The importance of making way for the next generation.
The UK’s Applerigg did not have a formal succession plan in place, but pragmatism and an acceptance of impermanence and change helped Alexander Scott make way for the next generation.
“My view is that when you’ve made a decision about succession, then you should get out of the way. And that's what I'm doing,” says Scott, who stepped down as Chairman in 2020 after 25 years at the helm of Sandaire, the multi-family office he founded in 1996. The family sold Sandaire to Schroders in 2020 and is now moving forward with Applerigg as a single-family office. “Part of our job as owners is to recognize that nothing's permanent. It’s our job to be continually alert to changes in our operational environment and take anticipatory action. Darwin's maxim was that it's not the strongest or the most intelligent species that survive, but those that adapt best to change. I believe that's entirely applicable to families and family businesses.” “We've changed everything recently; the incoming, inheriting generation are reorientating the total liquid portfolio towards sustainability and we’ve completely changed our approach to liquid assets. On my watch, we responded to our external environment, the wants and needs of our owners at that time; I hope I have created something that the next generation wants to inherit.
Philanthropy and committee or board membership are two ‘no pressure’ avenues for easing the next generation of a family into the business of the family office, says Dr Mary Ann Tsao.
“Our family is so small; there are only four people in my generation and two in the next who are old enough to start getting involved. We’re trying to engage them and get them on to the philanthropy board, then the family board, then the investment board and slowly but surely get them more integrated.” Dr Tsao acknowledges that for the senior generation to make way for the next generation isn’t always an easy process, but being in the next generation isn’t necessarily easy either, especially when the patriarch decides to retire suddenly over night without any preparation for the receiving generation. It took her three years to fully understand the businesses and assets under her father’s family office - while managing them at the same time - before bringing the siblings onboard to establish the Tsao Family’s current Singapore office in 2017. “I’ve spoken to others whose family office was run the same way as my dad's, and they had to fundamentally reorganize the whole thing to make it more aligned to what the next generation wants.”
“This family office is obviously still developing and evolving. For the last few years, we’ve been trying to get ourselves settled, from figuring out what we've got and closing one office, to setting up a new office and getting an investment policy together, getting [our approach to] philanthropy together. We're very much still in evolution, but I think succession is top-of-mind.” Formalizing a succession plan and finding ways to engage younger generations with the family legacy, rather than the business legacy, has helped to bring in fourth generation family members for Tolaram Group and Maitri Asset Management.
“Because while the next generation might not necessarily be engaged with the business legacy, they might still want to be engaged with the family legacy,” says non-family CEO Manish Tibrewal.
“So, we focus on what’s exciting to them. For example, several of our fourth-generation family members are involved with the Ishk Tolaram Foundation. Another is interested in operations into Nigeria, where they want to explore new business. And there are ones who are not at all engaged at a business level or a foundation level, but still come to our annual family assembly. And of course, the family members engage with each other there; they celebrate the legacy and discuss the future.” “There are very robust trust structures and a constitution with clearly defined rules on how to create a succession plan, who would be the observer and who can be the successor.” Maitri has recently started building its multi-family office capacity and clientele and is helping external families manage generational change in a way that protects and retains wealth and values yet allows for the continued evolution of family legacy as part of that process.