Family Business Audiocast | Episode 61 | Philip Marcovici

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R. Adam Smith: A warm welcome today to Philip Marcovici, principal of the Offices of Philip Marcovici in London. Philip, great to have you here today.

Philip Marcovici: Thanks for inviting me.

R. Adam Smith: Philip is one of the world's leading advisors to global families on wealth governance and intergenerational stewardship. He consults with governments, financial institutions, and family-owning families around the world on taxation, wealth management, family governance, and long-term strategy. Philip has worked extensively with ultra-high-net-worth families, helping design family constitutions, governance frameworks, trust structures, and succession systems that protect both capital and family cohesion over time.

He's the author of two influential books published by John Wiley — The Destructive Power of Family Wealth and The Transformational Power of Family Wealth — exploring both the risks of unmanaged wealth and its regenerative potential for families and communities across generations. Philip is a founding advisor to the Multi-Generational Leadership Program at the University of Cambridge Institute for Sustainability Leadership, working with some of the world's most influential families on shaping future leadership. His career spans law, academia, advisory, and board roles globally. Philip, tell us about your organization, based in Hong Kong and London.

Philip Marcovici: I spent my career as an international tax lawyer, most of it with Baker McKenzie — about half of nearly 30 years in Hong Kong, the other half in Zurich, Switzerland. About 15 or 16 years ago I retired from big law firm practice, not to do nothing, but to focus on teaching, writing, and working with a few families around the world. The Offices of Philip Marcovici is really just me and an assistant. I teach, I write, and I work with a handful of families on the kinds of things we'll discuss today. For context, I should mention I'm not American — I'm Canadian. I grew up and went to law school in Canada, studied law in the U.S. too, started my career in New York as a corporate tax lawyer, then moved to Hong Kong at the end of 1981.

R. Adam Smith: Being in Hong Kong since 1981 is fascinating — we've had several Asian family office experts on the podcast recently. I'd love to discuss the different structures and characters of family offices globally, comparing Asian and Western systems. You specialize in governance across cultures — can you talk about your approach, both as a practitioner and more philosophically?

Philip Marcovici: The big picture is that culture is often overplayed in family planning. When I first moved to Hong Kong, families would tell me, "Philip, you don't understand Chinese families — we all love each other, we don't fight, we don't need lawyers." Indian families said, "We all live together in the same compound, we never fight." Middle Eastern families said, "We have Sharia law, our culture is different." Over the years I've come to appreciate that culture and religion do factor into planning, but both are overplayed as the key issue. The reality is those Hong Kong families who said they never fight are now at each other's throats in the courts — same story in mainland China, Taiwan, India, the Middle East, everywhere. In my experience there are more similarities across cultures than differences. Wealth can be destructive of a family and a family business regardless of culture or religion, and families everywhere need to pay attention to the same fundamentals.

R. Adam Smith: Agreed — there are common patterns across family systems, especially for the larger family enterprises we cover on this podcast, given how complex, impactful, and cross-border they tend to be. What common patterns do you see, particularly as financial capital can outgrow a family's emotional intelligence or governance capabilities? Can you talk about framing wealth as both an asset and a liability?

Philip Marcovici: Something I see across nearly every geography is not enough focus on where the family is actually going. Planning very often addresses immediate issues — mom or dad, leading the enterprise, is getting older, there's a succession question, a death in the family, a divorce, a tax or legal change, a change in residence triggering a review of succession and asset protection.

I encourage families to pause and look forward — pick a date, 30 years or even 100 years out, and ask: what would our family and enterprise ecosystem ideally look like then? How is it governed and run? How do we ensure family members are happy and healthy? How do we ensure the business and investment enterprise runs well? How does it engage community, planet, and employees? Once the family agrees on that vision, they can step back and ask: where are we today, and what do we need to do to get there?

That forces a kind of continuity audit — looking at the trusts, foundations, companies, wills, and every structural instrument the family uses, and asking whether they're actually fit to reach that destination, and whether they've accounted for the derailers — things that can go wrong internally in the family or externally in the world.

R. Adam Smith: We'll get to governance structures and charters shortly, but first — talk about the value of external service providers across the family enterprise, beyond just tax.

Philip Marcovici: Families need external advice — it's a complicated world with many specialty areas, especially for families with cross-border assets and real complexity. But it's important not to blindly trust anyone, and not to let advisors hijack the overall planning process. The family itself needs to understand its own succession structures. Family members don't need to be experts on every topic, but they need to be well prepared to ask their advisors the right questions.

