In this edition, we present the concluding part of the discussion with Esiri Agbeyi, partner, private clients & family business leader, PwC Nigeria, on family offices, first recorded for PwC Nigeria’s NextGen Talk podcast.
Would you say it’s a standard for HNIs, and not for everybody, because usually it sounds like everybody that has a business should have a family office.
It’s not for everybody. There are ground rules that you need to take into consideration to build for that future. As long as those ground rules exist, make sure your assets are not mixed with your corporate assets. It costs money to run one as it is a business.
If you think about the business level, having to hire a CEO, the CFO, or an assistant to support all of these roles, that’s pretty much what you’re replicating on a personal level. If you have to protect data within your organisation, you’re going to do the same with your personal information which also costs money.
In your opinion, would you say that the pandemic has changed how family businesses in Nigeria, utilise family offices and why?
There are a lot more questions now than I had before on family offices. It’s also around the fact that people just want to understand what it entails, and they’re still trying to grapple their minds around it. Valid questions will be asked at this stage. Did COVID affect people’s decisions in that space? Yes, it did. At the last count, we’ve lost about 14.9 million people globally to the pandemic. These losses highlighted the gap in succession.
There’s also the possibility that there are conflicts that existed in the family that you weren’t aware of. The role of the family office then becomes very evident. Imagine a scenario where we had been very deliberate about training the next generation and causing them to understand what their stakes were within the businesses, making sure that there was no entitlements or sense of entitlement in the business.
That everyone was rewarded, and we knew who the leader was. We would have avoided a situation where there was that huge gap. COVID has highlighted the need for families to start asking questions about a key-man risk and how to plan ahead.
Do we need a family office for family cohesion, for ensuring that succession is gotten right? Succession is not just something that happens in a day, it’s a journey, and our journey starts from when the business is founded.
PwC Nigeria’s NextGen survey for 2022 shows that 60% of Nigerian family businesses do not operate a family office as a separate business vehicle for family investments and services. Why do you think this is so? What blind spots do you think the family businesses that fall into this category have to do?
A lot of business owners are still on that fast-paced journey of making money. Right now, a lot of Nigerian family businesses haven’t really started to think about what the future is like even post-COVID. Some of them are a bit more conscious, but it should be a lot more than what we have now. It takes a lot of awareness, which is why PwC is investing significantly in this area. We’re seeing that there are positive results and acceptance of this.
What we’re seeing now is some families are now reassessing their holding company structures, and asking, can we convert this into a family office? Having a holding company doesn’t necessarily mean you have a family office.
The holding company is just for holding the assets, but they’re not thinking about developing the next generation, they’re not thinking about succession in the way a family office would. Is it hinged on the family values or not? That reassessment is now happening.
For some families, wealth management companies or firms are also asking how can we claim this space? They’re thinking about that inherent advantage with families, setting them apart from other businesses. If you look at the top businesses in the world, they’re family businesses. The Walmarts and Samsungs of this world are family businesses. Jeff Bezos of Amazon has a family office.
Read also: Family office, fad or standard ? – part 1
When do you think we are going to get there in Africa?
We do have some family offices in Nigeria. The more we have, wealthy people start thinking about this,we will see that concept really strive. You need to start thinking of the next generation, you need to start thinking of diversifying your wealth. We’ve seen how technology has disrupted businesses.
It will continue to disrupt. Families need to start thinking about their investment strategy, and how you to situate wealth in different buckets to stabilise. It was five years when the currency just dropped significantly. The billionaires who had most of their wealth in Naira, saw their wealth halved already in dollar terms. Imagine if they had a family office that was very deliberate and strategic about saying I would invest in this type of foreign assets, I would hedge against this type of risk, depending on where you are, where you’re generating those incomes from, you have that kind of stability.
That’s what the future is. I’m rooting for a lot of new billionaires that are coming on board to start thinking about such dominance.
Can you share one recommendation that would help promote the utilisation of family offices in Nigeria?
Esiri: It’s not too late to start already. The key questions are, do I have personal assets separate from my corporate assets? What’s my legacy? What legacy do I want to leave? If the answer to the second question is, ‘I don’t want to leave anything’, then you don’t have anything to do with the family office, but if you do have something you want to leave for the future, then this is for you.
It’s not just all about making money. It’s also about giving back to society, your philanthropic contributions. We’re now moving out of the space of just donating cash. It’s now more about impact investments. What’s the impact? What difference are you making? Where are you on the ESG continuum?
If we stick with all of those, then we will start to get that question right about the kind of family office I want to have, this is how I want to distinguish my family business, and this is how I want to contribute to society.
