Succession Planning Tops UHNW Families' Concerns - Study

Tom Burroughes Group Editor London 28 November 2018

Succession Planning Tops UHNW Families' Concerns - Study

The multi-family office Stonehage Fleming polls ultra-high net worth individuals and families about their top wealth planning and related concerns.

Succession planning is one of the top three concerns that ultra-high net worth families have with regard to future financial planning, followed by capital protection and tax planning, a study by UK-based Stonehage Fleming finds.

Based on face-to-face interviews with about 30 UHNW families, workshops with 38 participants and a survey of 150 contributors (families and advisors), the study revealed the shifting emphasis from wanting to protect capital to planning to hand it over.

Some 69 per cent of respondents said that succession planning was one of their top three concerns for future financial planning, with 62 per cent citing capital preservation and 48 per cent pointing to tax planning.
Primogeniture (the right of succession belonging to the first-born son) was the number one way that leaders of the family or of the family business were selected (28 per cent). When asked about their intentions for the future, however, the figure was around a third of that at 10 per cent.

There is a growing preference for wider consultation in the family for the selection of new leaders, possibly including a formal process, the report said. Presently, 13 per cent use a committee to choose the family leader. However, at least a third (33 per cent) expect leadership to be selected in this way in future. 

Respondents said that the top risks to preserving long-term family wealth stemmed from family disputes (68 per cent) and a lack of planning (67 per cent) as opposed to purely financial or investment risks. 

The findings come in a report - the third in the series - called Four Pillars of Capital: Practical Wisdom and Leadership for Changing Times.

“Given the rate of technological, social and political change, intergenerational relationships are also transforming. Nearly all respondents agree that the impact of societal change on a family and family wealth must be reflected in the way they prepare for the future. Traditional, informal approaches are thus being challenged as families look to more sophisticated governance and communication,” Matthew Fleming, partner, family governance and succession, at Stonehage Fleming said.

Inevitably, the topic of “responsible investment” is raised - the subject of intense media and industry commentary in recent years - but that option has not been fully taken up yet. More than 75 per cent of respondents said they preferred the idea of responsible investment, but only 21 per cent are using a values-based approach to manage their investments. The situation suggests considerable room for growth.

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