R. Adam Smith: That comes down to education — internal and external, and an evolutionary process, since knowing what to ask isn't inherent; it has to be learned over time, often by bringing in the very advisors we're discussing.

Philip Marcovici: Exactly — and this raises another issue many families struggle with: they tend to focus preparation on family members actively working full-time in the business or investments, while family members on the periphery, pursuing their own independent careers, get neglected — even though they play an important governance and stewardship role. All family members, regardless of role, should be part of development frameworks designed to support their learning — not to give them all the answers, but to teach them to raise the right questions and play their stewardship role effectively. And yes, outside experts are needed, but for the family's own protection, they need to know how to use those advisors carefully.

R. Adam Smith: Let's talk about what governance really means in practice. We've discussed this on the podcast with guests from Merrill Lynch, Deloitte, RSM, Jim Grubman from the Ultra-High-Net-Worth Institute, Alfredo De Massis, Massimo Baù, Christina Wing, and Martin Roll — lots of views on the mechanisms, how formally to use them. As a lawyer, can you talk about balancing the legal utility of governance structures with the softer psychological elements?

Philip Marcovici: Governance becomes critical and complicated once you have multiple asset baskets across countries, companies, and entities. There's no black-and-white right answer, but generally what works well is a cooperative approach — not planning around one specific sibling being "the boss," but building genuine teamwork and cooperation among the next generation.

R. Adam Smith: And evolutionary too, not just cooperative — how does that need to grow and change as the family scales?

Philip Marcovici: It becomes representative. Depending on the family's structure — branch ownership versus per-capita ownership, for instance — you might have each family branch nominate someone to sit on a stewardship committee, with a rotating chairmanship. The philosophy is that, to the outside world — employees and others — the family should present a unanimous view, even as internally they debate and don't always agree. Governance needs clear approaches to voting, decision-making, and dispute resolution.

One simple example: some families require unanimous decisions, and if they can't agree, they roll the dice — whatever the dice says becomes the unanimous decision presented externally.

Governance also touches reporting and information requirements. Being a trust protector, for example, is itself a form of governance — but your name then gets reported to tax authorities where you live. Families need to understand what governments know about which assets, and design governance with that in mind. Sometimes we avoid having family members serve as protectors directly; instead the stewardship committee holds the power to appoint and remove the protector — which isn't a reportable power under the Common Reporting Standard, whereas being protector directly is.

One more interesting approach: some families use what I'd call a "governance plug-in" — a company whose sole purpose is providing governance across all the family's structures. Its board is made up of the family's stewardship committee members, and that company is then "plugged into" all the trusts, foundations, and other structures, so the family has common governance across everything.

R. Adam Smith: Is that like a proxy structure?

Philip Marcovici: It's a way of organizing family input, because in reality many families don't understand their own governance, and it may not be consistent across all their different corporate and investment interests. Simply put, good governance means constantly asking "what if" — anticipating what could go wrong and designing structures to withstand it.

R. Adam Smith: Let's touch on tax briefly, without giving away too much. For listeners who want to reach you, how should they get in touch?

Philip Marcovici: My website, philipmarcovici.com, has my email address. The most valuable thing people can do is read my books, or join the program I mentioned at the Cambridge Institute for Sustainability Leadership — a multi-generational program focused on the role of wealth in business-owning families in society, given growing income and wealth inequality, climate change, and other pressures. That's actually a good segue to tax.

In a nutshell, we're in a mess globally on tax right now — very few countries are getting it right, and many wealth and business-owning families themselves treat society as optional, moving from country to country purely to manage tax exposure. Meanwhile economies swing between protecting wealth owners and trying to detach them from their wealth through wealth taxes and high inheritance taxes.

I strongly advocate for genuine dialogue between governments and wealth-owning families, and a real understanding that these families already make a huge contribution to economies — and could do even more, if governments understood that value and designed simpler, fairer, more effective tax systems.

Take the UK, where I'm sitting right now — for years it hosted wealth and business owners from around the world, drawn by safety, education, and other factors, taxed relatively gently under the non-dom system. I wasn't a fan of that system and was glad to see it go. What I wasn't in favor of was the Labour government removing it without replacing it with anything to attract and retain wealth and business owners. As a result, the UK has lost many of its best future taxpayers — people who would have preferred to stay. It's one example of a government failing to understand the value wealth and business owners bring.

