How to Leave a Family Legacy that Lasts

How to Leave a Family Legacy that Lasts


Leaving a legacy is possibly one of the biggest sources of apprehension for ultra high net worth individuals (UHNWI). This is all the more so for individuals in the first generation that have created the wealth through entrepreneurship.

And while entrepreneurial flair is most likely the source of an individual’s wealth, these self-same characteristics are potential stumbling blocks to leaving an appropriate and lasting legacy for future generations to benefit from.

“By their very nature, entrepreneurs are visionaries who focus on the big picture and are often totally engrossed in driving their business forward,” says Eddy Oblowitz, Executive Chairman of Stonehage South Africa, a global, independent Multi-Family Office, which is part of the Stonehage Fleming group of companies.

“And while they may recognise the importance of successfully transitioning the fruits of their labour to the next generation, all too often these decisions and actions are placed on the back-burner.”

Related: Build your Business Legacy through Succession Planning

This critical mistake could lead to future wealth preservation faltering, or worse, being wiped out. Oblowitz says UNHWIs can guard against this by putting the necessary processes and measures timeously in place.

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The starting point would be to appoint a suitably qualified advisor who is independent, has the relevant skills and experience, knowledge of the family dynamics, infrastructure and global insights. This is seldom as easy as it sounds as financial advisors are a dime a dozen and such specialist skills may not necessarily be found in every financial advisor.

The search for such expertise should therefore not be undertaken lightly, with the key requirements being independence from a financial institution and the family and a keen understanding of family governance and attendant risk management.

“These are important considerations because succession planning is as much about wealth preservation and how that is passed on to the next generation as it is about retaining the culture and values the founder espoused and moulded,” Oblowitz says.

This might be considered a ‘soft’ issue, but one that could determine how effectively a legacy is preserved and built on.

Oblowitz suggests that a ‘family constitution’ is one of the practical ways to effectively enshrine the family’s culture and values as guidelines for future generations. Setting this down in writing serves to remove emotion from decisions, clarifies the family’s purpose for their wealth and unifies family members around core principles and implementable practices for remaining united, often in a times of crises.

“This is in effect a strategy document that incorporates key issues such as risk tolerance, governance procedures and structures as part of the transformative process of effective succession planning,” he says.

Contained in such a document could be, for example, how the family’s commercial interests should be run once the founder has stepped down or passed on.

Entrepreneurship and business management are not skills or acumen that all family members necessarily possess, and if this is recognised in a strategy document and appropriately acted upon, the founder can be assured that the business he/she has built up can continue to feed the family wealth.

Similarly, if the founder and family have identified a successor to the business’s throne, a clear strategy that outlines the manner and requirements of succession could ensure continuity and success.

All decisions need to be directed towards preserving and prudently growing a family’s wealth, and this requires that tough and often sensitive decisions be taken to ensure that the right decision rather than an emotive decision is made.

“In certain cultures, it might be considered ‘right and fair’ for the first-born son to automatically take over the mantle, but the real question to be asked and acted upon is whether it for the best interests of the family if that person is not suited or perhaps interested in these matters,” Oblowitz remarks.

Related: My family and I want to start a business together, but I’m worried about conflict. What are the common threats to a family business?

Setting down principles and objectives also side-step the thorny issue of succeeding generations believing in automatic entitlement to the family wealth that could potentially scupper a founder’s life’s work.

“Naturally, in the interests of maintaining open and transparent communication and in the interests of preserving family unity, the decisions on what these principles, objectives and guidelines are should so far as circumstances permit, be taken by the family collectively,” Oblowitz cautions.

“This not only engenders a sense of common destiny, but also allows for potential future disagreements to be ironed out before they become debilitating and or destructive.

“This is another reason that an independent, qualified, outside advisor is important to the success of any successful succession planning process. A voice of reason backed by experience and insight goes a long way to eliminating imprudent, emotive and or knee-jerk decision-making.”

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