There may be fewer PH family-owned firms in the future—Sun Life study

As a famous Chinese saying goes, “Wealth does not pass three generations.” Somehow, it describes the findings of a December 2019 Sun Life research, which hints a possible decline in the multigenerational family business model in the Philippines.

The study entitled ‘Future of Family Businesses in Asia’ polled 1,300 business owners from Indonesia, Hong Kong, Singapore, Malaysia, and Vietnam as well as 250 family business owners in the country. The respondents were categorized into startups (0 to 5-year-old businesses), growth companies (6 to 10-year-old businesses), and mature companies (over 10 years old).

Over 65% of younger enterprise owners surveyed think that there will be fewer family-owned businesses in the country in the future. This may indicate a shifting mindset among first-generation Filipino business owners. Based on the same research, this sentiment was also prevailing in the other Asian countries covered. The study found that young business owners in the nations lack interest in creating a long-lasting legacy as entrepreneurs.

“Family businesses are the foundation of Asia’s economies,” said Sun Life Asia President Leo Grepin. “There remain many advantages to running a family business in Asia. But the younger generation of business owners are thinking differently about the future of their business. Rather than pass it on to family as has been favored in the past, they prefer to build fast, sell, and retire early.”

According to a 2018 report by Credit Suisse Research Institute, up to 80% of businesses in the Philippines are family-owned or family-controlled. The financial research firm also ranked the country as the 11th country across the globe where family-run firms proliferate.


Vulnerability of businesses

Sun Life’s poll also indicates that the Covid-19 pandemic may possibly weaken the competitiveness of younger businesses as they are less prepared for unexpected business challenges and disruption. At the same time, mature business owners have heightened perceptions of the range of risks facing their business and are more likely to use risk mitigation tools to build resilience.

These findings are illustrated by the gap in terms of health and critical illness protection insurance policies in the country. The majority (or 95%) of polled local businesses think that if they, or their key people, suffer from an incapacitating sickness, their businesses would be seriously affected.

As Covid-19 was first emerging, only 52% of startup and 58% of growth business owners had a personal health insurance protection, while 30% of startup and 32% of growth business owners had key main protection. Additionally, only 53% of startup and 60% of growth businesses had an employee health and accident insurance program in place.

Meanwhile, 76% of mature business owners had personal health insurance in place and 82% had key man insurance protection. Moreover, 86% of them had health and accident insurance in place for their employees.

“The Covid-19 pandemic had created serious challenges for businesses that further complicates retirement and succession planning,” Grepin said. “While the first priority for business owners is steering their businesses safely through the pandemic, Sun Life encourages business owners not to lose sight of their longer-term plans and to take a holistic view of the range of financial solutions available to offset their risks and protect and strengthen their business and succession plans for generations to come.”

Thus, Sun Life Philippines has created Sun Future Proof, a two-pronged program that integrates financial education and financial solution for business owners. This could help local business owners cope with their situations and ensure the continued growth of their enterprises.

Empowering business owners for the future

Sun Future Proof provides business owners with access to experts from various fields to gather insights on business succession, retirement, the digital economy, tax planning, and other relevant topics. “In fact, even before the pandemic occurred, Sun Life has already been mounting financial planning sessions specifically for business owner clients, said Sun Life of Canada (Philippines), Inc. President Alex Narciso.

Sun Future Proof will also empower business owners to create a financial plan with the help of a Sun Life advisor, who has been trained to handle business and personal goals. “Sun Life Philippines even has a program for its advisors focused on family business and wealth advisory,” Narcisio said. “This is a first in the local insurance industry.”

With Sun Life Future Proof, Sun Life Philippines hopes to help business owners rise above the challenges of the pandemic, strengthen their businesses, and look forward to a brighter future. “This may be a challenging time in our history, but this is not a journey that business owners have to go through alone,” Narciso said. “Sun Life is here to help.”