R. Adam Smith: Tax is under-appreciated as a topic — individual tax revenue is a huge share of GDP globally. How does that differ between emerging markets and OECD countries, and philosophically — don't wealthy individuals, who hold such a concentrated share of wealth, have an obligation and opportunity to support their own society? We're seeing business and government converge more under the Trump administration in the US — do you ever see a time when very wealthy, impactful people can make a more direct, customized, collaborative contribution to government?

Philip Marcovici: There's a lot to unpack here. First, it's not just individual tax revenue that matters, but the tax revenue from corporate entities ultimately controlled by families — that has to count as part of the benefit of having wealth and business owners attached to an economy. In Asia, it's even more common for families to sit behind publicly listed companies. Family business and wealth ownership is a huge contributor to economies everywhere.

What we need is governments that genuinely understand that and can work with these families as partners. In the U.S. right now, we may be seeing the pendulum swing a bit too far in favor of wealth owners, which risks an even stronger swing the other way later. Extreme wealth and income inequality is real, in the U.S. and globally, and needs addressing — not by taking things away from wealth owners, but by finding smarter, better ways to encourage their engagement with society, including through tax.

R. Adam Smith: Turning to the future of family wealth — we're looking at $5 trillion, maybe heading toward $10 trillion, and around 10,000 family offices globally according to Deloitte, UBS, JPMorgan, and Campden. There's more to discuss about these families' impact on society as social actors — moving beyond pure capital preservation, the "protect the house" G1 mentality, toward a more regenerative influence involving the next generation, thinking about legacy and these organizations as institutional forces in society. Can you speak to that?

Philip Marcovici: I'm a great believer that we can build regenerative tax systems and regenerative economies — economist John Fullerton has written about the regenerative economy — and I believe we can build that around wealth and business owners. I don't see the scale of family office wealth as something to fear. In my experience, family-owned businesses and investments tend to be stewarded far more responsibly than short-term-focused public companies run quarter to quarter by CEOs without a family legacy to protect.

Family businesses have real potential to transform economies positively, especially with a good relationship between family businesses and governments, where the economy is designed to support and grow new family businesses and new family wealth — that's what regeneration really means. And the more families understand that unless the planet survives, their family and enterprise won't survive either, the more naturally they move toward responsible wealth and business ownership — which is genuinely positive for society.

R. Adam Smith: Which institutions are most focused on sustainability for and by billionaires and large families? There's the Giving Pledge, academic programs at Cambridge, Oxford, Harvard, Stanford, Chicago, Booth, INSEAD, Singapore, plus the private banking layer, and networks like FBN and various foundations. Who are the big players focused on this space?

Philip Marcovici: What I don't see enough of is the connection between the internal and the external. Universities and organizations like the ones you mentioned focus heavily on family business stewardship, information exchange, and training — how does a family stay sustainable? Other organizations focus on philanthropy, climate change, and global needs — but rarely connect that work back to what's happening internally within family businesses.

I believe a family enterprise that's sustainable across generations can be hugely positive for economies over the long term — and that synergy between the internal and external worlds is what gets everyone in the family genuinely excited about stewarding the assets for the future. In many families I work with, the younger generation is passionate about philanthropy and impact, so I encourage families to embed impact and philanthropy directly into the long-term structure of the enterprise, so the younger generation is motivated to work hard preparing to manage the business itself — since it's the business that funds the philanthropy and impact work they care about.

I'm not aware of many organizations really connecting that internal and external balance — there are plenty of silos focused on one or the other, but the link between them is what I'm really focused on.

R. Adam Smith: We've explored this internal-external conversation with guests from academia, philanthropy, ESG, and next-gen circles — Elizabeth Bagger, Sander Hopsberg, Jason Ma, and others. It's ironic that we have a tax expert talking about sustainability — there's almost a branding gap globally around sustainability, since it's so fragmented; you'd think a president, the UN, or the World Bank would own that conversation.

Philip Marcovici: It is unusual to hear a tax lawyer discuss these things, but my intimate knowledge of how tax systems work convinces me we need to rethink both how tax systems operate and how families structure themselves if they want to navigate becoming a genuinely multi-generational family. Not every family should or wants to be multi-generational, even with significant wealth — but those that do won't survive multiple generations unless they look outward, to employees, community, and planet. Equally, governments need to understand there's more benefit in working with wealth and business-owning families to encourage their growth than in short-term political wealth-bashing.

