Written by Chukwudi Iwuchukwu
If you are a successful entrepreneur (whether old or young) and God has blessed you so that you earn more than $1 million (580 million naira) yearly in profit, doing business in Nigeria, please consider opening a family office to manage your wealth so that in case of your demise, your wealth/business can continue uninterrupted and your wealth can pass down to your kids or unborn kids.
When I was younger, I used to hear about popular rich families like the late Ilodibe family that were wealthy in every sense of the word in Onitsha, but today, the kids from these wealthy families are on the same level as me and all of us are hustling in Lagos, but it should not be so for these kids if the patriarch or matriarch who made the money properly managed the wealth using the vehicle of the family office.
What is a Family Office?
There is no globally accepted definition of a family office. One of the reasons is that family offices can be set up in different ways to pursue varying objectives. Notwithstanding, a family office can be described as an entity established or engaged by a single family or a group of families to manage their wealth.
The focus of the family office is on managing, building, and sustaining wealth for current and future generations. It also plays a big part in risk management by building a diversified portfolio and making sure that it is well managed. The family office is preserved and handed over from generation to generation through the family office.
A typical family office has researchers (who research for the next stock, hedge fund, or crypto currency coin to buy), a management team, and an investing committee on top of a group of people who handle day-to-day tasks such as hiring security or nannies and arranging travel.
The family office culture is relatively new in Nigeria, but in foreign countries, the vehicle provided by the family wealth office is the only way for ultra-wealthy families to preserve their wealth and then pass it on to their children via the same model.
It is the reason the Walton family is the richest family in the world, with a total worth of over $190 billion.
The family preserves their generational wealth through the vehicles of two family offices: “Zoma Capital”, which is led by Ben Walton and his wife, and “Madrone Capital Partners,” founded by Rob Walton.
The world’s richest man, Elon Musk, has his own family office called Excession. Bill Gates preserves his own wealth through a vehicle of his family office called Cascade Investment.
Cascade Investment, controlled by Bill Gates, owns the most land in the United States; no other company or individual comes close to their land holding investment.
The same is true for Jeff Bezos, the founder of Amazon and the world’s second richest person, whose Bezos Expeditions manages his personal wealth.
In fact, it is rare, if not strange, to see an ultra-wealthy individual or family abroad who does not have a family office that manages their wealth.
The family office culture is still relatively new in Nigeria, but already some successful and accomplished individuals have embraced the idea of institutionalizing their wealth by opening a family office that manages their wealth.
Tony Elumelu, attached in this picture, has one called Heir Holdings that manages his vast wealth. His heirs’ holdings include businesses in the energy, oil and gas, financial services, hospitality, real estate, and health care industries. These businesses are based in 23 countries around the world.
The same with General TY Danjuma, who owns a family office called TY Danjuma Family Office.
The TY Danjuma Family Office is a privately-owned single family office that manages the assets of Nigerian billionaire and former defence minister, Theophilus Yakubu Danjuma.
The firm, which is based in Surrey, England, invests in public market equity and fixed income portfolios, alternative investments, real estate, and direct private equity investments. It manages the TY Global Conservative Fund, an open-ended USD mixed-asset fund incorporated in Singapore with a bias towards emerging markets. The firm also invests in everything from art and movie production to industrial gases (Beta glass) and pharmaceuticals (May and Baker pharmaceuticals).
Another example is the Tengen Family Office, which manages the wealth of the founders of Tengen: Aigboje Aig-Imoukhuede and Herbert Wigwe, the two founders of Access Bank.
One of the co-founders of Seplat Energy, Austin Avuru, is another rich Nigerian I know who uses a family office to protect his wealth. His own family office is called AAH Holdings.
The Avuru-led family business maintains a direct stake in the integrated oil and gas production, processing, and marketing company, Platform Petroleum, and an 8.2-percent stake in Seplat Energy worth N49.9 billion ($120 million).
Aside from making investments in the oil and gas industry to meet Africa’s need for clean energy, the family firm also wants to help Nigeria and Africa become self-sufficient in food by buying high-quality agricultural businesses. It also has a strategic equity portfolio that invests in firms that are competently and effectively managed and can provide long-term value and consistent income.
Africa’s richest man, Aliko Dangote, also opened his own family office a few years ago in New York to preserve his vast wealth as well.
Aside from preserving your wealth, the family office also grows the wealth of the patriarch or matriarch by investing in real estate portfolios, Bitcoin or picking stocks, crypto currency coins or hedge funds to invest in, or investing in promising start-ups that will generate massive ROI for the family office in the future , as I started earlier.
Upon the passing of the patriarch or matriarch who made the wealth, the family office now reports to the kids left behind, as the kids work hand in hand with the family office to preserve and grow the wealth left by their parents.
I think that the reason why wealth fades away after the first generation with the person who made it is the lack of a family office culture in this part of the world.
I once shared the story of the world’s richest dog, Guther. The dog is immensely rich because a family office is managing his wealth and has been able to grow it from 1992, when it was handed over to a family business to run, till now.
A rich parent’s heir or heiress has no reason to hustle or struggle if the wealth is preserved.
Ideally, what the child should be doing is sleeping, waking up, and going on a foreign vacation every quarter while he/she waits for the handsome financial return at the end of the year from the family office that manages his/her family wealth and business.
The child can work if he/she wants to, but the difference this time is that he/she is not working to eat, pay bills or rent; all those needs have been taken care of by the wealth the parents left behind. The child is working or chasing his/her passion because this person is being driven by a mission more than the pressure to pay bills.
Generational wealth can be passed from generation to generation, but the only way this happens is when our wealthy successful entrepreneurs learn how to preserve and manage money in their lifetime.
Without this, the story of kids whose parents were once rich but today are hustling to build from scratch will continue to be the norm rather than the exception.
This is not right, and I believe we can do better.