 3

Wealth Objectives – Trust

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The Investment S-Curve(example only – actual allocations to vary by family)

0% 20% 40% 60% 80% 100%

Safety Money

•Cash

•Bonds

•Property

•Others

All Weather Portfolio

•Private Equity

•Hedge Funds

•Property

•Others

High End

• New Managers• Emerging

Markets

• Direct and Co-Investment

• New Sectors

• Others

Pote

ntia

l Ret

urn

Low Medium High

Low

Medium

High

Risk

Wealth Objectives – Personal

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The Investment S-Curve(example only – actual allocations to vary by family)

0% 20% 40% 60% 80% 100%

Safety Money

•Cash

•Bonds

•Property

•Others

All Weather Portfolio

•Private Equity

•Hedge Funds

•Property

•Others

High End

• New Managers• Emerging

Markets

• Direct and Co-Investment

• New Sectors

• Others

Pote

ntia

l Ret

urn

Low Medium High

Low

Medium

High

Risk

Wealth Objectives – Foundation

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The Investment S-Curve(example only – actual allocations to vary by family)

0% 20% 40% 60% 80% 100%

Safety Money

•Cash

•Bonds

•Property

•Others

All Weather Portfolio

•Private Equity

•Hedge Funds

•Property

•Others

High End

• New Managers• Emerging

Markets

• Direct and Co-Investment

• New Sectors

• Others

Pote

ntia

l Ret

urn

Low Medium High

Low

Medium

High

Risk

Priorities and Actions

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1. Legacy Strategy Scorecard: _____/ 100

2. Leadership Scorecard: _____/ 100

3. Discussion Priorities

1. Family Element 2. Financial Element 3. Leadership Element 4. Other Element

Prio

rity

Issu

esAc

tion

Step

s /

[Res

pons

ibili

ty]

• No vision• No strategy• No succession plan

• Lack of liquidity• Too much risk• Not enough income

• Fragmentation• Joe/Bill dispute• No communication

• Eco-system weak• Low consensus on

philanthropy• X

• Annual 2 day meeting• Moderator for Joe/Bill• Monthly briefings

• Revised asset allocation• Reduce private equity/VC

and US$• Trustee board portfolio

• Develop strategy• Develop governance and

vision as Stage 1, steps to follow

• Begin process to define:− Future model− Candidates

• Review and renew eco-system by year end [JC]

• Hold special meeting on philanthropy [RC]

• X

Priorities and Actions

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1. Legacy Strategy Scorecard: _____/ 100

2. Leadership Scorecard: _____/ 100

3. Discussion Priorities

1. Family Element 2. Financial Element 3. Leadership Element 4. Other Element

Prio

rity

Issu

esAc

tion

Step

s /

[Res

pons

ibili

ty]

• ……………………• ……………………• …………………..

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• …………………...• ……………………• ……………………

• …………………...• ……………………• ……………………

Discussion Topics - Family

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I. Building an Enduring Family LegacyDiscussing the Meaning of Family Legacy in your FamilyComplexities of Ownership, Stewardship and TrusteeshipStaying in Control of Your Family Legacy When Working with TrusteesUnderstanding Generational and Branch Differences

II. A Shared Vision for the Family LegacyFamily History Map to Clarify Past LegacyDocumenting Family Values Seen in ActionsIdentifying Guiding Principles to Carry Forward and Leave Behind Understanding the Elements of The Family Promise

III. Developing a Vision of Future Legacy Gaining Consensus in the Midst of DiversityHow Much Togetherness is the Right Amount?What is Your Shared Vision of the Future Together?What Do You Want Your Generational Legacy to Be?

IV. Challenges and Opportunities the Family FacesIdentifying Risks and Challenges to Family LegacyPrioritizing Risks and Mapping their Impact on the FutureDeveloping Necessary Leadership Skills to Manage the RisksDeveloping an Entrepreneurial/Risk-taking Culture in the Family

V. Engaging Owners in the Journey AheadDiscussing What Emotional Ownership Means in Your FamilyEducating Owners about Responsible Ownership Determining Levels of Engagement for Each OwnerIdentifying Personal Learning Styles and Skill Sets

Developing a Legacy Planning Process for Your Family

VI. Principles of Governance to Foster the Future VisionMapping the Types of Decisions that Need to be MadeUnderstanding the Current Decision-making ProcessRights of Active Ownership versus Passive OwnershipSetting Goals for Each Dimension of the Family Enterprise

VII. Organizing Structures for Effective GovernanceStructural Models to Support Family EnterprisesIdentifying the Philosophies/Principles in Your Historical ModelsDesigning the Future Structure to Meet the Challenges AheadDeveloping a Family Constitution and Bylaws

VIII. Structuring the Family Office in Support of Family LegacyManager of Risk and Change and other RolesRange of Services to Support the Financial GoalsManagement Skills Needed to Provide Proper SupportDeveloping Leadership Succession Plans for Owners and Managers

IX. Monitoring the Impact of Your Legacy ProcessIdentifying Measures of Success that Matter to the FamilyEstablishing Periodic Review of the Progress MadeCelebrating the Successes within the Family

Talking Points – Structuring and Investment

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Philosophy of Wealth• Wealth ownership principles• Wealth “buckets” clear• Family roles and responsibilities• Distribution principles• Wealth purpose• Alignment with asset structuring• Measures of success

Developing a Legacy Planning Process for Your Family

Investment Strategy• Income vs. capital g• Risk profile• In-house vs. outsource revenues• Tax strategy• Currency• Manager philosophy/correction• Specific targets

Operational Issues• Custody• Reporting• Investment process• Investment committee• IPS (annual)• Eco-system• Cost control

Asset Allocation• Philosophy/approach• S-curve• Asset classes• Macro-environment view• Tactical ranges• Multi-generational• Alignment with

purpose/philosophy• Reporting• Investment process• Investment committee• IPS (annual)• Eco-system• Cost control

WEALTH MANAGEMENT

Strategy and Status• Family purpose• Philosophy of asset structuring• Objectives of structuring• Best practice and “Next

practice” for the future• Tax effectiveness and fFlexibility• Family governance and oversight• Learning to be a good trustee• Learning to be a good

beneficiary• NextGen preparation• Understanding ‘hard’ and ‘soft’

issues • Metrics (inc non-financial and

measurement reviews)

Eco-system• Family roles• Advisors

- Tax- Legal- Family

• Processes- On-shore- Off-shore

• Trust/Governance- Trustees- Protectors- Directors

• Succession- Educators- Mentors

Diversification• Purpose• Jurisdiction• Vehicles

- Trust- Corporation- Partnerships- SCC, LCC, etc.- Trustees/PTCs/oversight- Eco-system- Next practice

Documentation• Strategy• Wills• Trust deeds• Letter of wishes• Ethical will• Family constitution• Other

WEALTH STRUCTURING

Key Legacy Issues (and their alignment) Family operations and governance (meetings etc.) Leadership and Succession Document Architecture and Next Gen planning

Long term asset structuring (tax, family, risk factors involved) purpose and objectives Trust and corporate operations Diversification and efficiency

Family business strategy (plans, sale flotation, performance, financing needs, etc.) Role in family wealth plans Impact on family members

Family wealth philosophy and objectives Asset allocation and IPS Manager and product selection Cost and risk management Consolidated reporting

Design Selection Management (feedback, replacement etc.)

Quantum and objectives Plans, organization and assignment Funding

Family and family business roles Participation, education feedback Issues and concerns

Asset Structuring

Family Business

Family Wealth Management

Eco-system

Foundation

Individuals

Family Organisation