Senior members of global high net worth families have concerns about delegating the management of their businesses and investments, as well as the next generation’s ability and commitment to manage the family assets.
This comes from research by Barclays Private Bank, which surveyed over 400 global high net worth (HNW) individuals with at least £5m ($6.5m, €5.5m), and found 57% of wealth originators among HNW families believe that the younger generation (24 to 39-year-olds) are not currently fully prepared to take over the family business.
Some 63% believe that the millennial generation is not as committed to maintaining the established wealth.
The older generation feel their personal identity is tied to their business successes, having often held a singular authority over the direction of the business and investments, so the majority (67%) are cautious about stepping back and more than a third (35%) are uneasy about the next generation’s potential appetite for taking on extra risk.
Nearly six-in-10 (58%) of family members of all generations say this different outlook on life has created some friction between them.
Coronavirus adds pressure
The pressure on families to successfully arrange wealth transition has been increased by the business challenges created by covid-19.
Almost four-in-10 families (38%) are significantly reassessing their financial strategy as a result.
Some 70% said their overall aims in wealth management have changed, showing that long established wealth transfer plans will likely need to be reconsidered.
Effie Datson, global head of family offices at Barclays Private Bank, said: “The transfer of wealth between generations is an emotive subject for families and one that has risen to the top of the agenda recently, accelerated by the pressures of covid-19.
“It is important for families to have open, honest dialogue about their priorities and concerns, and build trust between the generations. Knowing clients’ priorities and concerns enables us to work with them to ensure their legacy is carried on in the best way for all.
“One way we see families successfully transition wealth between the generations is by establishing strong governance within their family office. By clarifying their values, their investment and management principles, and building a shared vision of the future, the family commits itself to an identity that is forward-looking and focused on building a better world for many generations to come.”
Duty to continue the family legacy
The survey also found only 45% of millennials currently feel prepared to take over the family business, and an additional 23% feel nervous about the prospect of inheritance.
Contributing to this challenge, millennials have not felt that the family business is discussed with them to the same extent as the older generations do (54% compared to 69%), and more than half (53%) said they have not received any emotional support from the original decision maker on these issues.
Despite this, 94% of millennials expect that they will be given that responsibility in the future, and 69% have a sense of duty to continue the family legacy.
Grégoire Imfeld, founder of One Family Governance, said: “The relationships between generations within high net worth families are complex, with cultural influences, changing education paths, and entrepreneurial mindsets being just some of the factors affecting the arrangements around business planning and succession.
“The eldest generation will often have created wealth through their own individual successes, so a diffusion of that wealth and power to their children and grandchildren can understandably be an emotional challenge.
“To help overcome this, it is essential that a plan is put in place for individuals to best take forward the family wealth in the roles that suit their ambitions, whether that be as shareholders, active business managers or the next generation of entrepreneurs.”
Respondents lived in France, Germany, Hong Kong, India, Italy, Qatar, Saudi Arabia, Switzerland, Singapore, UAE and the UK.