R. Adam Smith: It really is a branding issue — wealth needs better branding around its importance and impact, not just the greed and ego often associated with wealth creation. Meanwhile governments are too busy to brand themselves as a positive force, when they actually need the tax revenue — which isn't inherently bad, since it funds bridges, education, healthcare. It's just recycling capital through the most efficient spending mechanism a capitalist society has.

Philip Marcovici: Spot on — we need to make people feel better about paying taxes, and there are real things that can be done there. And we do have to accept there are plenty of irresponsible wealth and business owners who treat society as optional, whose mission is to pay as little tax as possible, moving from place to place to achieve that — often not in the long-term interest of their own enterprise, or the mental health of their own family members. Happy, healthy family members should be one of the core objectives of any wealth-owning family.

R. Adam Smith: That's a natural human instinct toward selfishness, in a sense — short versus long-term thinking.

Philip Marcovici: That's right, and we need to shift that thinking — which is what I enjoy about my work at Cambridge. A light turns on when multi-generational families realize that the more responsible they are to society, the more resilient their family members and their enterprise become. The older generation feels comforted that the younger generation is genuinely enthusiastic about stewarding things going forward, and the younger generation is enthusiastic because they've been part of building that plan from the start — knowing their involvement benefits not just the family financially, but the environment and communities too. That creates real purpose behind the family's wealth and business.

One thing I haven't emphasized enough: the plan has to belong to the younger generation. A succession plan simply won't work if mom or dad dictates it top-down — you need the future stewards, the younger generation, fully part of that planning process from the start.

R. Adam Smith: As we wrap up, one more question on tax at the government level. As families grow larger, the top 1% likely contributes a very large share of tax revenue — wealth concentration has grown substantially in this liquidity-driven bull market. Assets, especially public ones, seem overinflated, and there's arguably too much wealth concentration, which circles back to broader questions of inequality and redistribution, particularly for the middle class. Do you think there's ever a scenario — like choosing where your charitable giving goes on a tax form — where tax authorities let the very wealthy allocate part of their tax contribution to a specific purpose, as an incentive?

Philip Marcovici: Yes — that's called hypothecation, where a taxpayer can direct a portion of their tax toward a specific purpose. Economists generally dislike it, arguing governments should have full freedom to spend tax revenue as they see fit. That said, we have plenty of evidence of governments spending tax revenue poorly — the UK, the US, and others show real government wastage.

I'm actually a strong believer in allowing elements of taxation that permit that kind of choice, and even some governance role. If the UK let me hypothecate 25% of my taxes, I might direct that toward the National Health Service — and because I'm a significant contributor, I might also want to be involved in governing how that money gets spent. That closer involvement in how their money is used could help wealth owners feel genuinely better about paying tax, since they can see the impact and help ensure it does real good.

I'm not in favor of addressing inequality by simply taking more from the wealthy — sharply raising inheritance tax or introducing a wealth tax purely for redistribution. I favor building a societal understanding of responsible wealth ownership, broadening the tax base for wealth and business owners while simplifying it, in exchange for real value delivered by government. If I can genuinely trust the UK government for the long term, I won't mind paying considerably more tax there than elsewhere, and I'll base my business and family there — because I'm getting real value in return. That's what I promote, and what I write about in the book.

R. Adam Smith: Wonderful, thank you Philip. Today we've covered governance, control, and stewardship mechanisms; the importance of inheritance and next-gen involvement; the value of tax revenue; and how to design tax and governance systems while accounting for the personality dynamics within billionaire and family office organizations. I really enjoyed your comments on the internal-external balance and how families can use those levers to shape future leadership. We've covered a lot of new ground today.

Philip Marcovici: A very interesting conversation — look forward to staying in touch.

R. Adam Smith: Philip's work reminds us that sustainable wealth isn't just about accumulating it in the first place, but about stewardship across generations and the role tax plays in that process. Really great to have his insight today. This is R. Adam Smith, signing off. Stay tuned for the next episode of the Family Business Audiocast.

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Explore the strategic intricacies of family business success with the RAS Family Business Audiocast. Join R. Adam Smith as he delves into exclusive discussions with global leaders shaping the future of private wealth and enterprise. Each episode offers a rare glimpse into the core decisions driving prosperity in high-stakes markets. Tune in to gain expert insights and innovative strategies that empower family businesses to thrive across generations.

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