Michael Macfarlane cites a statistic suggesting that only 12% of family businesses survive to the third generation. Marco Poon is a third-generation member of a major Hong Kong business-owning family, and his account of how families prepare successors gives little space to portfolio construction. It centres on experience, values and a willingness to learn from other families.

Stewardship has to be taught

Poon's starting point is that family members must understand they are managing wealth on behalf of the family. Macfarlane offers the word stewardship, and Poon adopts it. Family members are free to spend within their means, he says, but the spirit of a family office is to drive that value and belief into the family.

He sees the older generation's experience of hardship as essential to that lesson. His family went through very difficult times and built its wealth from the ground up, so they know what struggle is. He jokes that to them, a 9-to-5 job is a holiday.

The next generation should know the struggle of the previous generation. Without that, they cannot be humbled enough to understand that they are just managing the family wealth. They don't own it.

— Marco Poon, Wealth Office

For Poon, family wealth exists for the survival of the family, the cultivation of the next generation and the development of the family into its next platform. He lists the education of family members, the storytelling of older generations, legacy and support for family members' well-being among the things every family should attend to, while accepting that every family is different. In a large family, he notes, members of different generations may be facing different conditions, and all of them should be supported.

Two routes to readiness

Poon frames successor preparation in direct terms. Outside of investment, families have to ensure the next generation is battle ready. He describes two ways to make that happen.

The first is work in a third-party organisation before joining the family. Successors learn what the real world is like, including what a 9-to-5 job involves, what it is to work under pressure and what it is to beg for a sales order. Those challenges, he says, exist wherever you are.

The second is a family-funded entrepreneurial project. Poon notes that families whose core operation is stable and strong often see related opportunities, and funding them can extend the main operation, train the family's own people and invest in the future at the same time. In Asia, he adds, families may not say it outright, but they usually want the next generation to become part of the family operation, which ultimately leads to succession. An operation across five countries, with different products, distribution and manufacturing, cannot simply be passed to someone without operational experience. Without knowing the operation, he asks, how can a successor sit in a governance position?

His own family gave him room to pursue entrepreneurship of his own alongside managing wealth and following financial markets. He says the experience helped him understand the operational challenges the family faces in a way that financial numbers alone could not.

He also tells the story of a friend who was summoned back to Hong Kong when his father was in intensive care. At the hospital, the father described a family portfolio his son had never known about, of around 70 individual bonds, recalling from memory each name, entry price and allocation. Only then did the friend understand why his father had steered him all his life towards studying finance, internships and a career in the industry. It had been preparation.

Learning from other families

The third element in Poon's account is peer learning. Raising family governance with private bankers, he says, produces silence, because the conversation is not in their interest. The natural place for it is with other families. Hong Kong now has a community where family members, mostly second and third generation, with first-generation members also welcome, discuss governance, tax issues, the latest trends in charity and the education of children.

He attributes Hong Kong's strength here to an existing community of family offices, strong academic research on family offices in its universities, and its position as a hub for Asia. He values the mix of generations, recalling that his elders immediately understood the risk in the Treasuries he had proposed, despite his own training in complex financial models.

Whatever I learned, I try to implement back in the family.

— Marco Poon, Wealth Office

That includes opportunities and risks other families are seeing, and practical ideas about how to teach children the correct value of money and how to manage it, which he discusses with his wife and adapts for their own programme. Each family is unique, he observes, but the challenges are very similar. Families want to last longer, pass wealth down, educate the next generation well and prepare for succession.

Poon's prescription for families hoping to last beyond three generations follows from all this. Families should focus on their objectives and vision, educate their members and drive values into the next generation. The tools are familiar ones. What matters, in his account, is that they are used deliberately and well before the moment of succession arrives.